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On October 5, 2011, the Obama administration announced the launch of pilot projects for grid modernization. This news comes as a welcome relief to the constant drumbeat of recessionary fears. This news also suggests that the Federal government remains capable of taking positive steps to promote economic growth and secure America’s energy future. The Obama administration explains these projects will “… accelerate the permitting and construction of seven proposed electric transmission lines.” It will cut red tape and “… serve as pilot demonstrations of streamlined federal permitting and increased cooperation at the federal, state, and tribal levels.” Twelve states are named as direct beneficiaries of the seven planned projects, many of which cross state lines.

This kind of large-scale, broad coordination was likely enabled by the urgency of the project. Representatives from many of the agencies involved describe the anticipated impact of this work on everything from employment to America’s deteriorating infrastructure to the environment to the economy as a whole.

Some of the primary benefits and features of these projects are explained as follows:

“Building electric transmission lines involves coordination among multiple federal, state, and tribal agencies subject to permitting, review, and consultation. Improving the overall quality and timeliness of these procedures enables the federal government to help expedite new transmission lines. Adding necessary transmission infrastructure will integrate renewable electricity sources into the grid, accommodate the growing number of electric vehicles on America’s roads, help avoid blackouts, restore power more quickly when outages occur, and reduce the need for new power plants.”

In other words, consumers, workers, and businesses should all benefit from this work.

Two businesses that could directly benefit are Hubbell, Inc (NYSE:HUB.B) and Quanta Services (NYSE:PWR). HUB-B makes high-tension line gear. The company’s stock trades only about 300,000 shares per day, but it has a very attractive forward P/E of 9.7 (NYSE:HUB.A) and even sports a 3.1% dividend yield. The stocks sits at the same value it had in early 2006 but is still trending upward from its 2009 lows.

Hubbell Inc. is still trending upward from 2009 lows
(Click to enlarge)

Hubbell Inc. is still trending upward from 2009 lows

Quanta Services (PWR) “designs, installs, upgrades, repairs, and maintains electric power transmission and distribution networks, and substation facilities; renewable energy generation facilities; and offers emergency restoration services, including repairing infrastructure to the electric power industry.” The company also provides services for natural gas and pipeline and telecommunication infrastructure. The stock is a bit richly valued with a forward P/E of 17, but its price-to-book value is only 1.2. The stock offers no dividend yield.

The stock has been stuck in a trading range for three years and trades at the same price it had in 2006. Assuming the rest of the market is too busy worrying about recession, another chance could come to buy PWR closer to the bottom of the trading range. Note that PWR has rallied the last three autumn periods.

Quanta Service
(Click to enlarge)

Quanta Service's trading range continues

Source for all charts: FreeStockCharts.com

It is too bad America did not get more of these kinds of economy-building projects earlier in this period of economic malaise. Hopefully, going forward, these projects can serve as a model for the government’s efforts to support economic growth and reduce (or eliminate) the regulatory barriers that impede economic progress.

Be careful out there!

Source: As America Invests In Its Grid Modernization, You Can Too