Economic Industry Overview

William C. Dunkelberg Owl Fund

October 20th, 2014

Economic Analysts:
Robert Kost Vicky Magginas
rkost@theowlfund.com vmagginas@theowlfund.com
Darmesh Patel GhishlainGuiebo
dpatel@theowlfund.com gguiebo@theowlfund.com

Company Overview

Quanta Services, Inc. provides specialty contracting services to the electric power, and oil and gas
industries in North America and internationally. The companys Electric Power Infrastructure Services
segment provides network solutions comprising design, installation, upgrade, repair, and maintenance
of electric power transmission and distribution infrastructure, and substation facilities. It also provides
emergency restoration services, including the repair of infrastructure. In addition, this segment designs,
installs, and maintains renewable energy generation facilities comprising solar, wind, and various types
of natural gas generation facilities. The companys Oil and Gas Infrastructure Services segment
provides network solutions to customers involved in the development and transportation of natural
gas, oil, and other pipeline products. Its services include the design, installation, repair, and maintenance
of pipeline transmission and distribution systems, gathering systems, production systems, and
compressor and pump stations, as well as related trenching, directional boring, and automatic welding
services.

General Construction Spending

General construction spending declined 0.8% for the month of August on a month over month basis
after a 1.2% increase in July.. On a year over year basis, total outlays increased 5%, compared to a 6.9
increase in July. Public spending fell 0.9% in August after a 2.1 increase in July.




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Quanta Services

Exchange: NYSE | Ticker: PWR | Sector: Industrials

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Nonresidential Construction Spending

Following an agreement on discretionary spending caps for fiscal years 2014 and 2015, Congress passed
a bill to fund the remainder of fiscal year 2014. The bill known as the Consolidated Appropriations Act,
2014 included all twelve appropriations bills and provides $1.1 trillion in discretionary funding for federal
government agencies. Contractions should expect an increase in certain areas of spending.
Nonresidential construction spending slipped in August, according to an Oct. 1 release from the U.S.
Census Bureau. Nonresidential construction spending shrank 1.2 percent on a monthly basis in August,
but has still managed to expand 6 percent on a year-over-year basis. Spending for the month totaled
$603.7 billion on a seasonally adjusted, annualized basis. The government also revised the July spending
figure down from $617.8 billion to $611.3 billion.



Electrical Power Grid infrastructure Spending
Electricity demand is expected to grow in the US by about 1.1 percent a year through 2030.Over the
next decade, the world will need to invest between $140.2bn to $170.5bn per year on traditional
transmission and distribution (T&D) infrastructure in order to keep pace with growth in electricity
demand. An additional $8.0bn to $27.3bn will be invested annually in smart grid infrastructure to
improve the efficiency and reliability of T&D grids, according to a new dataset published today by
Northeast Group, LLC. However, North America and Europe will see lackluster growth in traditional
T&D infrastructure spending of around 1 percent, but will account for the majority of smart grid
spending. Smart grid annual spending on distribution automation will be concentrated in Europe ($11.5
billion per year), followed by North America ($7.5 billion) and East Asia ($6.1 billion), as these regions
modernize their existing electric infrastructure.

The Obama administration has made an $11 billion down payment (using funds in the 2009 stimulus
package) on a more efficient grid. That has included $4.5 billion in grants to develop a so-called smart
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grid, which applies the speed and power of the Internet to the generation, transmission and distribution
of electricity.

Regulations Affecting the Electrical Power Grid

The purpose of the Clean Power Plan unveiled by the EPA is suppose to cut carbon emission from US
power plants by 30% from 2005 levels by 2030. The regulation aims at the 600 coal powered plants and
hopes these are converted to natural gas power or become more efficient. Regulation affecting the
electrical power grid will mostly be around grid reliability. Poor forecasting by the EPA means the
reliability of the electrical grid will be threatened due to coal shutdowns, as coal serves as baseload power
for much of the country. This means that coal provides a constant minimum rate of power throughout
the day needed to keep the lights on.

Key Pipeline Trends

Increasing gasification is shaping the long term demand profile for pipes. Over the next twelve years
there is an expected 35% increase in the demand for gas, in such the role of natural gas is expected to
account for 26% of total energy consumption by 2030. This growing demand is also driving an increase
in larger diameter pipelines.

Investment in new infrastructure to support LNG and unconventional gas developments will be a major
factor shaping future demand for pipelines. Outside the major oil province of the Middle East, gas-
related lines accounted for 67% of km installed over the past five years with this figure expected to
increase over the 2013-2017 period.

Increased investment in shale gas and oil will drive additional requirements for midstream line pipes in
the US and surging Asian energy demand is changing traditional supply flows domestically and abroad.
Asia will overtake North America as the largest market for onshore pipelines within the coming decade
as the region looks to increase imports of oil and gas from neighboring regions. Rapid demand growth in
Asia is also providing new markets for Russian oil & gas and with traditional importers in the west
expected to curb their energy demand. Additionally, major new interregional projects may be realized
during the forecast period (2015-2030), such as the pipeline planned to connect Russia to South Korea.
The US and Canada will require midstream natural gas investment of $205.2 billion over next 25
years ($8.2 billion per year).
New infrastructure will be required to move natural gas from regions where production is
expected to grow and to areas where demand is expected to increase.
Natural gas consumption expected to grow 1.6% per year within North America

Roughly 29 Bcfd of incremental pipeline capacity is being built between 2011 to 2020; and from 2021 to
2035 an additional 14 Bcfd is being built. A total of 43 Bcfd of incremental pipeline is needed to
accommodate increasing gas supply that is necessary to satisfy market needs over time. These maps do not
show intra-regional pipeline expansions such as those that occur within the Marcellus shale production area.
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Miles of Pipeline Added and Projections
Most new pipe (about 16,500 miles) is gathering line, which is generally smaller diameter pipe
that is planned for and financed as part of upstream project development.
An average of approximately 2,000 miles of new transmission line is added each year, which is
well within the range of recent years. Roughly 1,400 miles per year are mainline miles, while
about 600 miles per year are for lateral connections to power plants, processing plants, and other
facilities.










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DISCLAIMER
This report is prepared strictly for educational purposes and should not be used as an actual investment guide.
The forward looking statements contained within are simply the authors opinions.
TUIA STATEMENT
Established in honor of Professor William C. Dunkelberg, former Dean of the Fox School of Business, for his
tireless dedication to educating students in real-world principles of economics and business, the William C.
Dunkelberg (WCD) Owl Fund will ensure that future generations of students have exposure to a challenging,
practical learning experience. Managed by Fox School of Business graduate and undergraduate students with
oversight from its Board of Directors, the WCD Owl Funds goals are threefold:
Provide students with hands-on investment management experience
Enable students to work in a team-based setting in consultation with investment professionals.
Connect student participants with nationally recognized money managers and financial institutions

Earnings from the fund will be reinvested net of fund expenses, which are primarily trading and auditing costs
and partial scholarships for student participants.