Publisher's Note: Green Chip's Sam Hopkins is in New Orleans this week, reporting on the city's pressing water and transportation needs, and the company behind its massive infrastructure overhaul...
— Jeff Siegel
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More than 200 years after the Louisiana Purchase, the French are about to run New Orleans again.
The fleur de lis still graces everything from garbage cans to football helmets in this tropical American city, and as I've found in the past few days while looking for companies that are making the most of the Big Easy's post-Katrina renaissance, the famed fleur isn't the only nod to the area's erstwhile European rulers. . .
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French multinational conglomerate Veolia Environnement (NYSE:VE) is becoming the company that handles New Orleans' most basic water and transportation needs.
Veolia has been a major player in this sea-level city's water distribution infrastructure since the mid-1990s. Veolia Water North America built the largest water treatment plant in the United States here in 1992. Today, the company continues to operate and maintain filtration facilities near the Mississippi River, whose connection to the Gulf of Mexico gave New Orleans its historical strategic importance, as well as its fresh water supply.
Now Veolia, which trades on the Euronext Paris market as VIE, is taking control of the city's famous streetcars and buses from the New Orleans Regional Transit Authority (NORTA). NORTA has failed in its efforts to get public transportation back on track after Hurricane Katrina in 2005 (and Gustav and Ike in 2008), decimated the primary customer base for intra-city mass transit.
Veolia Takes Over Post-Katrina Transit
Consider this: the population of New Orleans is still about 30% lower than it was before Katrina, yet NORTA ridership dropped by 70% over the same period!
That's too low even for sea-level, and NORTA can't get the numbers up. So they're paying Veolia up to $600 million over the next decade to handle everything from payroll and pensions to network operation; security and timetables for the city system and its connections to surrounding parishes, as counties are called in Louisiana.
Perhaps most importantly, Veolia will take over the system's public relations, using lessons from Veolia Transportation's business in 70 countries to recover some of the 70% of customers NORTA lost.
To be fair, it's not all NORTA's fault. As you probably know, Katrina hit the poorest areas of New Orleans the hardest. The reason that many residents of places like the Lower Ninth Ward couldn't evacuate in time to avoid the storm and rising floodwaters is the same reason that NORTA ridership is down a full 40% more than the city's population. Those folks depended on mass transit to traverse the city and to escape it.
And we all remember the sight of entire bus fleets sitting chassis-deep in murky water, as the Superdome filled with panicked New Orleanians. As indelible as those images are to anyone who saw the disaster unfold on TV, the mental and physical scars of Hurricane Katrina are all the more apparent here.
Over four years after the storm and floods roiled, restaurants place post-Katrina recovery clearances in their front windows as if they were the standard bills of health. I've heard 10-piece bands sing songs about high water and helplessness, and I've seen signs saying, "Katrina broke our city and Capitalism isn't going to fix it."
But Katrina, among other things, demonstrated an epic failure of government at all levels to protect the citizens who bankroll it.
Veolia's job will be to prevent such breakdowns through effective disaster planning and management. If improvement comes through a "capitalist" five-year deal with an option to renew, so be it.
Beyond hurricane preparedness, Veolia is intimately involved in state and city-level efforts to bring federal stimulus money down to the Delta.
New Orleans: "Exhibit A" for Stimulus Funds
In February 2009, Newsweek called New Orleans "Exhibit A" for why a federal stimulus was not only needed to bring the world's richest country out of recession, but also to restore a basic level of service and civil life to one of its most precarious cities.
So far, 16% of Louisiana's federal stimulus money has been allocated to transit and water projects, according to the Louisiana Recovery Authority's website.
Transit and water projects are both right up Veolia's alley.
New Orleans is even seeking to expand Veolia's task by building three new streetcar lines. Estimated at around $150 million, the city wants federal stimulus aid to boost the project. Under the "Exhibit A" banner, New Orleans can legitimately say that by expanding service out to poorer areas, resettlement and reintegration into the local economy will be made possible for thousands of families now scattered all across the country.
Some of the currently un-served areas had older streetcar lines that were torn up, though the wealthier Uptown area kept its St. Charles conduit. So it's not an "If you build it, they will come" scenario, to paraphrase one of my favorite films. Instead, it's more a question of, "If we rebuild it, will they come back?"
People tell me this is the time of year to get work done in the Big Easy because you won't sweat too hard. It's not too muggy, and it's certainly not chilly enough for my temperate-zone bones to raise any objection. Veolia Environnement is bringing its international expertise and the weight of a conglomerate to New Orleans to rebuild old things and build new ones, too.
And as I reported a couple weeks back from California, Veolia is part of an expansive national consensus that infrastructure issues are paramount to economic vitality.
The market is looking wobbly right now, but if you want a piece of what Veolia is doing here and elsewhere, current levels around $32 give you a sound technical support base and an opportunity to start building a position in this water and transportation double-play.
As it happens, the Green Chip team is wrapping up a report on the newest addition to the Green Chip International portfolio. Like Veolia, it's a major force in some of the world's biggest markets for water services. But unlike Veolia, this is a country-specific play on an emerging market that investors are clamoring to get a piece of. This stock is a value investor's dream hidden by hype. You don't want to miss this winner.
Regards,
Sam Hopkins
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With leadership like that from the top do you wonder why New Orleans is still a bloody mess? The French may panache and flair, but they can't conjour up the residents who have not and very probably will not ever return as they are discovering that there are many places in which it is easier to be poor than the Big Easy.
Platitudes about infrastructure and human reality, sound good on a sophomore college paper, but with little to do with life in the real world.
The basic stupidity of the Mayor and other city officials is beyond comprehension by normal working people. The examples of similar flooding conditions in other parts of the U.S. are ample proof there is more to apparent tragedy and human suffering in New Orleans than meets the eye. Scenes from other parts of the country are noticeable for their lack of welfare recipients ransacking (looting), other people's property. The human tragedy of what has happened there is undeniable, and brought on in large part by the lack of integrity on the part of public officials...who then sought to blame the federal government for saving them from their own lack of planning and action.
It takes a certain level of honesty, ethics and desire to make public works projects successful. All these attributes have been demonstrated as missing from the majority of the population in New Orleans.
Full recovery will only come when the undereducated stop whining and learning to help themselves. You can put lipstick on a pig, and it is still a pig. New Orleans has too many people who willing for others to support them, and give them something for nothing... that's why they voted for their savior, who promised them change. Now that are beginning to experience the negative parts of that change, they can counted on to cry for more free lunch, with productive people footing their bill.
And the left liberals of the country will forever gloss over the realities, while currying for the favor that count only as votes.