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Monday, February 1, 2010
India presently has a 12% power deficitThis is a really good article and gives some insight to what
is happening in the emerging markets. You have seen me touting IBM and GE for some time for this very reason as well
as a play on their international business mitigating the weakness of the dollar. All of the companies listed have an
opportunity to do well in this environment. What is not mentioned is the impact on fossil fuel stocks. Notice
this staggering revelation: 400 million Indians -- more than one-third of the country's
population -- have no access to power at all. In other words, the power deficit in India only stands to get worse, and crippling
nationwide blackouts are not out of the question. That is more than the
entire population of the United States. Multiply that several fold to account for the rest of the emerging world and
you discover that the best investment play on the growth of the world emerging markets is energy; and yes the best of that
is fossil fuels. There cannot be enough conservation in the world to make up for the growth in the demand of energy.
There cannot be enough development of alternative energy to come close to keeping up with the growth of energy demand.
Like it or not, for the next 20 years, investment in fossil fuels will provide a great return.Motley Fool, By Tim Hanson
January
22, 2010 India's presently has
a 12% power deficit. That means that the people in the country spend about three hours on average each day without power from
the main electric grid. What's more, this deficit exists even though 400 million Indians -- more than one-third of the country's
population -- have no access to power at all. In other words, the power deficit in India only stands to get worse, and crippling
nationwide blackouts are not out of the question.To compensate,
factories, offices, hotels, and residents who have enough money purchase generators and stock their own fuel. Not only is
that wasteful, but it makes doing anything in India that requires power much more expensive than it needs to be.How much more expensive? One analyst we spoke to estimated that Indian manufacturers,
given a reliable power supply, could cut costs 10% or so -- making them competitive with China and giving India a whole new
way to create jobs and drive economic growth.In fact, we heard
over and over again that India's power problem is the single biggest factor holding back India's economy today. Whereas China
has 900,000 megawatts of generating capacity today, India has just 150,000.And just think: If India can grow 8% to 9% annually without reliable power, just imagine what it could do
with it.Knowing that ...
If you're still with me, then you're starting to appreciate the magnitude of India's
power opportunity. And the good news for investors is this: Not only is power a huge need in India, but the new government
has made fixing this situation one of its top priorities. Here's what that includes. - Plans
to double the country's generating capacity to 300,000 megawatts by 2017.
- Approvals
for massive thermal, nuclear, and hydroelectric power plants.
- Providing
electricity to every household in India within five years
(again, some 40% today go without).
- The total elimination of the power deficit
by 2012.
- Incentives for private capital to make it all happen.
Put it all together and not only is there an opportunity for hundreds of billions of
dollars to be invested in India's power sector, but India is going to let companies and their investors profit from it all.
That's why I call this the biggest investment opportunity I discovered this year.Who stands to profit
As
you've probably guessed, the big multinationals with expertise in these areas are all champing at the bit to win some of this
business. This includes General Electric (NYSE: GE) and Areva in the nuclear space, while ABB (NYSE: ABB) should profit from efforts to expand India's electric grid and make it more efficient. Siemens (NYSE: SI), too, is lining up transmission and distribution work as well as supplying turbines for conventional power plants.
Then you have the picks-and-shovels plays such as Honeywell (NYSE: HON), which installs industrial security and fire safety systems, as well as IT companies like Hewlett-Packard
(NYSE: HPQ), Cisco Systems (Nasdaq: CSCO), and IBM (NYSE: IBM) that make sure all of the equipment works together.And
while they all will likely end up being involved, there's one more piece of information that smart investors should know:
The Indian government is keen on making sure that a good portion of the business it doles out finds its way to domestic Indian
companies.This is why the likes of General Electric and Areva, both of which
already have approvals to build huge new nuclear power plants in India, expect to use local companies for up to 70% of the work.
Larry Hollatz, RFC®
11:02 am est
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