A climate investor’s guide to the infrastructure bill
The $1 trillion public-works measure offers opportunities – and risks
(Bill Sternberg is a veteran Washington journalist and former editorial page editor of USA TODAY.)
WASHINGTON, D.C. (Callaway Climate Insights) — Watching Jeff Bezos board his Blue Horizon capsule last month, I thought back to 1984, when I covered John Glenn’s unsuccessful bid for the Democratic presidential nomination. On the campaign trail, voters would sometimes ask the famed astronaut-turned-U.S. Senator how he felt as he was strapped into Friendship 7, listening to the countdown to blast off.
“The answer to that one is easy,” Glenn would reply. “I felt exactly how you would feel if you were getting ready to launch and knew you were sitting on top of two million parts — all built by the lowest bidder on a government contract.”
Glenn’s quip was, among other things, a reminder that when government builds stuff, be it rockets or roads, most of the construction money ends up in the private sector.
That’s one reason President Joe Biden’s infrastructure bill passed the Senate on Aug. 10 with bipartisan support, winning votes from all 50 Democrats and 19 Republicans despite former President Donald Trump’s efforts to torpedo the deal. Backers of the measure included such mainstays of the GOP donor base as the U.S. Chamber of Commerce, Business Roundtable and National Association of Manufacturers.
Companies large and small stand to benefit from the roughly $1 trillion in spending, a hefty amount even by Washington standards. Opportunities for investors include the obvious public-works plays: construction materials makers Vulcan Materials (VMC) and Martin Marietta Materials (MLM), and heavy machinery companies Caterpillar (CAT), Deere (DE) and Oshkosh (OSK).
For the sake of this column, however, let’s focus on some the climate-related provisions and the potential beneficiaries:
$7.5 billion to support a national network of electric vehicle charging stations. This is not as much as Biden originally sought for EV adoption, but it’s not chump change, considering the provision had to overcome opposition from lawmakers who said the government didn’t build out a network of gasoline stations and shouldn’t be underwriting charging stations, either. Although it’s too early to tell who the winners will be, EV charging companies to watch include ChargePoint Holdings (CHPT), an established player; Blink Charging (BLNK), which says it has deployed more than 30,000 charging ports in 13 nations; and EVgo (EVGO), a relative newcomer that has a partnership with GM. There’s also EV industry leader Tesla (TSLA), of course, which has built its own charging network. For Tesla and other automakers, however, the real action will come later in the year, when Congress decides whether to offer substantial new tax credits to encourage EV purchases.
$7.5 billion for zero-emission and low-emission buses and ferries. The White House says this money will lead to the purchase of more than 12,000 school buses that would be made in the USA, including at plants in the Carolinas. E-bus maker Proterra (PTRA) went public earlier this year and operates manufacturing facilities in California and South Carolina. BYD Company Limited (BYDDF) also has an e-bus plant in California, but its Chinese ownership could be a negative. Georgia-based Blue Bird Corporation (BLBD), a legacy maker of iconic yellow school buses, has been marketing electric buses since 1994 and hopes to become a bigger player in the e-bus market.
$65 billion to update the electric grid. Some potential beneficiaries from this pot of money include Eaton (ETN), the multinational power management company; Atlantica Sustainable Infrastructure (AY), a U.K.-based company that owns and manages renewable energy, natural gas, transmission and transportation facilities in North America and elsewhere; and Ormat Technologies (ORA), a Nevada-based geothermal leader that’s moving into energy storage.
Before you fire up the Robinhood app to invest the nest egg in infrastructure, a couple of the usual caveats apply.
Some of these stocks have already run up in anticipation of the infrastructure bill, which isn’t a done deal. The Senate-passed measure faces a rockier path in the House of Representatives, where its fate is entangled with a separate, highly controversial $3.5 trillion budget bill.
If the infrastructure measure does clear Congress and is signed into law, it’s also always worth keeping in mind the difference between revenue and profits. Being the low bidder on a government contract is one thing; making money from it can be quite another.