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ChangeWave Research: Infrastructure Projects April 30, 2009

ChangeWave Research Report:


U.S. Infrastructure Industry Spending Trends
Winners and Losers in the Race for Federal Stimulus $$$
Overview: Where will President Obamas economic stimulus dollars flow in the race to upgrade Americas infrastructure and which sectors and companies will reap the biggest rewards? To find out, we surveyed 409 members of the ChangeWave Research Network who work for companies involved with infrastructure projects. The March 12-17 survey focused primarily on infrastructure spending in the Transportation, Electricity/Smart Grid and Broadband sectors. The results provide an initial roadmap on where stimulus dollars are most likely to be spent within these rapidly evolving sectors, and which companies should win and lose as a result. Note this is a benchmark survey. As such, it provides an early look at industry infrastructure trends that will be the subject of future research on best positioned sectors and companies. It is the first in a series of ChangeWave industry surveys that will be tracking the impact of U.S. federal stimulus spending.

The Race for Federal Infrastructure Dollars


Industry respondents were asked which infrastructure areas they think will benefit most from the U.S. economic stimulus package in the next 12 months. Not surprisingly, Transportation infrastructure (62%) was the biggest winner followed by Alternative Energy (44%). Electricity/ Smart Grid (29%) and Water (11%) also stood out.

ChangeWave recently conducted surveys on the Alternative Energy Industry (Jan 2009) and Water Industry (Oct 2009). In the current survey, weve taken a close-up look at the Transportation and Electricity/Smart Grid industries both greatly affected by the U.S. government stimulus bill and also looked at the Broadband Network industry.
This information is from ChangeWave Research and contains confidential business information. It may not be copied or distributed without permission. 2009 ChangeWave Research. All rights reserved.

ChangeWave Research: Infrastructure Projects

Infrastructure Projects Set for Greatest Growth


First, respondents identified the key project areas they think will experience the most growth over the next 12 months within each industry: Which of the following U.S. Infrastructure projects do you think will see the most/least growth in spending over the next 12 months? Most Growth Transportation Projects Automotive Infrastructure (e.g., Roads, Bridges) Mass-Transit Infrastructure (e.g., Buses, Metro-Rail) Electricity Grid Projects Power Lines Control Systems (i.e., generators, switches, circuit breakers) Smart Grid Projects Smart Meters / Meter Infrastructure Broadband Network Projects Fiber To The X (FTTx) WiMax 63% 15% 36% 22% Least Growth 4% 8% 10% 9% Net Difference Score +59 +7 +26 +13

37% 20% 18%

1% 5% 6%

+36 +15 +12

Next, we took a closer look at infrastructure winners and losers within each industry, beginning with Transportation.

Transportation Infrastructure Projects


A series of questions were posed to 168 respondents working for companies involved in U.S. transportation infrastructure projects. Here are the transportation areas that industry respondents think will see the most and least growth in spending over the next 12 months:

This information is from ChangeWave Research and contains confidential business information. It may not be copied or distributed without permission. 2009 ChangeWave Research. All rights reserved. 2

ChangeWave Research: Infrastructure Projects Automotive Infrastructure (e.g., roads and bridges) is the clear winner here, with 63% of industry respondents believing it will experience the most growth over the next 12 months and only 4% believing it will experience the least growth (Net Difference Score = +59). Of course, a key reason for this is many road and bridge projects have been in the works for years and are currently shovel-ready, even as they wait for funding. Mass-Transit Infrastructure (e.g., Buses, Metro-Rail) came in a distant second, with 15% believing it would experience the most growth and 8% the least growth (Net Difference = +7). On the downside, Railway Infrastructure (e.g., High Speed Rail, AMTRAK) and Aviation Infrastructure (e.g., Airports, Runways) trailed far behind. Note that this survey was conducted prior to President Obamas latest announcement detailing plans to build a nationwide system of high-speed rail lines. Key Barriers We also asked respondents about the biggest barriers facing U.S. transportation infrastructure projects. What do you think are the biggest barriers to bringing U.S. Transportation Infrastructure up to 21st century standards? (Choose No More Than Two) Too Much Bureaucracy Not Enough Funding NIMBY (Not-In-My-Back-Yard) Issues Land/Property Issues Lack of Public Interest Legal Issues Other 61% 52% 25% 14% 9% 7% 8%

Bureaucratic Issues (61%) were the biggest barrier identified by respondents likely due to the multiple layers of decision makers involved in the approval process. Not Enough Funding (52%) was also a key barrier. Note that the American Association of State Highway and Transportation Officials (AASHTO) has identified 5,148 transportation projects that are ready to go right now in the U.S., worth more than $64 billion. Not-In-My-Back-Yard issues (25%) also received mention. Companies to Watch We asked industry respondents for their opinion on which companies heavily involved in transportation infrastructure will benefit most over the next 12-24 months. Caterpillar (CAT) and CEMEX (CX) ranked at the top of the list, which is not surprising as both play a major role in automotive infrastructure (e.g., roads and bridges). According to one respondent, industry leader Caterpillar represents American ingenuity and has established itself as a decently run company thats managed its international dealings quite well. Another calls it the foundation of any infrastructure build. Building materials producer CEMEX is also well positioned as a supplier of cement, concrete and other material for upgrading roads and bridges. They supply significant material for all construction projects, and their fuel costs have dropped writes one respondent. Construction services and materials producer Granite Construction (GVA) was also cited by our respondents. While GVA is a smaller company, its primary focus is on transportation infrastructure projects including roads and highways and the production of construction materials. Their business clearly falls within the sweet spot of where stimulus money will flow.
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ChangeWave Research: Infrastructure Projects As one California-based industry respondent puts it, Granite should get most of the local highway projects that will be hitting the streets in California over the next 6 months. Fluor (FLR) a global leader in engineering, procurement and construction also ranked high on the list and is well-known for managing government funded projects. However, U.S. transportation projects represent a small percentage of its overall revenues.

Electricity/Smart Grid Infrastructure Projects


A series of questions were also posed to 134 respondents working for companies involved in U.S. Electricity/Smart Grid infrastructure projects. Here are the Electricity and Smart Grid Infrastructure areas that respondents think will see the most and least growth in spending over the next 12 months:

Power Lines (+26) are expected to see the strongest growth over the next 12 months. Control Systems (+13) including generators, switches and circuit breakers are also seen as performing well. In terms of the smart grid, Smart Meters and Meter Infrastructure (+36) are seen as experiencing the most growth over the next year as is clear in the chart below:

This information is from ChangeWave Research and contains confidential business information. It may not be copied or distributed without permission. 2009 ChangeWave Research. All rights reserved. 4

ChangeWave Research: Infrastructure Projects Key Barriers Industry respondents find Not-In-My-Back-Yard issues (NIMBY; 43%) to be the number one barrier to upgrading the U.S. electricity grid. In other words, while the public wants electricity delivered to their homes, they dont want power lines in their back yard. Other important barriers: Too Much Bureaucracy (41%) and Not Enough Funding (37%). Companies to Watch Multinational conglomerates General Electric (GE) and Siemens AG (SI) are of course integral suppliers for major energy infrastructure projects. Though a relatively small part of their sales involve the U.S. electricity grid, both companies will be top beneficiaries of federal stimulus funding, according to industry respondents. ABB Ltd. (ABB) and EMCOR Group (EME), two companies extremely active in electricity transmission and distribution projects, are expected to get a significant boost from increased U.S. government spending in these areas. ABB products and services focus on transmitting and distributing electricity. "ABB is a big beneficiary due to their large global presence and diversity of product offerings to utilities," one industry respondent points out. As an infrastructure client of ABB puts it, "ABB sells and does almost everything we want, where we want it, when we want it." EMCOR Group a leader in mechanical and electrical construction and energy infrastructure was also cited by respondents. EME combines its expertise and services with a broad national footprint that should enable it to quickly mobilize for projects generated by the stimulus plan. In terms of the Smart Grid, Johnson Controls (JCI) and Itron (ITRI) appear best positioned with Itron having the added advantage that a major portion of its business focuses on Smart Meters and Meter Infrastructure for electric utilities.

Broadband Network Infrastructure


Broadband was a third sector focused on in this survey. A series of questions were posed to 173 respondents working for companies involved in U.S. broadband infrastructure projects and while they didnt find this sector benefiting as much in the short-term, its seen as an important U.S. investment over the next few years. Fiber to the X (FTTx; +15) and WiMax (+12) are the broadband network project areas expected to see the most growth in spending over the next year.

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ChangeWave Research: Infrastructure Projects

Key Barriers As we found with our other sectors, Not Enough Funding (55%) and Too Much Bureaucracy (50%) are considered major roadblocks for bringing U.S. broadband infrastructure up to 21st century standards. Companies to Watch Cisco (CSCO) is of course the company to watch here, but Corning (GLW) also received mention from our industry respondents. Cisco basically owns the industry standards, its competition is shrinking, and it has the strongest strategic partnerships and billions in savings. It handles the high-margin plumbing, while network providers compete for the low-margin direct to consumer business. Corning is a major supplier of optical fiber, cable and hardware for the telecommunications industry. This segment, representing 30% of the companys sales, should benefit from the broadband network build-out over the next 12 months according to the survey results. Bottom Line This survey of industry respondents focused primarily on infrastructure spending in the Transportation, Electricity/Smart Grid and Broadband sectors. Below is a summary of infrastructure projects in these sectors that are expected to see the most growth from the inflow of U.S federal stimulus dollars, along with the companies most expected to benefit.

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ChangeWave Research: Infrastructure Projects

Summary of Key Findings


Infrastructure Areas Benefiting from Economic Stimulus Infrastructure Projects Set For Greatest Growth Automotive (e.g., roads and bridges) (+59) Mass-Transit (e.g., Buses, Metro-Rail) (+7) Power Lines (+26) Control Systems (+13) (e.g., generators, switches & circuit breakers Smart Meters and Meter Infrastructure (+36) Fiber to the X (FTTx) (+15) WiMax (+12) Best Positioned Companies Caterpillar (CAT) CEMEX (CX) Granite Construction (GVA) Fluor (FLR) General Electric (GE) Siemens AG (SI) ABB Ltd. (ABB) EMCOR (EME) Johnson Controls (JCI) Itron (ITRI) Cisco (CSCO) Corning (GLW)

(1) Transportation Infrastructure

(2) Electricity/ Smart Grid Infrastructure

(3) Broadband Network Infrastructure

Note that during the 2nd Quarter we will be conducting surveys of the Alternative Energy industry and the Water Industry to track federal infrastructure spending in these critical areas as well along with the companies most expected to benefit.
The ChangeWave Research Network is a group of 20,000 highly qualified business, technology, and medical professionals as well as early adopter consumers who work in leading companies of select industries. They are credentialed professionals who spend their everyday lives on the frontline of technological change. ChangeWave surveys its Network members weekly on a range of business and consumer topics, and converts the information into a series of proprietary quantitative and qualitative reports.

Helping You Profit From A Rapidly Changing World www.ChangeWave.com

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ChangeWave Research: Infrastructure Projects

Table of Contents
The Findings .................................................................................................................. 9 Transportation Infrastructure: Roads, Transit & Aviation .......................................... 11 Electricity/Smart Grid Infrastructure.......................................................................... 15 Broadband Network Infrastructure............................................................................ 20 ChangeWave Research Methodology........................................................................ 25 About ChangeWave Research.................................................................................... 25

This information is from ChangeWave Research and contains confidential business information. It may not be copied or distributed without permission. 2009 ChangeWave Research. All rights reserved. 8

ChangeWave Research: Infrastructure Projects

I. The Findings
Introduction: Where will President Obamas economic stimulus dollars flow in the race to upgrade Americas infrastructure and which sectors and companies will reap the biggest rewards? To find out, we surveyed 409 members of the ChangeWave Research Network who work for companies involved with infrastructure projects. The March 12-17 survey focused primarily on infrastructure spending in the Transportation, Electricity/Smart Grid and Broadband sectors. The results provide an initial roadmap on where stimulus dollars are most likely to be spent within these rapidly evolving sectors, and which companies should win and lose as a result. Note this is a benchmark survey. As such, it provides an early look at industry infrastructure trends that will be the subject of future research on best positioned sectors and companies. It is the first in a series of ChangeWave industry surveys that will be tracking the impact of U.S. federal stimulus spending.

The Race for Federal Infrastructure Dollars


Industry respondents were asked which infrastructure areas they think will benefit most from the U.S. economic stimulus package in the next 12 months. Not surprisingly, Transportation infrastructure (62%) was the biggest winner followed by Alternative Energy (44%). Electricity/Smart Grid infrastructure (29%) and Water infrastructure (11%) also stood out.

This information is from ChangeWave Research and contains confidential business information. It may not be copied or distributed without permission. 2009 ChangeWave Research. All rights reserved. 9

ChangeWave Research: Infrastructure Projects Heres a look at the complete question: Over the next 12 months, which of the following infrastructure-related areas do you think will benefit most from the economic stimulus package? (Choose No More Than Two) Transportation Infrastructure (Roads, Transit & Aviation) Alternative Energy Infrastructure Electricity Grid Infrastructure Water Infrastructure Broadband Network Infrastructure Oil & Natural Gas Infrastructure Don't Know Other 62% 44% 29% 11% 10% 4% 9% 1%

ChangeWave recently conducted surveys on the Alternative Energy Industry (Jan 2009) and Water Industry (Oct 2009). In the current survey, we have taken a close-up look at the Transportation and Electricity/Smart Grid industries both greatly affected by the U.S. government stimulus bill and we look at the Broadband Network infrastructure industry.

Infrastructure Projects Set for Greatest Growth


First, respondents identified the key project areas they think will experience the most growth over the next 12 months within each industry: Which of the following U.S. Infrastructure projects do you think will see the most/least growth in spending over the next 12 months? Most Growth Transportation Projects Automotive Infrastructure (e.g., Roads, Bridges) Mass-Transit Infrastructure (e.g., Buses, Metro-Rail) Electricity Grid Projects Power Lines Control Systems (i.e., generators, switches, circuit breakers) Smart Grid Projects Smart Meters / Meter Infrastructure Broadband Network Projects Fiber To The X (FTTx) WiMax 63% 15% 36% 22% Least Growth 4% 8% 10% 9% Net Difference Score +59 +7 +26 +13

37% 20% 18%

1% 5% 6%

+36 +15 +12

Next, we took a closer look at infrastructure winners and losers within each industry, beginning with Transportation.

This information is from ChangeWave Research and contains confidential business information. It may not be copied or distributed without permission. 2009 ChangeWave Research. All rights reserved. 10

ChangeWave Research: Infrastructure Projects

(A) Transportation Infrastructure: Roads, Transit & Aviation


Respondents Involved With Transportation Infrastructure (n = 168) A series of questions were posed to 168 respondents working for companies involved in U.S. transportation infrastructure projects. Here are the infrastructure areas that industry respondents think will see the most and least growth in spending over the next 12 months:

Automotive Infrastructure (e.g., roads and bridges) is the clear winner here, with 63% of industry respondents believing it will experience the most growth over the next 12 months and only 4% believing it will experience the least growth (Net Difference Score = +59). Of course, a key reason for this is many road and bridge projects have been in the works for years and are currently shovel-ready, even as they wait for funding. Mass-Transit Infrastructure (e.g., Buses, Metro-Rail) came in a distant second, with 15% believing it would experience the most growth and 8% the least growth (Net Difference = +7). On the downside, Railway infrastructure (e.g., High Speed Rail, AMTRAK) and Aviation infrastructure (e.g., Airports, Runways) trailed far behind. Note that this survey was conducted prior to President Obamas latest announcement detailing plans to build a nationwide system of high-speed rail lines. Heres another look at the results: Over the next 12 months, which of the following U.S. Transportation Infrastructure projects do you think will see the most growth in spending? Automotive Infrastructure (e.g., Roads, Bridges) Mass-Transit Infrastructure (e.g., Buses, Metro-Rail) Railway Infrastructure (e.g., High Speed Rail, AMTRAK) Aviation Infrastructure (e.g., Airports, Runways) None Will Experience a Growth in Spending Dont Know / Other / No Answer 63% 15% 6% 3% 4% 10%

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ChangeWave Research: Infrastructure Projects And which of the following U.S. Transportation Infrastructure projects do you think will see the least growth in spending over the next 12 months? Aviation Infrastructure (e.g., Airports, Runways) Railway Infrastructure (e.g., High Speed Rail, AMTRAK) Mass-Transit Infrastructure (e.g., Buses, Metro-Rail) Automotive Infrastructure (e.g., Roads, Bridges) Dont Know / Other / No Answer Net Difference Score Most Growth Automotive Infrastructure (e.g., Roads, Bridges) Mass-Transit Infrastructure (e.g., Buses, Metro-Rail) Railway Infrastructure (e.g., High Speed Rail, AMTRAK) Aviation Infrastructure (e.g., Airports, Runways) 63% 15% 6% 3% Least Growth 4% 8% 27% 42% Net Difference Score +59 +7 -21 -39 42% 27% 8% 4% 18%

Respondents also rated which entities they thought would see the biggest increases in spending, and it's no surprise that the Federal Government will be the main source. Over the next 12 months, do you think spending on Transportation Infrastructure projects within each of the following U.S. sectors will increase, decrease, or will spending remain the same compared to the previous 12 months? Significant Slight Slight Significant Remain Don't Increase Increase Decrease Decrease the Know in in in in Same Spending Spending Spending Spending 8% 1% 1% 10% 55% 25% 26% 14% 5% 39% 33% 16% 12% 21% 20% 10% 15% 19% 6% 8% 21% 8% 10% 18%

Federal Government State Government Local Government Private Sector

This information is from ChangeWave Research and contains confidential business information. It may not be copied or distributed without permission. 2009 ChangeWave Research. All rights reserved. 12

ChangeWave Research: Infrastructure Projects Key Barriers We also asked respondents about the biggest barriers facing U.S. transportation infrastructure projects. What do you think are the biggest barriers to bringing U.S. Transportation Infrastructure up to 21st century standards? (Choose No More Than Two) Too Much Bureaucracy Not Enough Funding NIMBY (Not-In-My-Back-Yard) Issues Land/Property Issues Lack of Public Interest Legal Issues Other 61% 52% 25% 14% 9% 7% 8%

Bureaucratic Issues (61%) were the biggest barrier identified by respondents likely due to the multiple layers of decision makers involved in the approval process. Not Enough Funding (52%) was also a key barrier. Note that the American Association of State Highway and Transportation Officials (AASHTO) has identified 5,148 transportation projects that are ready to go in the U.S. worth more than $64 billion. Not-In-My-Back-Yard issues (25%) also received mention. Companies to Watch We asked industry respondents for their opinion on which companies heavily involved in transportation infrastructure will benefit most over the next 12-24 months. Caterpillar (CAT) and CEMEX (CX) ranked at the top of the list, which is not surprising as both play a major role in automotive infrastructure (e.g., roads and bridges). According to one respondent, industry leader Caterpillar represents American ingenuity and has established itself as a decently run company thats managed its international dealings quite well. Another calls it the foundation of any infrastructure build. Building materials producer CEMEX is also well positioned as a supplier of cement, concrete and other material for upgrading roads and bridges. They supply significant material for all construction projects, and their fuel costs have dropped writes one respondent. Construction services and materials producer Granite Construction (GVA) was also cited by our respondents. While GVA is a smaller company, its primary focus is on transportation infrastructure projects including roads and highways and the production of construction materials. Their business clearly falls within the sweet spot of where stimulus money will flow. As one California-based industry respondent puts it, Granite should get most of the local highway projects that will be hitting the streets in California over the next 6 months. Fluor (FLR) a global leader in engineering, procurement and construction also ranked high on the list and is well-known for managing government funded projects. However, U.S. transportation projects represent a small percentage of its overall revenues.

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ChangeWave Research: Infrastructure Projects As a follow-up question, we asked respondents Which one Transportation Infrastructure company do you think will benefit most and why? Heres a sampling of responses: ATS09490 writes, "Caterpillar (CAT) - foundation of any infrastructure build." RRT2061 writes, "Caterpillar (CAT) - you can't build anything without construction equipment." ALE12910 writes, " Caterpillar (CAT) represents American ingenuity in this area and has established itself as a decently run company and one that has managed its international dealings quite well." WOM43634 writes, " Caterpillar (CAT) - being deeply entrenched in the construction field, they will be 'go-to' equipment providers." CSN64168 writes, "Caterpillar (CAT) - demand for heavy equipment that meets the new environmental standards." ELI08474 writes, "CEMEX (CX) - bridge and building construction." ALN98201 writes, "CEMEX (CX) - lower fuel costs, more spending for new state, county, local government buildings in Obama's bailout bills." HAT2669 writes, "CEMEX (CX) - sweet spot in materials offerings." ASR3813 writes, "CEMEX (CX) supplies significant material for all construction projects and their fuel costs have dropped." GCL82843 writes, "Fluor (FLR) to manage government funded projects. These need fast tracking and Flour has the capability." IVA38065 writes, "Fluor (FLR) - track record, resources & marketing." HIG19963 writes, "GE - passenger rail electric upgrades, electric grid." DAV90905 writes, "GE, due to world presence, including China, India etc, where stimulus will build out China etc." 44008937 writes, "Granite Construction (GVA) will get most of the local highway projects hitting the streets in the next 6 months." IRV96319 writes, "Granite (GVA) - based in CA where a lot of the money will go." JON82044 writes, "I think Bombardier will do very well with their focus on light rapid transit, and short haul aircraft." DAV3956 writes, "Nucor (NUE) - low cost producer." RIC4676 writes, "Nucor (NUE) - provides specialty steel to bridges, alternative energy, mass transit, etc."
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ChangeWave Research: Infrastructure Projects GEO98215 writes, "URS - broadly diversified." JAS37448 writes, "URS - strong in roadway/highway design & construction." JP195429 writes, "US Steel because of the ban on the use of imported steel and the increasing need for steel."

(B) Electricity/Smart Grid Infrastructure


Respondents Involved With Electricity Grid Infrastructure (n = 134) A series of questions were also posed to 134 respondents working for companies involved in U.S. Electricity/Smart Grid infrastructure projects. Here are the Electricity and Smart Grid Infrastructure areas that respondents think will see the most and least growth in spending over the next 12 months:

Power Lines (+26) are expected to see the strongest growth over the next 12 months. Control Systems (+13) including generators, switches and circuit breakers are also seen as performing well. Heres another look at the data: Over the next 12 months, which of the following Electricity Grid Infrastructure subsectors do you think will see the most growth in spending? Power Lines Control Systems (i.e. generators, switches, circuit breakers) Communications Systems (i.e. microwaves, optical fibers) Transformers Cables None Will Experience a Growth in Spending Dont Know / Other / No Answer 36% 22% 14% 4% 3% 4% 14%

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ChangeWave Research: Infrastructure Projects And which of the following U.S. Electricity Grid Infrastructure sub-sectors do you think will see the least growth in spending over the next 12 months? Transformers Communications Systems (i.e. microwaves, optical fibers) Cables Power Lines Control Systems (i.e. generators, switches, circuit breakers) Dont Know / Other / No Answer Net Difference Score Net Most Least Difference Growth Growth Score 36% 10% +26 22% 9% +13 14% 16% -2 4% 16% -12 3% 15% -12 16% 16% 15% 10% 9% 32%

Power Lines Control Systems (i.e., generators, switches, circuit breakers) Communications Systems (i.e., microwaves, optical fibers) Transformers Cables

In terms of the smart grid, Smart Meters and Meter Infrastructure (+36) are seen as experiencing the most growth over the next year as is clear in the chart below:

Which specific Smart Grid technologies do you think will experience the most growth in spending over the next 12 months? Smart Meters / Meter Infrastructure Transmission Infrastructure Smart Components & Power Electronics Consumer Demand Monitoring and Management Smart Sensors Smart Demand Response Smart Protection Gear None Will Experience a Growth in Spending Dont Know / Other / No Answer 37% 18% 7% 7% 6% 4% 1% 2% 18%

This information is from ChangeWave Research and contains confidential business information. It may not be copied or distributed without permission. 2009 ChangeWave Research. All rights reserved. 16

ChangeWave Research: Infrastructure Projects And which specific Smart Grid technologies do you think will experience the least growth in spending over the next 12 months? Consumer Demand Monitoring and Management Transmission Infrastructure Smart Protection Gear Smart Components & Power Electronics Smart Demand Response Smart Sensors Smart Meters / Meter Infrastructure Dont Know / Other / No Answer Net Difference Score Current Survey (Mar 09) Net Most Least Difference Growth Growth Score 37% 1% +36 6% 3% +3 18% 18% 0 7% 7% 0 4% 4% 0 7% 19% -12 1% 13% -12 19% 18% 13% 7% 4% 3% 1% 34%

Smart Meters / Meter Infrastructure Smart Sensors Transmission Infrastructure Smart Components & Power Electronics Smart Demand Response Consumer Demand Monitoring and Management Smart Protection Gear

Respondents again believe the Federal Government would experience the largest increases in spending. Over the next 12 months, do you think spending on Electricity Grid Infrastructure projects within each of the following U.S. sectors will increase, decrease, or will spending remain the same compared to the previous 12 months? Significant Slight Slight Significant Remain Don't Increase Increase Decrease Decrease the Know in in in in Same Spending Spending Spending Spending 9% 1% 0% 13% 43% 34% 16% 15% 9% 25% 39% 23% 28% 18% 34% 10% 10% 13% 3% 4% 3% 17% 15% 18%

Federal Government State Government Private Sector Local Government

This information is from ChangeWave Research and contains confidential business information. It may not be copied or distributed without permission. 2009 ChangeWave Research. All rights reserved. 17

ChangeWave Research: Infrastructure Projects Key Barriers Industry respondents find Not-In-My-Back-Yard issues (NIMBY; 43%) to be the number one barrier to upgrading the U.S. electricity grid. In other words, while the public wants electricity delivered to their homes they dont want power lines in their back yard. What do you think are the biggest barriers to bringing the U.S. Electricity Grid Infrastructure up to 21st century standards? (Choose No More Than Two) Current Survey Mar 09 43% 41% 37% 16% 9% 9% 14%

NIMBY (Not-In-My-Back-Yard) Issues Too Much Bureaucracy Not Enough Funding Land/Property Issues Lack of Public Interest Legal Issues Other

Other important barriers include Too Much Bureaucracy (41%) and Not Enough Funding (37%). Companies to Watch Multinational conglomerates General Electric (GE) and Siemens AG (SI) are of course integral suppliers for major energy infrastructure projects. Though a relatively small part of their sales involve the U.S. electricity grid, both companies will be top beneficiaries of federal stimulus funding, according to industry respondents. ABB Ltd. (ABB) and EMCOR Group (EME), two companies extremely active in electricity transmission and distribution projects, are expected to get a significant boost from increased U.S. government spending in these areas. ABB products and services focus on transmitting and distributing electricity. "ABB is a big beneficiary due to their large global presence and diversity of product offerings to utilities," one industry respondent points out. As an infrastructure client of ABB puts it, "ABB sells and does almost everything we want, where we want it, when we want it." EMCOR Group a leader in mechanical and electrical construction and energy infrastructure was also cited by respondents. EME combines its expertise and services with a broad national footprint that should enable it to quickly mobilize for projects generated by the stimulus plan. In terms of the Smart Grid, Johnson Controls (JCI) and Itron (ITRI) appear best positioned with Itron having the added advantage that a major portion of its business focuses on Smart Meters and Meter Infrastructure for electric utilities.

This information is from ChangeWave Research and contains confidential business information. It may not be copied or distributed without permission. 2009 ChangeWave Research. All rights reserved. 18

ChangeWave Research: Infrastructure Projects Which one Electricity Grid Infrastructure company do you think will benefit most? Please mention why. Sample of Responses CRA58411 writes, "ABB - they sell and do almost everything we want, where we want it, when we want it." DSC99362 writes, "ABB will see the best benefit due to their large global presence and diversity of product offerings to the utility industry." CLI94984 writes, "Eaton Corp. (ETN) since it has a full line of new products needed to bring updated safety, control, and monitoring of the electric power grid." SAM82266 writes, "Eaton (ETN) - strong coverage of commercial, institutional, government markets." RAN92075 writes, "EMCOR Group (EME) - product line." RIC10260 writes, "GE - access to capital through GE Capital is important in a tightcredit environment." GIG97798 writes, "GE - Buy American and their wide range of products - once projects become clearly defined." DOL37209 writes, "GE - Over time, as alternative sources of energy increase, e.g. wind and solar, we will move from a system with relatively few central generating stations to one with many dispersed power sources feeding the grid. On the demand side it will be necessary to implement more sophisticated load management, load control and also possibly energy storage. GE has the breadth and depth of technology and expertise to address these challenges and opportunities." DAD09079 writes, "GE has a good entry at several areas, broad participation plus they may contribute to some pre-planning with government entities." BOB09953 writes, "Nature's Power Co. - 100% alternative energy and new transmission system." RCO5926 writes, "Quanta Services Inc (PWR) are involved with all aspects of the grid development - Transmission, Substation, Distribution, plus some Smart Grid, and they also have an extensive national representation and good reputation." DJH08346 writes, "Rockwell Automation (ROK) - industry leading controls equipment." BRA04038 writes, "Serveron - part of BP Global." JIM94736 writes, "Siemens (SI) is a full-line supplier to the utilities." DSP48927 writes, "URS (URS) and Black & Veatch - permitting & plans. They do front end work on stimulus projects & local environmental firms."
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ChangeWave Research: Infrastructure Projects AMA04519 writes, "Woodward Governor (WGOV) - Hydro generation has many old power plants and requires routine maintenance. There are not many companies out there that manufacture/maintain governors which is a major piece of equipment within generation. One could consider it a niche market." MIG04410 writes, "Xcel Energy (XEL) - Centrally situated in the wind corridor and capable of owning and maintaining a significant portion of the grid improvements. Also, Xcel is a big purchaser of renewable energy. They have made some really good decisions in that area."

(C) Broadband Network Infrastructure


Respondents Involved With Broadband Network Infrastructure (n = 173) Another sector focused on in the survey was Broadband Network Infrastructure. A series of questions were posed to 173 respondents working for companies involved in U.S. broadband infrastructure projects and while they didnt find this sector benefiting as much in the short-term, its seen as an important U.S. investment over the next few years. Fiber to the X (FTTx; +15) and WiMax (+12) are the broadband network project areas expected to see the most growth in spending over the next year.

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ChangeWave Research: Infrastructure Projects Over the next 12 months, which of the following Broadband Network Infrastructure sub-sectors do you think will see the most growth in spending? Fiber To The X (FTTx) WiMax Broadband Loop Carriers / Multi-service Access Nodes Municipal Networks Wireless LAN Access Technologies Access Equipment Passive Optical Networks (PONs) Satellite Cable Modem Termination Systems (CMTSs) DSL None Will Experience a Growth in Spending Dont Know / Other / No Answer 20% 18% 11% 8% 6% 5% 4% 4% 3% 2% 2% 5% 12%

And which of the following U.S. Broadband Network Infrastructure sub-sectors do you think will see the least growth in spending over the next 12 months? Satellite DSL Municipal Networks Cable Modem Termination Systems (CMTSs) WiMax Fiber To The X (FTTx) Broadband Loop Carriers / Multi-service Access Nodes Wireless LAN Access Equipment Passive Optical Networks (PONs) Access Technologies Dont Know / Other / No Answer Net Difference Score Most Growth Fiber To The X (FTTx) WiMax Broadband Loop Carriers / Multi-service Access Nodes Access Technologies Wireless LAN Passive Optical Networks (PONs) Access Equipment Municipal Networks Cable Modem Termination Systems (CMTSs) DSL Satellite 20% 18% 11% 5% 6% 4% 4% 8% 2% 2% 3% Net Least Difference Growth Score 5% +15 6% +12 +8 3% 0% +5 3% +3 2% +2 2% +2 9% -1 7% -5 20% -18 21% -18 21% 20% 9% 7% 6% 5% 3% 3% 2% 2% 0% 23%

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ChangeWave Research: Infrastructure Projects Once again, respondents believe Federal Government spending will see the most increases in spending. Over the next 12 months, do you think spending on Broadband Network Infrastructure projects within each of the following U.S. sectors will increase, decrease, or will spending remain the same compared to the previous 12 months? Significant Slight Slight Significant Remain Don't Increase Increase Decrease Decrease the Know in in in in Same Spending Spending Spending Spending 16% 4% 1% 13% 30% 36% 8% 6% 12% 30% 28% 36% 27% 30% 22% 14% 17% 15% 8% 6% 6% 13% 12% 9%

Federal Government State Government Local Government Private Sector

Key Barriers As we found with our other sectors, Not Enough Funding (55%) and Too Much Bureaucracy (50%) are considered major roadblocks for bringing U.S. broadband infrastructure up to 21st century standards. What do you think are the biggest barriers to bringing the U.S. Broadband Network Infrastructure up to 21st century standards? (Choose No More Than Two) Current Survey Mar 09 55% 50% 12% 12% 10% 8% 3% 8%

Not Enough Funding Too Much Bureaucracy Lack of Public Interest Technological Limitations Legal Issues Land/Property Issues Don't Know Other

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ChangeWave Research: Infrastructure Projects Companies to Watch Cisco (CSCO) is of course the company to watch here, but Corning (GLW) also received mention from our industry respondents. Cisco basically owns the industry standards, its competition is shrinking, and it has the strongest strategic partnerships and billions in savings. It handles the high-margin plumbing, while network providers compete for the low-margin direct to consumer business. Corning is a major supplier of optical fiber, cable and hardware for the telecommunications industry. This segment, representing 30% of the companys sales, should benefit from the broadband network build-out over the next 12 months according to the survey results. Which one Broadband Network Infrastructure company do you think will benefit most? Please mention why. CUN13828 writes, "Alcatel-Lucent (ALU) has broadest product base." KCK21845 writes, "Alcatel-Lucent (ALU) - they have their hands in multiple 'pies' considering the several broadband technology options." KEV58677 writes, "AT&T (T) - They are building out 3G wireless network and will be finished in Southern California 1Q 2010. Verizon (VZ) is behind." CON85510 writes, "AT&T (T) - due to more variety of service offering and lowering their monthly package subscription. Money is tight and people are looking to lower their cost of accessing TV, modem and phone service." EDG96105 writes, "Ciena (CIEN) has quietly consolidated a lot of key technologies." JAS40738 writes, "Cisco (CSCO) basically owns the industry standards, its competition is shrinking, and it has the strongest partnerships and billions in savings. It handles the high-margin plumbing, while network providers compete for the lowmargin direct to consumer business." DOL37209 writes, "Cisco (CSCO) - Arms merchant to almost the all the other participants." MAT9449 writes, "Cisco (CSCO) - Great equipment and support. Seems to have a lock as preferred provider in many areas." GIG97798 writes, "Cisco (CSCO) - most diverse footprint - is well positioned in both consumer and service provider sides." DAV94761 writes, "Cisco (CSCO) - is positioning their products to work with every company's equipment so they will dominate." DLO0787 writes, "Cisco (CSCO) - It's all about bringing Ethernet to the consumer home. Cisco owns the Ethernet world and stands the most to win."
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ChangeWave Research: Infrastructure Projects ARP47488 writes, "Clearwire (CLWR) - they have the infrastructure in place and just need to integrate it and convince the public it is a better alternative." DAN17494 writes, "Corning (GLW) - supplier of fiber cable and passive components to biggest majority of projects." JMT94035 writes, "Corning (GLW) - because of the need for fiber optic cabling." GRA09983 writes, "D-Link Systems because they have an IPv6 ready Customer Premises Unit available now." DRD12640 writes, "Dycom (DY) - They are well positioned to take advantage of the broadband boom, both from the engineering and construction standpoint." MZF09988 writes, "Harris (HRS) - will continue to do well with life cycle replacements and updates to its Federal Systems Customers." XPF99689 writes, "Mas Tec (MTZ) - highly connected subcontractor." CIM10101 writes, "Motorola (MOT) because of their Canopy products enabling small companies to serve broad band to remoter locations." LAR04472 writes, "Motorola (MOT) - will get its act together. Has great engineering." AMA28871 writes, "Nortel (NT) - It has knowledge and technology." KRI03894 writes, "Occam (OCNW) - most of the money is going to rural and they dominate that along with Calix." LML96438 writes, "Qualcomm (QCOM) due to licensed IP throughout entire wireless ecosystem." JAC04546 writes, "Qwest (Q) due to their private and public contracts." JJD89195 writes, "Verizon (VZ) because they have already made the investment into upgrading the infrastructure and the technology of the terminal equipment is growing quickly."

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ChangeWave Research: Infrastructure Projects

II. ChangeWave Research Methodology


This report presents the findings of a recent ChangeWave survey focusing on infrastructure projects. The survey was conducted between March 12-17, 2009, and a total of 409 respondents working for companies involved in infrastructure projects participated. ChangeWave's proprietary research and business intelligence gathering system is based upon the systematic gathering of valuable business and investment information directly over the Internet from accredited members. The Research Network is assembled from senior technology and business executives in leading companies of select industries. Nearly 3 out of every 5 members (56%) have advanced degrees (e.g., Master's or Ph.D.) and 93% have at least a four-year bachelor's degree. The business and investment intelligence provided by ChangeWave provides a real-time view of companies, technologies and business trends in key market sectors, along with an indepth perspective of the macro economy well in advance of other available sources.

III. About ChangeWave Research


ChangeWave Research, a subsidiary of InvestorPlace Media, LLC, identifies and quantifies "change" in industries and companies through surveying a network of thousands of business executives and professionals working in more than 20 industries. The ChangeWave Research Network is a group of 20,000 highly qualified business, technology, and medical professionals as well as early adopter consumers who work in leading companies of select industries. They are credentialed professionals who spend their everyday lives on the frontline of technological change. ChangeWave surveys its Network members weekly on a range of business and consumer topics, and converts the information into a series of proprietary quantitative and qualitative reports. ChangeWave delivers its products and services on the Web at www.ChangeWave.com. ChangeWave Research does not make any warranties, express or implied, as to results to be obtained from using the information in this report. Investors should obtain individual financial advice based on their own particular circumstances before making any investment decisions based upon information in this report. For More Information:
ChangeWave Research 9201 Corporate Blvd. Rockville, MD 20850 USA Telephone: 301-250-2200 Fax: 301-926-8413 www.ChangeWave.com alliance@changewave.com

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