There are engineering projects and then there are generational engineering projects.
A supertall skyscraper like Dubai's Burj Khalifa or New York City's One World Trade Center may take six or eight years from beginning of construction to topping it out. Contracts to construct buildings like these can bring significant revenues to the companies who land the jobs.
Then there are even bigger projects, huge infrastructure investments that have the tendency to alter the destiny of nations over the course of generations. Some of these projects are designed to be worked on and expanded indefinitely.
The challenges that changing climate and demographics pose will bring about a wave of these mega-projects around the world, most of which will take at least a generation to complete, and in many cases, far beyond that.
When they're finished, the face of the planet will be changed, hundreds of millions of people will be affected - for the better. And investors with the foresight to get in on the ground floor could end up being very rich.
The Delta Works
The Dutch have battled the North Sea and their rivers for centuries, keeping the water out, and claiming living space for their small, densely populated, low-lying country. Much of Western Europe drains into the Netherlands' meandering river system. Between the sea and the rivers, the country is in a watery squeeze, but it's more than holding its own.
Most of the Netherlands' territory has been claimed from the sea, two-thirds of its citizens live below sea level, and more than half the country lies at 1 meter or less below sea level.
After a disastrous flood in 1953 killed thousands and inundated more than 9% of their total farmland, the Dutch realized that a long-term solution was needed.
The Delta Commission, was formed, and afterward conceived of a mega-project under the omnibus Deltaplan, comprising a huge network of dams, bridges, sluices, locks, dikes, and storm surge barriers erected all over the soggy Rijn, Maas, and Scheldt deltas in the northwest of the country.
More than 50 years on, the system has worked with typical Dutch efficiency and effectiveness, but it's not truly "complete" yet.
A 200-Year Project, a Deadly Challenge
There is a major Delta Works expansion planned, one which will take the works into the 23rd century.
The North Sea is expected to become ever more stormy and violent as the earth warms, and sea levels there are expected to rise by 1.3 meters by 2100, and more than 2 meters by 2200. The need for enhancing the Delta Works is quite clear, and the costs will be rather high, at $144 billion over the next 80 to 100 years, and far beyond that even.
Unwilling to wait until disaster claims thousands more lives in the century to come, the Dutch are proactively looking to beef up their defenses in the face of angry, rising water.
It's hard to peer into the crystal ball into the 23rd century, but there are quite a few companies poised to gain from any continuing expansion of the Delta Works.
There's no shortage of top-flight Dutch engineering companies on the Euronext Amsterdam, and any of these are sure to get a slice of long-lived, lucrative Dutch government contracts to enhance the Delta Works. There's little chance of a foreign company swooping in on the deal. There simply are no finer water engineers than the Dutch.
Ballast Nedam NV (AMS:BALNE) has a long history on the Delta Works' sister project, the Zuiderzee Works. This engineering feat closed off the Zuiderzee, a great shallow bay of the North Sea, and enabled the land beneath the water to drain off and become polder.
Ballast Nedam completed one of the largest features of the Zuiderzee Works, a 20-mile causeway called the Afsluitdijk. Not only that, but the company completed the work on budget and ahead of schedule - no mean feat for a project of that sheer magnitude.
More recently, Ballast Nedam worked on the Oosterschelderkering, the largest and most ambitious portion of the Delta Works. It took over a decade, and was the most expensive component in the system.
There is another Euronext play on the Delta Works enhancement. Koninklijke Boskalis Westminster NV (AMS:BOKA). Headquartered in Papendrecht, this company worked with Ballast Nedam on the Oosterschelderkering project, and recently performed the dredging of the Port of Melbourne, Australia. In fact, the company has the world's largest dredging fleet, which keeps their services in near-constant demand. Royal Boskalis employs nearly 14,000 people worldwide and banked more than $3.4 billion in FY 2010.
The New York City Flood Barrier
Hurricane Sandy dealt a massive blow to the New York area in 2012. At $65 billion, Sandy was the second costliest Atlantic hurricane in our history. Nearly 300 people died, directly or indirectly, as the nine-foot surge flooded entire neighborhoods, and the City That Never Sleeps went without power for more than a week in some places.
While not as deadly as Hurricane Katrina was in New orleans, it gave New Yorkers a similar wake-up call. Sea levels are rising, while storms are growing more violent, and more frequent. And America's largest, richest city can no longer afford to ignore the ocean at its front door.
Pharaoh Bloomberg Gets His Great Pyramids
New York City Mayor Michael Bloomberg has called for a great flood barrier to protect his home turf. The US government is shifting its focus from prevention of climate change, which is increasingly seen as inevitable, toward adaptation to climate change.
To this end, the building of a barrier works for New York City is increasingly seen as essential. The cost is estimated, conservatively, at $20 billion - a lowball number if ever there was one.
New Yorkers can look to the city of Saint Petersburg, Russia, where a similar, larger coastal barrier saved the beautiful old city from the Gulf of Finland's rage in 2010. That largely unheralded project was started by the Soviets in 1980 and, unsurprisingly, stalled several times until it was finally completed in 2011.
No one knows yet what shape New York's flood barrier will take, but if it looks anything like Saint Petersburg's, it will have the added benefit of easing traffic as well. The Saint Petersburg project, like the Delta Works, are not just flood barriers, but new highways. The New York project could provide all-new eastern approaches to the city.
The New York flood barrier poses an interesting challenge to investors. There just are not very many American dam builders and engineers left. It seems the American dam-building industry put a pin in itself after the Hoover Dam was finished!
There's just not much business for it in the US anymore, with most jobs of this scale going to the Army Corps of Engineers, thence to subcontractors. It's very likely that the Corps will take a front-seat position in the construction of the barrier.
But there's no shortage of companies to provide critical support and materials. What's more, any bet on these companies is a bet on a return to economic growth in general.
Ireland-based Oldcastle Materials is owned by parent company CRH plc (NYSE:CRH), and its ADRs are traded on the New York Stock Exchange. It has a truly global presence, and a large part of its operations are here in the United States.
Oldcastle Inc. is largest supplier of concrete - in all forms, across numerous project types - in the country. If it's concrete, it probably came from Oldcastle. Oldcastle had a tough time during the economic slowdown, but its stock has held up fairly well. As growth returns, and as the need for more of these mega-projects becomes apparent, companies like Oldcastle will see a return to boom times in a big way.
The speculators out there might want to consider picking up shares of Cemex SAB de CV (NYSE:CX). This company did the responsible thing, and paid off most of its debt after a large acquisition in 2009. There's been a considerable amount of money coming into these shares, even as its big bull run appears to have tapered off somewhat.
On the other hand, CX October 2013 $12 calls (CX131019C00012000) have a tremendous open interest right now, which suggests this stock is being closely watched. Make no mistake, this is a volatile stock, but we could see another pop based on any large order or contract to supply cement. The proposed New York Flood Barrier will be too big for any one company to handle.
As the force of climatic change becomes more and more apparent, we'll see more mega-projects of all kinds getting underway. Nearly half the world's population lives on or near river deltas of varying sizes, and even more live on coastlines.
To adapt the lives of billions of people will take mountain-moving drive and vision. But first, we'll need to admit that there is a problem, and to begin to plan honestly for our future. Once we do that, the way forward becomes clear, and we can all begin to (really) profit from a bit of foresight and planning.
There are other ways to generate income over the long term, not just with growth plays. Click here for a special report about the best dividend strategies for today's low-yield environment.
Related Links:
- Nederland Deltacommissie:
Advice to the Cabinet - Reuters:
Russia Completes Soviet-era Dam in St. Petersburg - Bloomberg:
Bloomberg Proposes $20 Billion NYC Flood Barrier After Sandy
[epom]