Engineering, Construction & Building Materials industry review Q4-2007; RSM EquiCo Capital Markets

Strong End Markets for E&C Companies

Continued strength in end markets, particularly in oil and gas, mining, industrial and infrastructure sectors, should drive growthfor engineering and construction companies, which are expected to benefit from new capital spending cycles in federally funded transportation, power (coal and nuclear) and nuclear remediation sectors. New power plants, retrofits and upgrades of existing plants (environmental controls) continue to provide growth opportunities. Currently there are 21 proposed nuclear power plant sites identified by the Nuclear Energy Institute in the United States Aging facilities are also providing demand for aftermarket services. Near-term opportunities are service and replacementwork for the aging fleet of nuclear power plants. Demand for engineering, procurement and construction services in the transportation sector continues to be robust. According to Granite Construction Inc., approximately one quarter of U.S. highway bridges need repair or replacement in the near term. The collapse of the I-35W Mississippi River Bridge in Minneapolis was a wake-up call for the Federal Highway Administration, which issued a strong technical advisory to all State DOTs and other bridge owners to immediately re-inspect similar bridges. On November 1, the FHWA released a total of $183.5 million to help rebuild the bridge. In late November, the FHWA awarded $1.59 million in grants to five companies developing innovative technologies to improve highway quality and safety. Read complete report.