Where We’re Going, We Need Roads; Let’s Talk Infrastructure
Thankfully, by the time you read this, much of Texas will have finally regained power and is making progress in rescinding boil water orders that affected as many as 15 million citizens. Despite these positive developments, however, the catastrophic aftermath of Winter Storm Uri will reverberate for quite some time. While there have been plenty of questions and accompanying finger pointing to go around — was wind or natural gas to blame for outages? (spoiler alert from last week’s newsletter: yes) Did Texas’ free market approach to power fail? Which Cruz daughter forced the trip to Mexico? There is at least one familiar refrain that brings almost a sense of perverse comfort: America’s infrastructure came up short.
Winter Storm Uri is the latest in a long (and growing longer) line of climate related disasters that has overwhelmed our country’s outdated and overmatched infrastructure. Following years of drought, failing power lines in California sparked wildfires in 2019 that displaced hundreds of thousands and burned over 350 homes. In 2005 and 2017 hurricanes Katrina and Harvey, respectively, caused billions of dollars of damage to, among other things, roads, bridges, and of course levies, not to mention the immeasurable human suffering. Last week’s failure of Texas’ power grid and water infrastructure is simply the latest in what has become a disconcerting regularity: the “once in a lifetime” weather event. In 2017, the most recent year a comprehensive study was completed, the American Society of Civil Engineers (ASCE) gave America’s Infrastructure a D+. President Biden, Pollyanna that he is, might say that this is an opportunity to build back better. We at FWP would agree and go even further.
Years of neglect and can kicking by Congress mean that infrastructure is an exciting space right now. With a proposed $2 trillion in government spending coming down the pike (an idiom that while often misstated is particularly apropos in this context), this rings even more true for those of us with a sustainable bent. Distributed, rather than centralized, power grids would offer flexibility in the case of catastrophe and take better advantage of low-cost renewables. The proliferation of renewable energy requires massive investment in battery and other storage. COVID-19 and our new home / work / school life has thrust universal and affordable broadband to the front of the country’s collective conscience. Advances in green materials such as concrete with half the carbon footprint of traditional cement lend excitement to potentially mundane but necessary road and bridge repairs. That barely touches upon the EV commitments or built environment and smart city revolutions currently underway.
With an average annual return of 9% in the U.S. since 2010, according to The Economist, infrastructure has consistently offered investors a steady but differentiated return stream. Add to that a federal government with both a commitment to sustainability and an open checkbook, and FWP sees an exciting opportunity for private capital to drive immense impact with steady, differentiated returns.
Tucker Pribor, VP Investments
Five members of the Texas Utility Grid Operator ERCOT’s board of directors are quitting. Why? They all live in states not named Texas.
Curious how your individual state performed on its infrastructure report card? Use this ASCE interactive map to find out.
Want to learn more about infrastructure and see a vision for the future? Pick up Move by Rosabeth Moss Kanter. This author highly recommends, it’s a page turner.
This newsletter is intended solely for informational purposes, and should not be construed as investment/trading advice and are not meant to be a solicitation or recommendation to buy, sell, or hold any securities mentioned. Any reproduction or distribution of this document, in whole or in part, or the disclosure of its contents, without the prior written consent of Flat World Partners is prohibited
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