Insituform Technologies, Inc (INSU)

Company Summary

• Insituform Technologies, Inc was incorporated in 1980, and provides repair services
for sewer, water, energy, and mining piping systems and corrosion protection of
industrial pipelines in the United States and worldwide.
o Five business segments:
 North America Sewer Rehabilitation
 European Sewer Rehabilitation
 Asia-Pacific Sewer Rehabilitation
 Water Rehabilitation
 Energy and Mining

o Sewer Rehabilitation Operations

 The sewer rehabilitation activities are conducted principally through
installation and other construction operations performed directly by the
Company or its subsidiaries.
 The North American Sewer Rehabilitation operations include research and
development, engineering, training and financial support systems. During
the year ended December 31, 2009, tube manufacturing and processing
 facilities for North America were maintained in nine locations,
geographically dispersed throughout the United States and Canada.
 Outside North America, the Company conducts Insituform CIPP process
rehabilitation operations in the United Kingdom, France, The Netherlands,
Spain, Portugal, Switzerland, Hong Kong, Australia and Singapore through
the wholly owned subsidiaries and in India, Germany, Czech Republic,
Slovakia, Hungary and Ireland through joint venture relationships. It also
maintains a manufacturing facility in Wellingborough, England to support
the European operation.

o Water Rehabilitation Services

 Company performs water rehabilitation operations using the Insituform Blue
product portfolio. Under the Insituform Blue brand, the Company restores
water pipes using the InsituMain, InsituGuard, InsituFlex, InsituFold and
Thermopipe lining systems throughout North America, the United Kingdom
and Hong Kong through the existing operations.

o Energy and Mining Operations

 The energy and mining operations perform rehabilitation and corrosion
protection services for industrial, mineral, oil and gas piping systems. It also
offer products for gas release and leak detection systems.
 The operations are conducted through the United Pipeline Systems division,
based in Durango, Colorado, and the Bayou and Corrpro subsidiaries, based
 in New Iberia, Louisiana, and Medina, Ohio, respectively. Some energy and
mining operations outside of the United States are conducted through
wholly owned subsidiaries in the United Kingdom, Portugal, Chile, Canada,
Kuwait, United Arab Emirates, Argentina and Brazil and through the Mexican
joint venture subsidiary in which INSU owns a 55% equity interest.
o Business activities also include research and development, manufacturing,
distribution, installation, coating and insulation, cathodic protection and
licensing.

• Recent Acquisitions:
o February 20, 2009: completed the acquisition of The Bayou Companies,
L.L.C. and its related entities (Bayou)
 The Bayou business performs internal and external pipeline coating, lining,
weighting and insulation, as well as specialty fabrication and services for
offshore deepwater installations, including project management and
logistics.
o March 31, 2009: completed the acquisition of Corrpro Companies, Inc. and its
subsidiaries (Corrpro)
 The Corrpro business performs corrosion protection services, including
engineering, product and material sales, construction and installation,
inspection, monitoring and maintenance, coatings, and focuses in cathodic
protection.
 o June 30, 2009: acquired the shares of its joint venture partner, VSL International
Limited, in Insituform Pacific Pty Limited (Insituform-Australia) and Insituform
Asia Limited (Insituform-Hong Kong)
o October 30, 2009: expanded its coating and insulation services in Canada, with
the acquisition of the pipe coating and insulation facility and related assets of
Garneau, Inc., through the joint venture Bayou Perma-Pipe Canada, Ltd. (BPPC)
o December 3, 2009: acquired the 25% noncontrolling interest in the cured-in-
place-pipe (CIPP) tube manufacturing operation, known as Insituform Linings
Limited (Instituform Linings).
o January 29, 2010: acquired the Singapore CIPP licensee, Insitu Envirotech (S.E.
Asia) Pte Ltd (Insituform-Singapore).

• Subsidiary Companies:
o United Pipeline Systems : Headquartered in Durango, Colorado, United
Pipeline Systems offers HDPE lining systems for the rehabilitation and protection
of industrial and municipal pipelines used for the transport of corrosive liquids
and gases in the energy and mining sectors.
o Corrpro Companies, Inc.: Offering cathodic protection and engineering
services for the prevention of corrosion, Corrpro's headquarters are in Houston,
Texas.
o The Bayou Companies, Inc.: For over 65 years, Bayou has been providing
coating systems and offshore technologies for oil and gas pipelines.
*(Sources: Bloomberg, Reuters & www.insituform.com)

Industry Update
Failing pipelines:
• Deteriorating infrastructure is costing America financially and socially. Federal officials
recorded 2,840 significant gas pipeline accidents since 1990, more than a third
causing deaths and significant injuries.

• The United States has a 2.5-million-mile network of gas transmission lines, and more
than 60 percent of the nation’s gas transmission lines are forty years old or older.
Most of them are made of steel, and older varieties are prone to corrosion. More
problematic are pipes made of cast iron. A few places in Pennsylvania still had wooden
gas pipes as of last year, officials there stated.

• San Bruno explosion —killed four people, injured dozens, and destroyed nearly forty
homes — the result of malfunctioning of 44-year-old Pacific Gas & Electric
transmission line.
Increase in infrastructure spending:
• The U.S. is spending about 2% of GDP on infrastructure, while Europe is spending
about 5%, Australia and India about 2-3%, and China about 9-12%. For developed
countries, the average spending is 3%. Developing countries’ average is 6%.

• U.S. is increasing its effort to improve infrastructure: 2009, Congress passed the
American Recovery and Reinvestment Act, which allocated $105 billion to
infrastructure spending.

• Obama administration is also speaking of establishing National Infrastructure

Bank, to increase government and private party partnership in building American
infrastructure.

SWOT
Strengths:
• Partnership and operations across the world
• Diversified income from several sectors in addition to sewer pipelines: water, energy
and mining
o Experts in corrosion control and cathodic protection through Bayou Companies,
Corrpro Companies and United Pipeline Systems
• Premier deep water coating, insulation and prefabrication facilities on the Gulf Coast
 • Specialization in the pipeline repair industry that can be matched by few

Weakness:
• Small cap company, may be acquired by bigger firms

Opportunity:
• Strong need of pipeline repair due to aging infrastructure in the U.S.
• Increase in government partnership with private parties in the infrastructure sector
• Increase in spending on infrastructure world wide
• Low interest rate and borrowing cost

Threat:
• Increase in number of competitors
• Governmental projects may be assigned to larger cap companies
• Government may put infrastructure projects on halt due to limited budget
Porter’s Five Forces
of Competitive
Position New Market Entrants:

• Relatively hard for new

Insituform market entrants, INSU
Technologies is specialized and
experienced in the field of
pipeline repair.

Supplier Power: Competitive Rivalry: Buyer Power:

• Unemployment rate in the • Eliminated key • Low consumer demand

construction industry is competitors through volatility, pipelines are
high and wage cost is acquisitions. essential to the
low. functioning of society
• Potential threat is the
• Commodity price increase possibility of being
may lead to increase in acquired by large cap
construction expense. companies.

Product and Technology

Development:

• Enhances technology and

expertise through a series
of acquisitions.