WEBVTT - Constellation CEO Joseph Dominguez Talks Gas, Power Prices and Data Center

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<v Speaker 1>Bloomberg Audio Studios, Podcasts, radio News.

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<v Speaker 2>First of all, thanks so much for being with us.

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<v Speaker 2>We appreciate your times.

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<v Speaker 1>Great to be on.

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<v Speaker 2>Obviously, a big topic of discussion here right now is

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<v Speaker 2>the war with Iran. Curious how it is affecting constellation.

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<v Speaker 1>You know, not much directly right now. You know, as

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<v Speaker 1>a domestic electricity producer, natural gas pricing in the US

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<v Speaker 1>isn't really dramatically effected. We're already shipping every molecule we

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<v Speaker 1>can of LNG, so there's not going to be an

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<v Speaker 1>uptick of natural gas leaving the country until new facilities

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<v Speaker 1>are built. So the price of natural gas has been

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<v Speaker 1>relatively stable. We don't use oil to make electricity except

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<v Speaker 1>during the debt of winter, and we're already past that

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<v Speaker 1>period of time, so we're seeing some stability. In the

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<v Speaker 1>long term, we're worried about what everybody else is worried about,

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<v Speaker 1>supply chain issues, different things as we think about the

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<v Speaker 1>implications to Asia, which will be of course more significant.

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<v Speaker 2>So right now, the long term is more of a

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<v Speaker 2>bigger problem for.

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<v Speaker 1>Yeah, I think that's right. It's both a problem and

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<v Speaker 1>an opportunity. I would say, how is an opportunity? Well, look,

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<v Speaker 1>I think, you know, before when we were thinking about

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<v Speaker 1>the data economy where all the data centers are going

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<v Speaker 1>to go, there was a pretty good debate that a

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<v Speaker 1>lot of the data centers were going to go to

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<v Speaker 1>the Middle East. We had already seen agreements to transferring

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<v Speaker 1>chips to the Middle East for the construction of data

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<v Speaker 1>centers there. Unless we end up with, you know, really

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<v Speaker 1>a solid piece in the Middle East, which seems you know,

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<v Speaker 1>unlikely at least based on the history we've all lived together,

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<v Speaker 1>I think people are going to start to have second

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<v Speaker 1>thoughts about citing major new infrastructure projects in the Middle East.

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<v Speaker 1>I don't think Europe is in the game for these

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<v Speaker 1>data centers, so that means more data centers in the US.

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<v Speaker 1>As the data economy builds out as an electricity producer,

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<v Speaker 1>that means more customers that we're going to deal with.

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<v Speaker 1>I think the same is true for industrial customers that

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<v Speaker 1>already we're moving from Europe to the United States. These

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<v Speaker 1>pressures on international energy prices are all going to drive

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<v Speaker 1>people to North America.

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<v Speaker 2>And you just touched on this, but also nuclear power

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<v Speaker 2>extremely popular right now because of data centers and AI.

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<v Speaker 2>So what are the different ways you can capitalize on that.

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<v Speaker 1>Well, the first thing we got to do is lock

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<v Speaker 1>down the existing fleet and make sure that we could

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<v Speaker 1>operate it safely for as long as we can. That

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<v Speaker 1>requires a good deal of investment. Having these agreements and

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<v Speaker 1>having this social acceptance of nuclear and this kind of

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<v Speaker 1>passion around nuclear means that we can make billions of

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<v Speaker 1>dollars investment to keep the fleet the way it is

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<v Speaker 1>operating for a much longer period of time. Also increasing

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<v Speaker 1>the output of the fleet. We think we could get

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<v Speaker 1>as much as six or seven brand new nuclear plants

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<v Speaker 1>worth of energy just by uprating the existing fleet. We're

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<v Speaker 1>busy underway doing those things at Constellation. And then the

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<v Speaker 1>last piece of it is actual new nuclear, whether that

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<v Speaker 1>be small modular reactors or large machines. So I mean,

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<v Speaker 1>in all three areas, securing the existing fleet and the

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<v Speaker 1>capital investments needed, increasing the output of those units, and

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<v Speaker 1>building new units alongside of those. We're very active.

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<v Speaker 2>When you power data centers, you also have consumer bills.

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<v Speaker 2>So how do you balance that need for data centers

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<v Speaker 2>and its effect on pricing while keeping reliable and affordable power.

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<v Speaker 2>You know, we hear a lot of people say not

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<v Speaker 2>in my backyard yeah.

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<v Speaker 1>And look, I think this is involving conversation. I think

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<v Speaker 1>the early days are data centers are takers, and they're

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<v Speaker 1>driving up the cost of energy, and that is driven

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<v Speaker 1>by this peak demand, which is a handful of hours,

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<v Speaker 1>call it forty of the eight thousand hours we have

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<v Speaker 1>in a year are constrained, and we're seeing higher prices

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<v Speaker 1>in those hours as data center demand has come on.

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<v Speaker 1>The President is addressing that through executive order and the

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<v Speaker 1>data Economy customers have agreed to be flex at that

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<v Speaker 1>peak or bring their own capacity resources at the peak.

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<v Speaker 1>If we manage the peak, we want the data centers

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<v Speaker 1>on the grid. Why is that because think about it,

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<v Speaker 1>all the wires we've built all the way down your streets,

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<v Speaker 1>all the big transmission lines you all see, are dramatically underutilized,

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<v Speaker 1>with the exception of those forty hours. If we could

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<v Speaker 1>get more electricity running through those wires during these periods

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<v Speaker 1>where the system isn't being utilized, that means we could

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<v Speaker 1>collect rent or tolls on those lines through these customers,

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<v Speaker 1>and we could actually reduce costs. Coming into this SIRAUS

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<v Speaker 1>session very different than last year. Our big think tank

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<v Speaker 1>reports that are saying, hey, if you do this right,

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<v Speaker 1>data centers actually drive down the cost of electricity, not out.

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<v Speaker 2>But if you do them right, and data centers drive

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<v Speaker 2>them down, what do you do in the meantime, Because

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<v Speaker 2>it's not going to be immediate.

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<v Speaker 1>In the meantime, you have to use other tools. So

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<v Speaker 1>in the meantime, here's what we're thinking about. We've been

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<v Speaker 1>working with some of our other industrial customers to voluntarily

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<v Speaker 1>reduce demand during these peak hours so we're able to

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<v Speaker 1>curtail certain customers have the data economy, customers pay them

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<v Speaker 1>to do that so that we get that same flexibility

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<v Speaker 1>on peak. The next up in terms of available generation

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<v Speaker 1>are the backup generators at the data centers, how to

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<v Speaker 1>use them more effectively as a grid resource, how to

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<v Speaker 1>use batteries as a resource. And then as you look

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<v Speaker 1>at three or four years out, that's when you're thinking

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<v Speaker 1>about new gas fire generation.

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<v Speaker 2>There's a lot of concern about a possible crash or

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<v Speaker 2>at least some type of correction in the AI market

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<v Speaker 2>and data centers. What's constellation read on this?

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<v Speaker 1>You know what I think people think because there are

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<v Speaker 1>major customers that we have some independent forecast. The reality

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<v Speaker 1>is this, I am looking at what they are spending.

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<v Speaker 1>They know their business, they know the demand. So as

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<v Speaker 1>long as the capital expenditures on data centers is continuing

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<v Speaker 1>to climb as it has, that is the best sign

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<v Speaker 1>post for me to gauge the growth of my own business.

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<v Speaker 1>We're not kind of separately going out there and evaluating

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<v Speaker 1>AI and whether we have a bubble. What the data

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<v Speaker 1>economy customers are telling us is that demand is increasing

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<v Speaker 1>because they're building more and more.

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<v Speaker 2>Speaking of growth, any specific M and A plans right now.

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<v Speaker 1>Well, if there were, I wouldn't be able to tell you.

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<v Speaker 2>All Right, we appreciate your time.

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<v Speaker 1>Thanks for being with that, all right, Thank you