Speaker 1: This is Bloomberg Markets. I'm Katie Greifeld. So now for
Speaker 1: our sock the hour, and Constellation Energy has been hitting
Speaker 1: highs after announcing it would invest one point six billion
Speaker 1: dollars to bring the three Mile Island nuclear reactor in
Speaker 1: Pennsylvania back online. Microsoft will purchase the energy for two decades,
Speaker 1: and this, of course is the latest sign of surging
Speaker 1: interest in the nuclear industry as power demand for AI.
Speaker 1: Soares joining us now, and please to say we have
Speaker 1: Joe Domingez. He is the CEO of Constellation Energy joining
Speaker 1: me on set. It's great to see.
Speaker 2: You, great to see you. Thanks for having me on.
Speaker 1: So let's talk about the TikTok of this deal. Of course,
Speaker 1: Microsoft agreeing to buy two decades worth of energy when
Speaker 1: it comes at when you come at it from the
Speaker 1: investor perspective, it feels like investors have just been waiting
Speaker 1: for a catalyst for nuclear So with that perspective in mind,
Speaker 1: I'm curious how long this steal had been in the works.
Speaker 3: Oh God, we started thinking about twenty months ago that
Speaker 3: the right thing was to figure out a way to
Speaker 3: restart the machine. So from an inside Constellation discussions with
Speaker 3: our board, you know, The conversation started twenty months ago,
Speaker 3: but for a long period of time it was just
Speaker 3: how do we do it?
Speaker 2: Can we do it?
Speaker 3: What are their critical pieces of equipment we'd have to
Speaker 3: buy in advance.
Speaker 2: So we got that.
Speaker 3: Done, and then earlier this year we started talking to
Speaker 3: Microsoft about it. We had partnered with Microsoft on different
Speaker 3: products before, so they made.
Speaker 2: Sense as a client. Of course they have the.
Speaker 1: Need, so the relationship was there, and of course we
Speaker 1: see the culmination of that now. I'm curious. I mean,
Speaker 1: when it comes to the nuclear industry, you have bipartisan support,
Speaker 1: You've read a lot of academics and other thought pieces
Speaker 1: that nuclear just makes so much sense, but there's still
Speaker 1: that reputation cloud, if you want to call it, hanging
Speaker 1: over it. I'm curious when you think about the industry
Speaker 1: now versus when you were spun out of Exelon in
Speaker 1: twenty twenty two, how has it changed.
Speaker 3: Oh god, it feels like ten years, right, it's really
Speaker 3: thirty one months that we have been And back then
Speaker 3: the thought was.
Speaker 2: You know, there wasn't going to be a catalyst.
Speaker 3: It's always one of these things where in retrospect you
Speaker 3: think the pieces are coming together. Electrification of the transportation sector,
Speaker 3: home heating industry. We're on shoring a lot of industry
Speaker 3: now to deal with supply chain issues.
Speaker 2: But AI was the thing.
Speaker 3: That just really drove the load projections to a point
Speaker 3: where you said, without nuclear, it's not going to happen.
Speaker 1: Did that surprise you, the fact that you did have
Speaker 1: AI come along and be such a theme. I mean,
Speaker 1: it feels like it's almost in every part of conversation
Speaker 1: that you could have right now, and you've seen power
Speaker 1: demand tick up as a result. Did that surprise you?
Speaker 3: Well, that it was AI, of course, because I wasn't
Speaker 3: focused on that, But that nuclear was going to be important.
Speaker 3: It was absolutely clear to me for a long time,
Speaker 3: and I spoke about this for a long time that
Speaker 3: if we're going to run a full time economy on
Speaker 3: emissions free energy, couldn't just run it.
Speaker 2: On part time power.
Speaker 3: We had to have resources that we could dispatch and
Speaker 3: would run all the time, especially as we transitioned away
Speaker 3: from fossil fuels.
Speaker 2: So the fact that nuclear.
Speaker 3: Was going to be relevant and important, again, that was
Speaker 3: no news to me or anybody else in the industry,
Speaker 3: especially folks who had grown up planning the business. But
Speaker 3: the catalysts and when they would happen, that was a surprise.
Speaker 3: I knew nothing about it, really, you know, just to
Speaker 3: be honest.
Speaker 1: Yeah, well, let's talk about the balancing act here, because
Speaker 1: of course AI tech companies, they get a lot of
Speaker 1: the headlines when it comes to power demand. But how
Speaker 1: do you plan to balance out their needs with the
Speaker 1: needs of regular customers and industrial demand for example.
Speaker 3: Well, you know, the markets in which we operate are
Speaker 3: so called competitive markets, so we don't have a regulator
Speaker 3: that says, well, we're going to build you know, these
Speaker 3: five power plants. We use price signals in our market
Speaker 3: to drive investment, much like you would for wheat farming
Speaker 3: or not gas or oil or any other commodity. So
Speaker 3: as prices increase in supply demand titans, we would expect
Speaker 3: people to come in. And that's what's happened over the
Speaker 3: last twenty years in our markets. People have put private
Speaker 3: capital to work building power plants when needed.
Speaker 2: And I expect that will happen again here.
Speaker 1: And of course we're about six weeks away from a
Speaker 1: presidential election, and you know, we already said this, but
Speaker 1: you think about nuclear it has support from the right
Speaker 1: and the left, but even that being said, I mean,
Speaker 1: how do you anticipate a change in administration potentially affecting
Speaker 1: your business? Are you planning for that?
Speaker 3: Well, you have to be cognizant of it. But in
Speaker 3: our business, if you're going to change the strategy every
Speaker 3: time there's a new occupant in the White House or
Speaker 3: every time something changes in Congress in terms of which
Speaker 3: party is in control, you're going to do nothing. You're
Speaker 3: going to be so constipated that your strategy is never
Speaker 3: going to work.
Speaker 2: So for us, we look at.
Speaker 3: The long term needs of America. Here's what's clear to me.
Speaker 3: AI is here to stay, and the country has to
Speaker 3: be successful in AI from a geopolitical securities perspective as
Speaker 3: well as an economic perspective. Number two, the climate crisis,
Speaker 3: although we may change our focus over a period of time,
Speaker 3: is going to be something that we are going to
Speaker 3: have to deal with as humanity. So I think about
Speaker 3: our assets and our strategy around those two pillars and drivers,
Speaker 3: and the third thing being reliability and affordability. So that's
Speaker 3: what we're working to solve, and we can't redesign it
Speaker 3: every four years.
Speaker 1: So I want to bring this conversation to your share
Speaker 1: price you and I were speaking beforehand before the sentiment
Speaker 1: started about how I often ask CEOs about their share
Speaker 1: price and they say, I don't monitor it. But your
Speaker 1: shares have doubled over the past year. So theoretically you
Speaker 1: have plenty of money to spend here, a lot of
Speaker 1: cash on hand. How might you plan to spend it?
Speaker 3: Well, look, we think the best investment we can make
Speaker 3: is in Constellation. So when we don't see a growth
Speaker 3: opportunity like the growth opportunity we have here with MYOT,
Speaker 3: we have and will continue to invest in Constellation through
Speaker 3: share buybacks.
Speaker 2: I will say this because.
Speaker 3: I do watch your show, and I have seen CEOs
Speaker 3: say they don't watch their sock price, and I wonder
Speaker 3: if their bored really buys into that. But look again,
Speaker 3: I mean, it's like the politics question. It's a thing
Speaker 3: you have to be cognizant of, and when you have
Speaker 3: big moves, you're always watching it. You probably endure the
Speaker 3: pain of the downs more than the joy of the ups,
Speaker 3: to be quite honestly, but you have to have a
Speaker 3: long term, durable strategy.
Speaker 2: So I keep a pretty good eye on it.
Speaker 1: Yeah, I mean, if I had a real time report
Speaker 1: guard telling me how I was doing. It's the only
Speaker 1: thing I would look like look at. But in any case,
Speaker 1: shifting away from just nuclear, I am curious, what's going
Speaker 1: on with your hydrogen program in specifics.
Speaker 3: Well, we're looking for final regulations out of Treasury, and
Speaker 3: at this point, I'm anticipating we'll see those final regulations
Speaker 3: after the election, given everything that's on Treasury's plate in
Speaker 3: terms of IRA rules, So.
Speaker 2: We're at a stalemate right now.
Speaker 3: Right now, the Treasury rules do not permit existing nuclear
Speaker 3: to participate in making hydrogen.
Speaker 2: We think that's a mistake.
Speaker 3: We think that's contrary to the law, and we've been
Speaker 3: quite outspoken about this. I think we've advanced a very
Speaker 3: good case to explain why Treasury should change its thinking
Speaker 3: in the final regulations, and I'm cautiously optimistic they'll do that.
Speaker 3: Then we'll really get into it, because here's the important thing.
Speaker 3: While we want to transition away from fossil fuels, keep
Speaker 3: in mind that roughly eighty three percent of industry is
Speaker 3: still relying on.
Speaker 2: Fossil fuels for their processes.
Speaker 3: It's only seventeen percent electrified, and we're going to need
Speaker 3: replacement drop in fuels like hydrogen to replace some of
Speaker 3: fossil fuels in those operations, and we.
Speaker 1: Don't have much time left. But I have to ask,
Speaker 1: I mean the human element of what we're talking about
Speaker 1: reopening the three three Mile Island nuclear reactor. I mean
Speaker 1: a lot of people there. My first thought was, Okay,
Speaker 1: I'm thinking about that partial meltdown that we saw in
Speaker 1: nineteen seventy nine. I mean, how do you answer those fears.
Speaker 1: You have all the great benefits of nuclear but still
Speaker 1: there is that human emotion element there.
Speaker 3: Oh sure, Look, you got to remember that was the
Speaker 3: worst black guy we ever had as an industry, But
Speaker 3: it was something else for us that we were inside of.
Speaker 2: It was it also began in this.
Speaker 3: Conversation about how do we get better all of the time,
Speaker 3: and the thousands of process improvements and equipment improvements, construction
Speaker 3: improvements all began.
Speaker 2: Much like in our personal lives.
Speaker 3: Where you have a hiccup or a bad thing happens,
Speaker 3: you learn and grow from it.
Speaker 2: To us in the industry, that was the rebirth.
Speaker 3: That was the beginning of figuring out how to do
Speaker 3: it better. And I'm proud that the World Health Organization
Speaker 3: scores nuclear as the safest technology, tied with solar. In fact,
Speaker 3: a lot of people don't talk about this, but in
Speaker 3: the fifty plus years since Eisenhower's famous speech, right, more
Speaker 3: people have been killed falling off rooftops installing solar panels
Speaker 3: than have ever been injured in industrial accidents at nuclear plants.
Speaker 2: So it is a good safety record.
Speaker 3: But we understand the critical importance of this compact. We
Speaker 3: have communities and safety will always be number one for us.
Speaker 1: All right, well, that is a good place to leave it.
Speaker 1: Really appreciate you taking the time. That, of course, is
Speaker 1: Joe Dominguez. He is the CEO of Constellation Energy. This
Speaker 1: is Bloomberg