Speaker 1: Bloomberg Audio Studios, podcasts, radio news, Joe.
Speaker 2: The Buzzword today, recession, slow and growth, other issues. Are
Speaker 2: you noticing any of that A constellation?
Speaker 1: No, not yet, certainly not in powered demand.
Speaker 2: So what kind of power demand are you seeing? There's
Speaker 2: been a lot of change in terms of deep seek.
Speaker 2: There's been questions about how long the CAPEX cycle can
Speaker 2: last for hyperscalers.
Speaker 3: What are you seeing?
Speaker 1: We don't see an end in sight right now. We're
Speaker 1: starting to see it get rationalized. And by that I
Speaker 1: mean we're not seeing the same request for data centers
Speaker 1: popping up in five or six utilities. So I think
Speaker 1: the hyperscalers are beginning to figure out where they want
Speaker 1: to go. And it's not the frenzy of activity, but
Speaker 1: in terms of the deal pace, it continues the same
Speaker 1: way we saw it last year.
Speaker 2: And how are the deals like? How is it to
Speaker 2: get them done?
Speaker 3: Is it hard? Is it coming up with a structure
Speaker 3: the money? Like? What is it?
Speaker 1: It's not hard, but they're complicated because they're multi billion
Speaker 1: dollar deals, right, So we're talking about twenty year deals
Speaker 1: for power that sometimes could cost five or ten billion dollars.
Speaker 1: So like any commercial deal of that scale, it's going
Speaker 1: to take a long time to negotiate, and each time
Speaker 1: you need to do that with a new party you
Speaker 1: have to go through all the terms and conditions again.
Speaker 1: But I think we're going to get some some deals
Speaker 1: done this year.
Speaker 2: Can you give me some hints, like in maybe areas,
Speaker 2: what kind of deals, like what kind of power?
Speaker 1: Well, I think nuclear continues to be very attractive for
Speaker 1: the hyperscalers because it operates twenty four to seven, it's cleaned,
Speaker 1: so it meets their environmental goals, and it matches up
Speaker 1: really well from a reliability standpoint.
Speaker 3: So let's go to the money then for a second.
Speaker 2: So coming up with the deals is very interesting, particularly
Speaker 2: the one you do with Microsoft to restart three Mile Island.
Speaker 3: Are your costs going up right now?
Speaker 1: A little bit? But it's really labor inflation that we
Speaker 1: mostly see. Now. Remember we have existing nuclear plants that
Speaker 1: are already built, so a lot of the cost of
Speaker 1: the raw materials that you're saying, you know, potentially impacted
Speaker 1: by arafs in the long run, but an escalation through inflation.
Speaker 1: We're not seeing much of that tiny bid on uranium pricing.
Speaker 1: But most of what we're seeing is labor contracting, So are.
Speaker 2: You planning for a tariff increase that we should be
Speaker 2: seeing on steel and aluminum on Wednesday?
Speaker 3: Right? You would have no, that would have limited impact.
Speaker 1: How do you see that pretty limited impact on us?
Speaker 1: It would impact replacement parts and that sort of thing,
Speaker 1: But it's going to be a deminimous impact on our budget.
Speaker 2: And if you wind up seeing an increase, right even
Speaker 2: in labor does how does that change in your contracts?
Speaker 2: Like you've already said it, you have to go back
Speaker 2: to them and say, hey, listen, we got to renegotiate
Speaker 2: my costs are going on.
Speaker 1: No, there's no reopeners up or down for those sorts
Speaker 1: of inflation.
Speaker 3: So you're really taking on that risk.
Speaker 1: Sure, yeah, yeah, we're taking it on for over twenty
Speaker 1: year period. And that's the importance of being able to
Speaker 1: do this with nuclear, Right, we know exactly what our
Speaker 1: cost structure is going to be within a range for
Speaker 1: ten and twenty years. Harder to do with our natural
Speaker 1: gas assets, where we don't know what the price of
Speaker 1: now gas is going to be ten years out, or
Speaker 1: whether we're going to have a carbon tax, or what
Speaker 1: the changes in environmental regulations are.
Speaker 3: Going to be So how do you manage that risk?
Speaker 1: Well, I think what's really difficult to do that. In
Speaker 1: the case of natural gas, I think there what you're
Speaker 1: doing is something that looks more like an index product
Speaker 1: that is indexed either inflation or natural gas prices.
Speaker 2: When you talk about the different parts of your business,
Speaker 2: how much of the capex that you're spending is going
Speaker 2: to new stuff, beefing up old stuff, or just replacing
Speaker 2: and making sure everything stays on track.
Speaker 1: Yeah, So for us alex we face a critical decision
Speaker 1: as to whether to relicnse the nuclear plants for another
Speaker 1: twenty years, and we're facing that across the fleet. So
Speaker 1: when you say new, if we don't do this, it's
Speaker 1: going to be retired, very much like Three Mile Island
Speaker 1: was retired. So the distinction between keeping existing open and
Speaker 1: something that's truly new is immaterial. Right. If it's gone,
Speaker 1: it's gone. It's the same as if it were never built.
Speaker 1: So we are investing all of our moneies to secure
Speaker 1: that fleet for the future, and we're also doing uprates
Speaker 1: and restarts and other things like that. In terms of
Speaker 1: a percentage to your question, I would say ninety percent
Speaker 1: of our spend is in the existing assets and getting
Speaker 1: them ready to run for decades to come.
Speaker 2: So when we talk about power demand booming and increasing
Speaker 2: by multiple digits, right, I mean ten percent would be huge.
Speaker 2: How do you play that? Like, if it's not new,
Speaker 2: is it just expanding?
Speaker 1: While it is expanding, a lot of our clients are
Speaker 1: interesting interested in operating that's increasing the output of existing
Speaker 1: nuclear plants, and we're doing that in a number of
Speaker 1: different regions. Obviously, the restart is more limited. You had
Speaker 1: one plant there that you could turn on, and I
Speaker 1: think there might be another in the nation. And then
Speaker 1: the rest of that is going to be probably spent
Speaker 1: on renewables, storage and natural gas for the time being,
Speaker 1: and then the fullness of.
Speaker 2: Time new nuclear em and a for that I know Calpine,
Speaker 2: So that really beefs up your natural gas. Nuclear is
Speaker 2: now fifty percent of your portfolio versus say seventy.
Speaker 3: That was a big shift. What else is in your
Speaker 3: pipeline for.
Speaker 1: That, Well, we've got a lot on our plate. We've
Speaker 1: got a lot of food d Yeah, and so this
Speaker 1: year we're going to spend making sure that we're ready
Speaker 1: to integrate Calpine and prepared for regulatory approvals at the
Speaker 1: back end of the year. But as you said, it's
Speaker 1: a big deal. And I think what we've indicated as
Speaker 1: a company is M and A is a big part
Speaker 1: of our strategy.
Speaker 2: Yes, m and A in beefing up nuclear, natural gas,
Speaker 2: or you want to diversity, all of the.
Speaker 1: Above, all of the above. I think storage is going
Speaker 1: to increasingly be a part of the story, so we'll
Speaker 1: look at those opportunities as well.
Speaker 2: Everyone now wants to get into power. It is the
Speaker 2: coolest thing right now in the market. Whether you're looking
Speaker 2: integrated utilities, regulated utilities, even energy companies.
Speaker 3: Are you seeing more competition.
Speaker 1: I think there's a lot of interest from all kinds
Speaker 1: of places. There's a lot of foreign interest in investing
Speaker 1: in the US. I think what people are trying to
Speaker 1: figure out is whether they too can secure longer term contracts.
Speaker 1: I don't see people building spec power plants hoping, you know,
Speaker 1: the demand will come. So I think there's going to
Speaker 1: be a lot of interest there, but it's largely going
Speaker 1: to be fossil. It'll continue to be renewables, but it
Speaker 1: always has been renewables. And then we'll see whether they
Speaker 1: could get deals done. You know, the hyperscaler is going
Speaker 1: to have to make some tough decisions between their own
Speaker 1: climate goals on the one hand, and their growth needs.
Speaker 1: We think there are other opportunities to introduce that demand
Speaker 1: without necessarily building more emitting generation. And we think a
Speaker 1: big part of the story is curtailment demand what we
Speaker 1: call demand response in the business. There's a new study
Speaker 1: out of Duke that's been making the rounds over the
Speaker 1: last couple two three weeks that indicates we could build
Speaker 1: seventy one gigawatts of data centers in the US by
Speaker 1: just getting curtailment of about zero point two five of
Speaker 1: one percent. So it's it's really a peaky system where
Speaker 1: we have problems during certain hours, but overwhelmingly I'll give
Speaker 1: you a statistic, eighty percent of the time we use
Speaker 1: less than two thirds of the power in the country.
Speaker 3: Wow. Okay, So efficiency it is key. We started with macro,
Speaker 3: so I want to end with macro as well.
Speaker 2: If we wind up getting inflation, if stagflation becomes an issue,
Speaker 2: if rates stay higher for longer, right, if renewables get
Speaker 2: more in the chopping block because returns are dented because
Speaker 2: of those higher rates, how does that impact how do
Speaker 2: you think about your business?
Speaker 3: Well?
Speaker 1: I think there's a lot of push pull in all
Speaker 1: of that. What I think will be most meaningfully impacted
Speaker 1: is new generation that would otherwise come online. So I
Speaker 1: talked a moment ago about the need for long term
Speaker 1: contract and to support the new gen that people are
Speaker 1: talking about. Everybody. There's a frenzy of activity, as you indicated,
Speaker 1: around that, but that only happens if we have growth,
Speaker 1: So that's the first thing to fall off.