World Bank Natural Gas Investing

$52.6 billion.

That’s how much the World Bank ponied up last year for infrastructure projects across the globe.

Of course, this kind of scratch is nothing new. The World Bank has long been the go-to spot for emerging economies looking to build and scale up power generation projects with the assistance of loan guarantees.

We’ll definitely see the same thing next year, although in 2014, there will be one minor change to the World Bank’s policies…

No more coal!

That’s right. Last week, the World Bank announced that it would severely restrict funding for new coal plants in developing countries, and instead focus on natural gas and hydroelectric dams.

I must admit I am a bit confused on the latter, as many of the regions where World Bank assistance is needed, water isn’t typically abundant…

But natural gas? Well, I see where this is going.

U.S. Gets a Piece of the Action

Not surprisingly, the World Bank made its announcement about a month after Obama announced the United States would put the kibosh on funding for coal plants overseas.

Sure, there are environmental undertones here. After all, if you’re looking to decrease CO2 emissions, coal’s a great place to start.

But there’s something much bigger at play here. And it’s something that’ll definitely benefit the United States.

You see, while the World Bank suggests it will focus on natural gas, many of the nations it serves do not have an abundance of the stuff. Sure, there may be enough to get things started, but for the sake of long-term, sustainable supplies, there are only two places you can turn to: China and the United States.

China still has a good ten years before it gets even close to pumping out the volumes we produce every single day.

So in the near term, I suspect new natural gas power plants for which the World Bank plans on funding, will ultimately end up relying on U.S. exports.

I’m not exactly sure how the transportation and logistics of moving LNG to places like East Africa and India could potentially counter the environmental benefits of natural gas over coal…

But I do know that with every new natural gas plant the World Bank supports, one way or another, the U.S. gets a piece of the action.

The Coming Boom

The obvious plays here are the producers and exporters. That’s a given, and we’ve discussed this enough in these pages already.

So if you’re looking for another way to play the coming boom in natural gas exports, consider this…

You can’t use natural gas to generate electricity unless you have natural gas power plants up and running. And in many of the places where the World Bank is looking to give a boost to natural gas, natural gas power plants are either non-existent or incredibly old and must be upgraded in order to handle bigger loads — particularly when it comes to natural gas turbines.

Natural gas turbines really don’t get much press in investing circles. They’re not particularly exciting, and most energy investors are too consumed by production to consider the nuts and bolts of actual electricity generation. But make no mistake about it; natural gas turbine suppliers are crushing it — and will continue to crush it as more and more folks across the globe rely on natural gas.

Now the two main natural gas turbine suppliers are not pure plays, but they basically own the space. They are GE (NYSE: GE) and Siemens (NYSE: SI). And while Siemens is not a U.S. company, it does build one of the world’s most efficient natural gas turbines at a production facility in North Carolina.

Both companies claim superior efficiency; both companies continue to be the go-to manufacturers of modern natural gas turbines; and both companies will benefit immensely from the World Bank’s increased support of natural gas.

The Next Wave

Of course, while the World Bank has been quite vocal about natural gas with this recent announcement, the organization is also getting very aggressive in the alternative energy space.

In fact, the World Bank approved $3.6 billion in funding for alternative energy projects last year. That’s roughly 44% of its total annual energy lending. (Although to clarify, most of that still went to hydro.)

Still, growth in wind and solar has been quite impressive. For example, in 2002, 7,000 Bangladeshi households were using solar panels. Today, with the help of the World Bank, 1.4 million low-income households in Bangladesh rely on solar for their electricity needs.

Yes, there is an altruistic rub to this. But make no mistake, a handful of solar companies benefited handsomely. In this case, they were China-based solar companies pumping out cheap product.

When it comes to natural gas, however, it’s the United States that will benefit the most…

And of course, the investors who are smart enough to position themselves today for the next wave of natural gas profits will reap the biggest rewards.

To a new way of life and a new generation of wealth…

Jeff Siegel Signature