Adding to its long list of utility, marketing and transportationassets, Aquila Energy parent Utilicorp United entered into astrategic partnership with Quanta Services Wednesday for $400million. Utilicorp hopes to increase its profit potential in thederegulating electric and telecommunications markets by teamingwith the Houston-based Quanta, a provider of specialized servicesfor companies in those industries.

Calling the deal a “complementary extension” of UtiliCorp’snetwork strategy, Robert Green, UtiliCorp COO said thatderegulation of energy and telecom utilities offers a veryattractive growth opportunity. “Our partnership with Quanta, thepremier energy and telecom contractor, will enable our twocompanies to combine skills and international experience to captureboth energy and telecom network business in this market as itdevelops.” He added that the market for U.S. network constructionand maintenance is more than $40 billion with strong growth and aconsolidation under way.

Jerry Cosely, a Utilicorp spokesman, said the company isbreaking new ground with this venture. “In terms of a networkaspect, this is all new to us. This is our first foray into thehardware construction and maintenance in the electric and telecomindustries.”

But Cosley also pointed out that this is not Utilicorp’s firstexperience with telecommunications. In 1998, the Kansas City-basedcompany entered into an alliance with Peco Energy to form EnergyOneLLC. This marketing arm offered AT&T long distance as part of apackage that also included gas and power options. Unfortunately forUtilicorp, the partnership failed because the energy markets hadn’tderegulated enough (See Daily GPI, April 29,1998).

At closing of the transaction, Quanta will initially receiveproceeds of $150 million in exchange for Convertible 6.5% preferredstock. The remaining investment of up to $250 million by UtiliCorpcould take the form of a direct equity investment in Quanta and/orthe purchase of Quanta’s existing outstanding securities. No otherterms were disclosed.

“We are pleased to announce our second significantinvestment-related strategic partnership as the deregulation of thepower industry continues to increase in its intensity,” stated JohnColson, Quanta Services’ CEO.

Quanta also has a similar agreement with Enron Capital &Trade Resources Corp. (ECT). This partnership, agreed to in Octoberof 1998, required a $50 million investment from Enron.

Quanta Services, Inc. is a provider of specialized contractingservices to electric utilities, telecommunication and cabletelevision operators, and governmental entities.

©Copyright 1999 Intelligence Press Inc. All rights reserved. Thepreceding news report may not be republished or redistributed, inwhole or in part, in any form, without prior written consent ofIntelligence Press, Inc.