The Closest I’ve Ever Been to Changing the World (8) — A Supergrid Underground Globally?

The Closest I’ve Ever Been to Changing the World (8) — A Supergrid Underground Globally?

Continuing from the last post, I told him I found it strange that in the infrastructure industry, the returns I’ve seen are only around 6%–9%, which feels too flat. If the opportunity is so big, why are traditional returns so low, yet so much capital is still pouring in?

He said, “The 6%–9% you’re talking about refers to traditional infrastructure projects like wind or solar — unlevered returns are usually around 7%–9%, very stable but indeed not high. If you add leverage, it can reach 12%–15%. These projects are now considered safe, routine investments. Early on, the industry was paying much higher returns until the section had enough volume in the fleet of wind and solar farms, and insurance and return track records, that equity returns began dropping steadily. But tunnels are completely different. Our CAPEX is very low — the amount of capital we actually put into each tunnel is minimal — while returns are high and risks are controllable. So we’ve completely changing the old 6%–9% paradigm.

Even though the configuration is different, achieving a 40%–50% annual return per tunnel isn’t impossible. I personally think it’s very feasible and highly probable. And with such a margin, even if several things go wrong, there’s so much room to maneuver,  it’s unlikely to drop straight from 40%–50% to single digit. Even if it falls to 30% or 20%, it’s still highly profitable and leaves plenty of room for profit.

I know this feeling well — once you have certain degree of monopoly and pricing power, it’s truly satisfying. Personally, I love toll-based monopoly models, like highways — stable, recurring income from ‘flow.’ My long-term vision is to build a global underground transportation network — a super grid — crossing borders and continents. Starting from Texas and California, we’ll connect North America, then link to Europe and Asia by tunneling under the Atlantic and Pacific. Technologically, this has already been proven feasible, so the only real bottlenecks are time and money.”

I said, “As long as technology and geopolitics are sorted out, you really don’t have to worry about time or money. But… do you truly have no competitors? Are you really the only company in the world that can do this?”

To be continued next time!