The coming electrical infrastructure boom – And a JSE small cap set to benefit!

There’s no doubt that over the past five years, the world has undergone an unprecedented renewable energy boom. But this boom has raised a major problem that could threaten the future of power generation entirely. I’m talking about electrical infrastructure. More specifically, ageing electrical grids.

Without building/upgrading the links needed to transport electricity/energy from where it is generated to where it is needed, there’s no electricity. We’ve written a lot about this megatrend in both MoneyMorning and South African Investor.

With many more renewable energy projects expected to come online in the foreseeable future, governments around the world need to urgently address grid constraints.

That’s exactly what they’re doing. And in my view, it’s a global trend that should be on your radar.

The global (and local) drive to modernise electrical grids and its electrical infrastructure

Recent megatrends such as electrification and artificial intelligence (AI) (see South African investor for opportunities in this space) have started to put huge pressure on aging electrical grid infrastructure globally. So much so that new solar and wind farms sit idle.

In response to grid constraints, major economies will invest billions to build and modernise their infrastructure. For example,

• China is set to spend $800 billion
• The US has committed $30 billion
• The UK plans to invest £60 billion
It’s not just a global phenomenon.

SA already faced grid constraints due to decades of underinvestment. But it’s now become a big concern as the massive wave of renewable energy projects continue to come online.

In fact, at one stage, grid constraints, especially in the Western, Eastern, and Northern Cape prevented new wind and solar projects from proceeding. To solve this problem in the short-term, Eskom introduced a 10% curtailment measure for existing power producers.

However, National Transmission Company South Africa (NTCSA) – which separated from Eskom, recently announced plans to invest R112 billion in transmission capacity, over the next five years.

The NTCSA will either build the infrastructure itself and/or pay developers to construct transmission lines and then potentially, take them over. This announcement follows Eskom’s call for critical line upgrades, back in June 2024. As a reminder, Eskom said,
“For us to expand the transmission we must install about 14,000km of new lines in the next 10 years. Just to put it into context, in the past 10 years we only did 4,400km so we must grow that 3.5 times.

In short, the world is going to experience an “electrical infrastructure revolution” over the next decade. And in turn, global and local profit-opportunities will arise for investors.

This is why this this JSE cable company is on my electrical infrastructure watchlist!

Everything that requires electricity also requires cables. After all, power lines and high voltage cables are the cornerstones of power generation. That means, the “electrical infrastructure revolution” will drive huge demand for electric cables and wires.

That’s why this local cable company, South Ocean Holdings (JSE: SOH) stands to profit.
South Ocean is a manufacturer of low voltage electrical wires and cable. The company consists of several wholesalers and distributors who then sell these products to the construction, mining and retail sectors.

All products are manufactured at the SOEW plant in Alrode and SOEW distributes its products directly to its clients, using its own fleet of trucks and delivery vehicles. In other words, they don’t need to pay outside delivery providers, so they save on costs.

Over the years, South Ocean’s manufacturing plant in Alrode has experienced several upgrades and now produces at more than double its initial capacity!

In 2022, these upgrades paid off, as SOEW became the largest manufacturer and distributor of low voltage electric cable in South Africa. In the same year, due to the huge demand for electric cables and wires, South Ocean acquired an additional manufacturing plant in Elandsfontein to boost its production capacity.

South Ocean demonstrates huge future growth potential. This small cap has already generated Red Hot Penny Share readers a 65% return and from my perspective has plenty more growth to come. If you are looking for excellent short term profit growth, then there’s some super value to be had right now in the JSE small cap sector and you can get access to the best investment opportunities in Red Hot Penny Shares.

If you’re interested in investing in global megatrends like AI, nuclear and electrification, then I strongly urge you to look at South African Investor. So far this year their mega trends portfolio has seen some great returns… These are longer term global plays – if you’d like to learn more go here.