"infrastructure" - how to invest

[jk]

how do you invest in "infrastructure"? if you look at e.g. macquarie's offerings, you find a collection of airport parking concessions, port operators, toll roads, utilities, airport fixed base operators, bulk liquid storage, etc. it seems to me that such operations are nice sources of revenue and dividends, but that's not what we mean in the discussions on this board when we refer to "investing in infrastructure."

i think "infrastructure," as used in discussions here, refers to the process of newly building or renewing current infrastructure, and investing in that might mean buying heavy equipment makers, steel companies, cement producers, large project construction contractors. [perhaps it could extend to some tech companies which produce backbone equipment or satellites or wimax, but this seems more speculative.] if so, then construction and materials would be the way to invest.

[Jim Nickerson]

Re: "infrastructure" - how to invest

how do you invest in "infrastructure"? if you look at e.g. macquarie's offerings, you find a collection of airport parking concessions, port operators, toll roads, utilities, airport fixed base operators, bulk liquid storage, etc. it seems to me that such operations are nice sources of revenue and dividends, but that's not what we mean in the discussions on this board when we refer to "investing in infrastructure."

i think "infrastructure," as used in discussions here, refers to the process of newly building or renewing current infrastructure, and investing in that might mean buying heavy equipment makers, steel companies, cement producers, large project construction contractors. [perhaps it could extend to some tech companies which produce backbone equipment or satellites or wimax, but this seems more speculative.] if so, then construction and materials would be the way to invest.

John Serrapere made a recommendation for what I believed he called an "infrastructure play" last year. I have tried to find the company he recommended here in his post, but I cannot find it. Perhaps someone with better search skills will come up with it.

[dbarberic]

Re: "infrastructure" - how to invest

I was thinking that a good proxy would be any mutual fund or ETF that invests in natural resources/base metals (excluding PMs). Construction, building, and heavy equipment is all find and dandy, but at the end of the day, they need the raw materials.

[jk]

Re: "infrastructure" - how to invest

jim, for you:
Current sell off consequence of pop in Low Quality Equity Bubble
June 12, 2006 ( John Serrapere - iTulip.com)



I also will buy BQY and MIC as plays on high quality besting junk and my expectation of a boom in infrastructure stocks. The U.S. has hell to pay for neglecting infrastructure and now must spend money that we do not have to fix things or we will not be able to compete with economies, like China and India (Chinidia), that are building modern, virgin more efficient infrastructure. We are gong to compete for the materials and services to fix things at the same time that Chindia is building virgin structures. However, our expenditures will primarily replace existing assets. The benefit of replaced infrastructure on long-term GDP growth is marginal versus the incremental value of virgin new infrastructure in Chinasia. BQY and MIC will have higher growth while we will have slower growth with bouts of Stagflations.

[quigleydoor]

Re: "infrastructure" - how to invest

how do you invest in "infrastructure"? if you look at e.g. macquarie's offerings, you find a collection of airport parking concessions, port operators, toll roads, utilities, airport fixed base operators, bulk liquid storage, etc. it seems to me that such operations are nice sources of revenue and dividends, but that's not what we mean in the discussions on this board when we refer to "investing in infrastructure."

I have been following Macquarie for some time. Interesting to see how this small Australian bank can develop a new model and securitize a bunch of assets that Americans have been neglecting for decades. Macquarie has many projects all over the world, and is penetrating America more slowly due to Americans' chauvinistic attitude toward municipal finance and public works.

I liked MIC, at $28, as a solid dividend earner. I liked the idea of foreign management and leadership adding value to American assets (I own DEG for this reason too). But I sold MIC at $42.20 because it seemed to be inflating along with everything else. Will buy again when it looks like a good value.

I am a bit skeptical of Macquarie Bank's financial engineering. Is this another Enron in the making?

i think "infrastructure," as used in discussions here, refers to the process of newly building or renewing current infrastructure, and investing in that might mean buying heavy equipment makers, steel companies, cement producers, large project construction contractors. [perhaps it could extend to some tech companies which produce backbone equipment or satellites or wimax, but this seems more speculative.] if so, then construction and materials would be the way to invest.

Macquarie's definition of infrastructure is different from yours. What you are describing is probably better labeled construction and heavy equipment.

A while ago I came across a conference agenda about infrastructure. It discusses terrain in good detail. Here it is. Most useful is the first session's handout.

You might also want to watch Chicago closely. It has been called the Silicon Valley of infrastructure finance by Bloomberg.

[DemonD]

Re: "infrastructure" - how to invest

There are many infrastructure "plays" if you will.

I saw an article off of yahoo yesterday that is showing how buffett is doing backdoor china infrastructure plays by buying a steel company in south korea, and freight train companies that run from the midwest US to the west coast.

You can also invest is base metals (either mining companies or the physical stuff). And then of course there are the blue chips like CAT, Alcoa, Illinois Tool Works, GE that are heavily involved in infrastructure.

Here is one that combines a couple things in one: Mueller Water Products (MWA or MWA-B), it's a pure play on water infrastructure, it was spun off from a bigger company (Walter Industries I believe) and is a solid buy even right now (at around 16/share), I would call it a definite buy at under 14/share. I think water is one of the if not the best way to "play" any infrastructure boom. The only caveat to this is that GE is one of the biggest players in water infrastructure so you do have an 800 pound gorilla as a competitor if you choose to invest in water infrastructure (and oh yeah, the housing bust may also hit MWA since they do a lot of residential building).

[bill]

Re: "infrastructure" - how to invest

A few good links:
http://transportation.house.gov/
http://www.nascocorridor.com/
http://www.alinda.com/
http://www.csis.org/component/option...k,view/id,568/
http://waterindustry.org/
http://www.reason.org/index.shtml
http://www.fhwa.dot.gov/ppp/index.htm
http://www.graniteconstruction.com/
http://www.progressrail.com/portal/p..._schema=PORTAL


The last few days I have been attending.http://www.eshow2000.com/awea/ It seems to be a Green correct industry and a lot of hot capital chasing deals. The large Wind Turbine over 100 KW are in big demand with delivery 2-3 years wait time from most manufactures at premium prices. The infrastructure for transmission lines are in high demand and badly needed to connect existing and future wind farms to large metropolitan regions. The electrical transmission infrastructure expansion will experience immediate growth. John Deere http://www.deere.com/en_US/jdc/produ...rgy/index.html is involved as a co-developer in commercial wind and has intentions to expand its operations. The existing tax credits play a major part in this industry and it looks like they will continue as well as ramp up in 08-09 creating a wind industry expansion. The European Wind companies are aggressively entering the US market because of saturation levels in the UE. I will follow up with a more detail report after the conference
http://www.awea.org/
http://www.eere.energy.gov/windandhy...ralwindsiting/
http://www.eere.energy.gov/windandhy.../wind_maps.asp
http://www.nawindpower.com/page.php?5
http://www.renewableenergyaccess.com...0421DBF8E9685A

June 5, 2007
A 20,000-foot view of how the 2007 wind energy project picture is unfolding in the U.S.
by Kathy Belyeu, American Wind Energy Association
Although only a modest 124 MW of new wind power was commissioned in the U.S. in the first quarter of 2007, the impressive number of projects currently under construction is expected to make this year the biggest one yet by far in terms of new capacity installations. Over 4,500 MW of wind power projects are in the process of being built for completion this year and early next year, according to reports from American Wind Energy Association (AWEA) member companies.

[DemonD]

Re: "infrastructure" - how to invest

Although only a modest 124 MW of new wind power was commissioned in the U.S. in the first quarter of 2007, the impressive number of projects currently under construction is expected to make this year the biggest one yet by far in terms of new capacity installations. Over 4,500 MW of wind power projects are in the process of being built for completion this year and early next year, according to reports from American Wind Energy Association (AWEA) member companies.

Only 124 MW commissioned... might that be due to tightening credit, where companies can't get credit for projects? Just wondering..

Any other ideas out there?

[bill]

Re: "infrastructure" - how to invest

Only 124 MW commissioned... might that be due to tightening credit, where companies can't get credit for projects? Just wondering..

Any other ideas out there?

I think its because of a transmission problem.
http://www.awea.org/newsroom/release...ng_041907.html

The American Wind Energy Association (AWEA) today applauded the unanimous approval by the Federal Energy Regulatory Commission (FERC) of a new California Independent System Operator (ISO) transmission policy. The policy, which the U.S. wind energy industry has worked to develop and support, aims to address the “chicken or egg” problem that has bedeviled wind power development where no wind farms are built unless there is transmission, and no transmission is built unless there are wind farms already in place. Today’s ruling in effect states that, in windy areas where there is no transmission, transmission should be financed and built first as long as it is clear that there is a large energy resource to be tapped and that there is some financial commitment on the part of generating companies to eventually develop projects in the area.

[bill]

Re: "infrastructure" - how to invest

http://www.riverreporter.com/issues/...ad3-nietc.html

Hinchey vows to continue national corridor battle
NYRI executive trumpets house vote as a victory
By FRITZ MAYER
WASHINGTON, DC — In the wake of the defeat of a measure that would have prevented the federal government from trumping state governments on the issue of power line siting, Congressman Maurice Hinchey vowed to continue the fight. He said many lawmakers who voted against his measure did not understand it, and he promised to reintroduce similar legislation in the near future.
The measure, which was proposed as an amendment to the Energy and Water Appropriations Bill for 2008, was voted down by 174 to 257 on June 20. It would have prevented the use of federal funds in the creation of National Interest Transmission Electricity Corridors.
An executive of New York Regional Interconnection (NYRI), on the other hand, called the vote a victory. William May, NYRI project manager, said, “New transmission lines, along with conservation and new generation from clean sources, will play a key role in ensuring reliable electricity supplies. We hope this bipartisan vote by the House will encourage states to take actions that will keep our nation’s energy lifeblood flowing.”
Critics have challenged the need for the 200-mile NYRI power line project, which would run through eight counties in New York. The creation of a national corridor would allow the federal agencies to approve the project if state agencies reject it.
The proposed Atlantic Corridor covers nine states and the District of Columbia. Another proposed corridor in the west covers two additional states. While Hinchey, a Democrat, and his co-sponsor Congressman Frank Wolf of Virginia, a Republican, were unable to persuade their colleagues to support their measure, anti-corridor sentiment has been growing.
Over the past month, the governors of Connecticut, Pennsylvania, New York, New Jersey and Virginia have all publicly opposed the national corridors and the Energy Policy Act of 2005, which allowed for their creation.
However, according to NYRI, powerful groups including the International Brotherhood of Electrical Workers, the United States Chamber of Commerce and the American Wind Energy Association, support the creation of the national corridors.
Hinchey and Wolf are pushing three separate bills that would block national corridors or hinder their use by power line companies. The first bill would repeal the section of the Energy Policy Act of 2005 that authorized the national corridors. The second bill would strip the ability of the Federal Energy Regulatory Commission (FERC) to grant federal eminent domain authority to companies for power line projects.
The third bill would restrict the designation of national corridors and ensure that areas that are recognized for their scenic, natural, cultural or historic value are not included as part of any national corridor.


http://www.house.gov/list/press/ny22...floorvote.html

"The fight to stop the Department of Energy from moving forward with these so-called 'National Interest Electric Transmission Corridors' is far from over," Hinchey said. "States have done just fine in siting and permitting power line projects on their own and don't need the federal government to tell them what to do. We must not allow these powerful energy companies to simply come into town, seize private property, and construct massive power lines that will generate billions of dollars for them while the quality of life for residents is severely compromised. That's not what this country is about."

http://www.altenergystocks.com/

What's In Store For The Grid

One the biggest problems facing North American power markets is the age of, and lack of investment in, power grids. Over the next few years, we can likely expect some major investments going into refurbishing and expanding North American electricity distribution networks.
As an alternative energy investor, you probably want to have the grid issue on your radar. The reason is that as new money pours into this sector, certain firms with interesting technologies to make the grid more efficient could see some substantial upside.
The DOE announced, two days ago, that it had awarded funding for five grid-related projects. Among recipients of these funds are two publicly-listed alternative energy companies, namely American Superconductor (NASDAQ:AMSC) and SC Power Systems, which is the US unit of AIM-listed Zenergy Power (LSE:ZEN.L) or (ZNEPF.PK).
Grid modernization, like smart metering a year ago, is unlikely to get the average investor especially excited. However, given
the degree to which our power grids do need an upgrade, this is definitely an area worth keeping an eye on.

DISCLOSURE: AES Contributing Editor Neil Dikeman's firm has a banking relationship with Zenergy Power.

[zoog]

Re: "infrastructure" - how to invest

I can't shed any light on "how to invest", but here's a local example of an infrastructure project that even has a bit of alternative energy thrown in.

Received a bulletin in the mail today from the city about recent and upcoming projects at our wastewater treatment facility. One section is about power generation.

Sewage treatment at the plant produces more than one million cubic feet of digester gas every day. About 60 percent is methane gas. The plant uses about half the methane to generate heat and electricity for plant operations... Now the City of Portland is installing two 850-kilowatt engine-generators that will use the rest of the plant's methane and supply about 50% of its electricity. The project will cost about $8 million to build and will generate over half a million dollars worth of energy annually.

Sounds like a good use of resources to me. They don't say what company is providing the generators, but if known that could be a possible investment option if more cities are considering this kind of upgrade.

[DemonD]

Re: "infrastructure" - how to invest

zoog - great find!

now THIS is what a free market and capitalism is supposed to produce. Usable energy from a bi-product that would otherwise be waste will now power a 1.7 MW generator.

Of course I'm betting there's some special interest oil shill out there about to write an article about the negative effects of methane on water supplies and how it's all a big "boondoggle."

[FRED]

Re: "infrastructure" - how to invest

jim, for you:
Current sell off consequence of pop in Low Quality Equity Bubble
June 12, 2006 ( John Serrapere - iTulip.com)



I also will buy BQY and MIC as plays on high quality besting junk and my expectation of a boom in infrastructure stocks. The U.S. has hell to pay for neglecting infrastructure and now must spend money that we do not have to fix things or we will not be able to compete with economies, like China and India (Chinidia), that are building modern, virgin more efficient infrastructure. We are gong to compete for the materials and services to fix things at the same time that Chindia is building virgin structures. However, our expenditures will primarily replace existing assets. The benefit of replaced infrastructure on long-term GDP growth is marginal versus the incremental value of virgin new infrastructure in Chinasia. BQY and MIC will have higher growth while we will have slower growth with bouts of Stagflations.

If you bought BQY June 12, 2006 you paid $14.65. It's now trading at $17.47

If you bought MIC June 12, 2006 you paid $28.77. It's now trading at $38.30.

[c1ue]

Re: "infrastructure" - how to invest

These are good ideas - but I have my doubts as to whether infrastructure plays can really be used to stave off the final economic reckoning.

In particular, it will be years, perhaps even a decade or two before major projects are funded, designed, built, then operational to the point of profitability.

While short term this does mean money going into the economy, most of this money in the beginning is going for raw materials.

Actual job creation is pretty low - just look at how many actual people work on high rise construction projects these days.

In the meantime it is clear the wheels are coming off in the next 2 years.

The WPA spent $11.3B in 1941 - equal to $160+B in 2007 dollars, and employed 8 million people.

It also raised the federal deficit to a pretty significant number eclipsed only by the deficits of WWII.

Given the deficit situation now - I just don't see how additional deficit spending can be funded without inflation. Not 'inflation', but 'INFLATION' which will make the present inflation look like the good old days.

[zoog]

Re: "infrastructure" - how to invest

Given the deficit situation now - I just don't see how additional deficit spending can be funded without inflation. Not 'inflation', but 'INFLATION' which will make the present inflation look like the good old days.

Agreed. You mean this kind of inflation?

The official annual rate of inflation in Zimbabwe is more than 4,500%. In practice, this means the price of a loaf of bread costs 50 times more in cash than it did a year ago.

The IMF said on Tuesday that Zimbabwe's year-on-year inflation rate could reach over 100,000 percent by the end of the year.

Wow! I'd hate to be paying $3500 for a loaf of bread.