Primoris Wins $55M Power Plant Contract - Analyst Blog

The Industrial division of ARB, Inc. a unit of the West Construction Services segment of Primoris Services Corporation PRIM has secured a contract worth over $55 million for a new power plant in California. The contract was unanimously approved by the Pasadena City Council.

In order to ensure production of reliable, environmentally responsible electricity service, competitive rates and energy independence, the Pasadena Department of Water and Power (PWP) approved the Glenarm Repowering Project in 2009. As part of its Integrated Resource Plan, the Pasadena City Council decided to replace the inefficient generating units at the power plant. Finally the council certified the environmental report last April and authorized contracts for design and equipment.

The scope of work in the power plant for Primoris includes the demolition of the 50-year-old GT-5 steam generator which will be replaced by a new, more efficient and cleaner generator. The contract also comprises design, procurement and construction of this new generator.

The construction is scheduled to begin in the third quarter of 2014 and is expected to be completed by the second quarter of 2016. The project will increase energy efficiency and help the city comply with state and federal requirements for quick starting generators and back up power through 2030.

Last month, ARB, Inc. has secured a new underground contract from a major utility customer worth $200 million. The deal covers pipeline safety and replacement work in Southern California.

The West Construction Services segment of Primoris recorded a sales increment of 12.7% year over year to $234 million in the first quarter of 2014. The segment's gross profit increased 10% year over year to $31.7 million. During the next four quarters, Primoris will realize revenues of around 98% of the West Construction Services segment backlog.

Primoris remains optimistic on strong balance sheet which will provide the flexibility for continuous investment in external and internal opportunities. In addition, various tailwinds such as the aging pipeline system, oil and natural gas pricing differentials and environmental regulations will drive demand in Primoris' end-markets providing growth opportunities in both near and mid-term.

Dallas, TX-based Primoris is a specialty contractor and infrastructure company that serves diverse-end markets. The company also provides a wide range of construction, fabrication, maintenance, replacement, water and wastewater as well as engineering services to major public utilities, petrochemical companies, energy companies, municipalities and other customers.

At present, Primoris has a Zacks Rank #3 (Hold).

Some better-ranked stocks in the building and heavy construction industry include EMCOR Group Inc. EME, Sterling Construction Co. Inc. STRL and Tutor Perini Corporation TPC. All these stocks carry a Zacks Rank #2 (Buy).