WEBVTT - U.S Bank Earnings, Energy in Focus 0:00:02.920 --> 0:00:10.840 Bloomberg Audio Studios, podcasts, radio news. You're listening to the 0:00:10.840 --> 0:00:15.040 Bloomberg Intelligence podcast. Catch us live weekdays at ten am 0:00:15.040 --> 0:00:17.520 Eastern on Apple car Playing and broyd Otto with the 0:00:17.520 --> 0:00:21.400 Bloomberg Business App. Listen on demand wherever you get your podcasts, 0:00:21.640 --> 0:00:24.000 or watch us live on YouTube. 0:00:25.000 --> 0:00:27.280 In terms of earnings outs, it's another big day for 0:00:27.360 --> 0:00:31.360 the big banks Bank of America and Morgan Stanley Alson 0:00:31.360 --> 0:00:33.760 Williams joins us. She is the senior bank analyst for 0:00:33.840 --> 0:00:37.800 Bloomberg Intelligence. She is the expert on these big banks. Alex, 0:00:38.040 --> 0:00:41.879 let's start with one of my former employers, Bank of America, 0:00:42.120 --> 0:00:44.519 Merrill Lynch. I'm going to keep that name in the 0:00:44.600 --> 0:00:47.400 in the name, there wouldn't be an investment bank that 0:00:47.400 --> 0:00:48.160 work for Merrill Lynch. 0:00:48.360 --> 0:00:51.400 Talk to us about what we saw the Bank of America, Allison, So. 0:00:51.320 --> 0:00:55.160 I think the Merrill Lynch side of things did very well, 0:00:55.240 --> 0:01:00.200 so making you proud there. Thank the wild fees came 0:01:00.240 --> 0:01:06.039 in better than expected. Equities trading and equities fees also 0:01:06.080 --> 0:01:09.039 better than expected. So continuing to build on some of 0:01:09.080 --> 0:01:13.759 those investments in the investment banks. So everything going well there, 0:01:13.800 --> 0:01:17.880 and actually on the net interest income sort of a 0:01:17.920 --> 0:01:21.280 standout result in the sense that their net interest income 0:01:21.319 --> 0:01:25.000 actually increased from the prior quarter. It was better than expected. 0:01:25.040 --> 0:01:28.120 So that all sounded great until we got to the 0:01:28.160 --> 0:01:31.400 conference call and the bank really just kept their guidance 0:01:31.480 --> 0:01:34.200 study and so I think that's what the stock maybe 0:01:34.360 --> 0:01:37.880 reacting to today. But really, I mean, that's consistent with 0:01:37.920 --> 0:01:41.720 the other banks, and frankly, I think makes sense. We 0:01:41.800 --> 0:01:44.160 had look at the change we had since the last 0:01:44.160 --> 0:01:47.400 time the banks reported. Last time they reported, it was 0:01:47.400 --> 0:01:50.920 six to seven cuts expected. Today, I mean it's been 0:01:50.960 --> 0:01:54.280 three and drifting lower, right, So those expectations keep getting 0:01:54.920 --> 0:01:58.440 pushed out, and with things changing so dramatically, I don't 0:01:58.440 --> 0:02:01.840 think it's surprising that they kept their guidance stable. I 0:02:01.840 --> 0:02:04.120 would point out that their guidance is a little bit 0:02:04.160 --> 0:02:08.600 more positive in the sense that they do expect growth 0:02:08.639 --> 0:02:11.919 in the second half. I think just maybe ahead of 0:02:11.919 --> 0:02:15.040 the call, people got excited and thought, you know, could 0:02:15.120 --> 0:02:17.640 we have already seen the trough and they're saying, no, 0:02:18.120 --> 0:02:19.000 second quarter is going to. 0:02:19.040 --> 0:02:19.480 Be the troughs. 0:02:21.960 --> 0:02:24.400 Maybe it was the seventeen uses of strong in a 0:02:24.520 --> 0:02:29.359 statement that kind of raised that expectation. Also, what was interesting, though, 0:02:29.400 --> 0:02:31.560 was the charge off so that increased by about three 0:02:31.639 --> 0:02:33.840 hundred and six million dollars to one and a half billion. 0:02:33.840 --> 0:02:35.919 Can you talk us through I know that's the that's 0:02:35.919 --> 0:02:38.239 the bank side of the business, the everyday banker side 0:02:38.240 --> 0:02:38.720 of the business. 0:02:38.720 --> 0:02:40.520 But what's that what's that going on there? 0:02:40.760 --> 0:02:43.560 And that you know, that is the other part of it. 0:02:43.720 --> 0:02:48.120 And so you know, when we think about core lending income, 0:02:48.160 --> 0:02:51.160 it's the net interest income is the revenue side, and 0:02:51.240 --> 0:02:54.600 provisions are a key part of the cost side of things. 0:02:54.760 --> 0:02:58.040 Obviously operating costs the other part. And what we saw 0:02:58.400 --> 0:03:01.640 was charge us came men higher than expected. Part of 0:03:01.639 --> 0:03:04.960 that was Card. We do expect that from Card. It's 0:03:05.000 --> 0:03:08.400 a seasonally higher quarter. Delinquencies tend to be lower, and 0:03:08.440 --> 0:03:13.679 they are signaling improvement from here. So that's a negative. 0:03:13.840 --> 0:03:15.760 But as I said, sort of in line with the 0:03:15.800 --> 0:03:20.840 trends on the commercial real estate, charge offs higher than expected, 0:03:21.040 --> 0:03:25.239 and the bank talked about changing some of their revaluation 0:03:25.360 --> 0:03:30.320 and their models sort of feeding into this. But basically, 0:03:30.680 --> 0:03:35.200 you know, looking forward to the future quarters, they think 0:03:35.200 --> 0:03:37.280 that things might look a little bit better, but for 0:03:37.400 --> 0:03:40.720 the quarter, things weaker. On commercial real estate. We know 0:03:40.800 --> 0:03:44.400 that that's a hot button issue for investors. It's something 0:03:44.440 --> 0:03:46.720 we've said, it's going to be a long story to 0:03:46.760 --> 0:03:50.240 play out, so sometimes a little better, sometimes a little worse. 0:03:50.520 --> 0:03:54.440 But Wells Fargo we did actually see some improvement in 0:03:54.480 --> 0:03:57.760 their non performers, and so I think that was more 0:03:57.920 --> 0:04:00.320 negative for Bank of America. 0:04:01.840 --> 0:04:04.880 Also, what is Bank of America saying about loan growth? 0:04:04.920 --> 0:04:05.560 I mean, are their. 0:04:05.520 --> 0:04:08.200 Corporate bankers are they making loans or do the customers 0:04:08.280 --> 0:04:08.720 need capital? 0:04:08.840 --> 0:04:10.520 What are they seeing they are? 0:04:10.760 --> 0:04:13.040 But it's your friends at Merrill Lynch that are making 0:04:13.080 --> 0:04:17.000 the loans and not you know, sort of that middle back, 0:04:17.360 --> 0:04:22.720 middle market, asset based type of business. So we saw, 0:04:23.000 --> 0:04:24.880 you know, the debt issue ince this quarter we saw 0:04:25.160 --> 0:04:27.960 very strong and we've heard mixings from banks in terms 0:04:28.000 --> 0:04:31.440 of if they think some of that has been pulled forward. 0:04:32.240 --> 0:04:35.320 But the bottom line is capital markets very strong, but 0:04:35.600 --> 0:04:38.960 you know, the bread and butter lending business, those loan 0:04:39.040 --> 0:04:42.279 balances coming in weak and weaker than expected. And so 0:04:43.120 --> 0:04:45.880 that's another piece to the interest income is you know, 0:04:45.880 --> 0:04:49.240 how much of it relates to securities and higher yielding securities, 0:04:49.839 --> 0:04:54.400 whereas the loan growth you know, has been weak, and 0:04:54.640 --> 0:04:58.080 if we don't get those fed cuts, you know, are 0:04:58.080 --> 0:05:00.560 we going to get some improvement, and so Bank of 0:05:00.600 --> 0:05:03.720 America I think has some improvement baked into its net 0:05:03.760 --> 0:05:07.160 interest income guidance. But I think there could be some 0:05:07.320 --> 0:05:12.440 skepticism out there, you know, if the rates stay high. 0:05:12.839 --> 0:05:16.440 You know, we're already seeing that impacting demand. Could that 0:05:16.680 --> 0:05:18.080 continue to be soft? 0:05:20.680 --> 0:05:23.080 And then wrapping up here, Morgan Stanley, that stocks up 0:05:23.080 --> 0:05:24.520 by about three point seven percent. 0:05:25.760 --> 0:05:27.359 What stood out to you? They seem to kind of 0:05:27.360 --> 0:05:29.480 fire on all the cylinders they did. 0:05:29.520 --> 0:05:32.040 I mean, they delivered on all of their key metrics. 0:05:32.120 --> 0:05:36.400 Number one, the wealth flows. We had really strong wealth 0:05:36.440 --> 0:05:38.960 flows first half of last year. That's softened, so we're 0:05:38.960 --> 0:05:42.240 showing a little bit of a rebound. So that's definitely 0:05:42.320 --> 0:05:46.640 a positive. Equity trading coming in better than expected, Equity 0:05:46.680 --> 0:05:49.719 fees coming in better than expected pretty much, you know, 0:05:49.800 --> 0:05:52.599 all of the investment banking lines except for M and 0:05:52.640 --> 0:05:56.320 A coming in better, so that's all good. And then 0:05:56.360 --> 0:05:59.400 the profit margin, which is the other key thing investors 0:05:59.480 --> 0:06:03.680 focus on, coming in you know, about twenty six percent, 0:06:04.320 --> 0:06:07.880 and so that's in line with the revised guidance. Keep 0:06:07.920 --> 0:06:10.599 in mind they do have a thirty percent target near term. 0:06:11.040 --> 0:06:13.960 They said, excuse me, long term near term, they said 0:06:13.960 --> 0:06:16.440 it's going to be a little bit lower because of investments, 0:06:16.880 --> 0:06:19.960 So coming in beating the consensus and within their target. 0:06:20.080 --> 0:06:23.240 So you know, there are some select modest negatives in 0:06:23.279 --> 0:06:27.280 the quarter, but in general hitting all the high points 0:06:27.279 --> 0:06:33.719 and some I think restoring some confidence for Morgan Stanley. 0:06:33.800 --> 0:06:35.960 So Allison, where are we just in terms of the 0:06:35.960 --> 0:06:39.040 big investment banks in terms of headcount? Are they where 0:06:39.040 --> 0:06:42.120 they need to be? Do they need more downsizing? 0:06:42.200 --> 0:06:42.880 Where are they? 0:06:43.360 --> 0:06:46.000 I think, Paul that really is going to depend on 0:06:46.480 --> 0:06:50.160 if we can get some sustained momentum investment banking fees. 0:06:50.279 --> 0:06:54.200 So you know, all the managements generally spoke very positively 0:06:54.440 --> 0:06:58.080 in terms of what we're seeing, you know, talking about 0:06:58.080 --> 0:07:02.000 the IPO is getting better reception. Maybe there's some better 0:07:02.000 --> 0:07:05.279 outlook there. Morgan Stanley today just talking about the fact 0:07:05.320 --> 0:07:09.120 that you know, at some point companies need to execute 0:07:09.240 --> 0:07:11.440 on things that they need to do in terms of 0:07:11.440 --> 0:07:14.680 either going public or doing deals, et cetera. But I 0:07:14.760 --> 0:07:18.160 do think that a lot of the headcount has really 0:07:18.360 --> 0:07:22.640 been conservative in terms of the cuts we've seen since 0:07:22.720 --> 0:07:25.520 the boom, because we had such a scramble in that 0:07:25.920 --> 0:07:29.000 you know, record a twenty twenty one time period. As 0:07:29.000 --> 0:07:31.600 you recall all the headline stories about the scramble for 0:07:31.720 --> 0:07:35.800 talent and ratcheting up of pay of junior talent, and 0:07:35.880 --> 0:07:39.000 so it's really going to depend on if we can 0:07:39.040 --> 0:07:43.120 see that sustained momentum and investment banking, and then that 0:07:43.280 --> 0:07:46.520 that headcount gets put to work. If we are disappointed, 0:07:46.680 --> 0:07:49.080 there could be sort of another look at things. 0:07:50.480 --> 0:07:53.200 Unfortunately, and didn't they all they paid up for that though, 0:07:53.280 --> 0:07:55.120 right Like I feel like they had to definitely shell 0:07:55.160 --> 0:07:58.160 out the money to those bankers this quarter in a 0:07:58.160 --> 0:07:58.800 different way, No. 0:07:58.960 --> 0:08:03.960 And compensate revenue in general has been a lot stickier, 0:08:04.080 --> 0:08:07.960 and so we definitely saw that last year. This quarter 0:08:08.240 --> 0:08:12.040 we saw the compensation ratios coming in, you know, about 0:08:12.080 --> 0:08:15.160 in line, showing some good cost control at companies like 0:08:15.200 --> 0:08:18.680 Morgan Stanley and Goldman where we have the most visibility. However, 0:08:18.880 --> 0:08:21.280 keep in mind it was a really strong revenue quarter, 0:08:21.520 --> 0:08:24.520 so again we're going to want to see that revenue 0:08:24.760 --> 0:08:27.080 continue to support the compensation. 0:08:29.880 --> 0:08:31.480 Hey, just real quickly thirty seconds. 0:08:31.600 --> 0:08:34.040 I see the City Group is the best performing of 0:08:34.080 --> 0:08:36.440 the big banks here here to date. Is this finally 0:08:36.640 --> 0:08:38.680 Jane Fraser getting listening moving? 0:08:39.320 --> 0:08:41.320 I mean I think it is, and I think they 0:08:41.360 --> 0:08:46.000 do have you know, they have a positive story and 0:08:46.040 --> 0:08:49.960 they have the most potential for improvement. So even though 0:08:50.000 --> 0:08:52.840 their returns are the weakness, they have a path and 0:08:53.440 --> 0:08:56.680 you know, Jane Frasier really making some tough moves. We 0:08:56.760 --> 0:08:59.720 know that City Group has been you know, a story 0:08:59.840 --> 0:09:04.720 of restructuring it seems like forever, but really making some 0:09:04.840 --> 0:09:09.600 dramatic cuts and layers, you know, focusing on the core businesses, 0:09:10.440 --> 0:09:12.880 you know, really taking an acts to some poor markets. 0:09:12.920 --> 0:09:16.120 So I think there there is a story there. 0:09:16.280 --> 0:09:16.600 Also. 0:09:16.679 --> 0:09:18.920 Credit Card, as we said, you know, we've talked about 0:09:19.000 --> 0:09:21.920 cart is the business that's growing in loans, not the 0:09:21.920 --> 0:09:24.200 commercial and so that's helping City Group. 0:09:24.240 --> 0:09:27.280 They're the most exposed. They're a big player there. Yep. 0:09:27.280 --> 0:09:29.560 All right, Allison, great stuff has always Alison Williams, senior 0:09:29.600 --> 0:09:32.360 bank analysts for Bloomberg Intelligence breaking down some of the 0:09:32.360 --> 0:09:35.920 big banks again today Morgan Stanley Bank of America. 0:09:35.960 --> 0:09:37.119 We had JP Morgan. 0:09:36.920 --> 0:09:40.560 Last week, So some pretty solid results coming out of 0:09:40.760 --> 0:09:41.280 the big banks. 0:09:42.760 --> 0:09:46.640 You're listening to the Bloomberg Intelligence podcast. Catch us live 0:09:46.720 --> 0:09:49.800 weekdays at ten am Eastern on Apple, card Play and 0:09:49.800 --> 0:09:52.720 Android Auto with the Bloomberg Business Act. You can also 0:09:52.760 --> 0:09:56.280 listen live on Amazon Alexa from our flagship New York station. 0:09:56.640 --> 0:09:59.440 Just say Alexa playing Bloomberg eleven thirty. 0:10:00.840 --> 0:10:03.240 So we're here at the Bloomberg and EF Annual Energy 0:10:03.280 --> 0:10:06.560 and Climate Summit. So it brings together corporate executives, government officials, 0:10:06.600 --> 0:10:09.440 industry leaders to talk about the stuff that's going on 0:10:09.480 --> 0:10:12.720 in the energy industry, in particular clean power, trade, federal 0:10:12.800 --> 0:10:16.559 US policy, hydrogen, clean tech, all the stuff. Now, a 0:10:16.679 --> 0:10:19.360 key figure in all of this comes from DC and 0:10:19.400 --> 0:10:23.240 his name is David Crane. He's Under Secretary for Infrastructure 0:10:23.280 --> 0:10:26.200 in the US Department for Energy. He was also CEO 0:10:26.280 --> 0:10:29.280 of NRG for about twelve years back in the day. 0:10:29.320 --> 0:10:31.000 And his job is to make all of this stuff 0:10:31.040 --> 0:10:32.840 work in a realistic fashion. 0:10:33.120 --> 0:10:34.480 Good luck, David, that's a gun. 0:10:34.960 --> 0:10:37.640 Thank you. Well. I said, there's a lot of stuff, a. 0:10:37.640 --> 0:10:38.320 Lot of stuff. 0:10:38.800 --> 0:10:42.080 So something was you had a speech and a panel 0:10:42.120 --> 0:10:44.120 and something that you said that really stuck out. You said, 0:10:44.360 --> 0:10:47.080 demand growth in the US for power is going to 0:10:47.080 --> 0:10:49.880 be more than we thought for the last ten years. 0:10:49.920 --> 0:10:52.719 So twenty twelve to twenty twenty two, power demand was 0:10:52.800 --> 0:10:55.319 up just fifty basis points a year, and now we're 0:10:55.360 --> 0:10:57.560 looking at five to six percent a year. 0:10:58.000 --> 0:10:59.760 I tell that to Paul and his eyes glaze over. 0:11:00.240 --> 0:11:02.600 But it's really important. What does that actually mean? 0:11:03.080 --> 0:11:05.400 Well, five to six percent in our world is huge. 0:11:05.440 --> 0:11:08.800 I mean that's that's like tiger economies from the nineteen nineties. 0:11:08.880 --> 0:11:11.559 And because of the long lead time of most things 0:11:11.559 --> 0:11:16.520 in the electricity sector, those five to six percent per 0:11:16.600 --> 0:11:20.000 year pile up if you're not if you're not getting 0:11:20.040 --> 0:11:23.760 after it. So what it means is and what's very 0:11:23.800 --> 0:11:26.360 important all this as we look at these transitioning to 0:11:26.400 --> 0:11:29.640 the clean energy economy, all these new technologies, is you 0:11:29.640 --> 0:11:32.720 always have to ask the time question, what you need 0:11:32.720 --> 0:11:35.439 and what time frame, and what are the solutions that 0:11:35.480 --> 0:11:37.880 fit that land within that time frame? 0:11:38.480 --> 0:11:38.679 You know. 0:11:38.800 --> 0:11:41.040 A couple of summers ago, my summer read was the 0:11:41.200 --> 0:11:46.320 Grid Frame Wires between Americans and our Energy Future. I 0:11:46.400 --> 0:11:48.240 read that on the beach and people are laughing me 0:11:48.280 --> 0:11:50.000 like a geek. So I feel like I know what 0:11:50.000 --> 0:11:52.480 I'm talking about here, and what I know is we 0:11:52.559 --> 0:11:56.400 need constant investment in our energy grid. And if Alex 0:11:56.480 --> 0:11:58.959 is right, the energy demand is going to keep increasing. 0:11:59.000 --> 0:11:59.680 That's even more so. 0:12:00.400 --> 0:12:02.240 What are some of the key issues that you need 0:12:02.280 --> 0:12:04.160 to tackle or trying to tackle at least in the 0:12:04.240 --> 0:12:04.640 short term. 0:12:04.679 --> 0:12:06.800 Here, Well, first of all, I need to tackle what 0:12:06.920 --> 0:12:10.120 your summer reading is each Paul, I think you got 0:12:10.160 --> 0:12:11.680 to get a life exactly. 0:12:12.000 --> 0:12:12.480 If that's what. 0:12:14.200 --> 0:12:17.120 I think, well, I mean one big one, the missing link, 0:12:17.840 --> 0:12:20.720 and I mentioned this on stage as well, is permitting reform. 0:12:20.840 --> 0:12:23.320 I mean, we're very supportive permitting reform. It takes a 0:12:23.320 --> 0:12:26.880 lot of different permutations. I'm personally not a policy person. 0:12:26.920 --> 0:12:30.640 I'm the implementation person. But we just need to do 0:12:30.720 --> 0:12:35.000 things faster because just the scale of infrastructure that exists 0:12:35.120 --> 0:12:39.120 under this new legislation, just in my area, by the 0:12:39.200 --> 0:12:42.520 end this year, we will have invested in over one 0:12:42.600 --> 0:12:45.840 hundred infrastructure projects that are over one hundred million dollars 0:12:45.880 --> 0:12:51.320 each and so we're straining the system in many different ways. 0:12:51.400 --> 0:12:54.880 But permitting it should not be the bottleneck. 0:12:55.040 --> 0:12:57.160 So to break that down a little bit. When we 0:12:57.200 --> 0:13:00.480 say permitting, what are we talking about? I say that 0:13:00.520 --> 0:13:02.040 in terms of like, are we going to have to 0:13:02.040 --> 0:13:04.760 move power lines underground? For example, do we need more 0:13:04.800 --> 0:13:07.400 transmission lines if we're going to set up that hydrogen 0:13:07.480 --> 0:13:09.760 hub or a new nuclear facility, and we need to 0:13:09.760 --> 0:13:12.040 get that to the grid. Does it mean we need 0:13:12.080 --> 0:13:14.360 to just try less start over and like do a 0:13:14.400 --> 0:13:16.720 new grid. Like there's a lot of ways that infrastructure 0:13:16.760 --> 0:13:19.160 can be used. What does it actually mean for you? 0:13:19.880 --> 0:13:23.720 Well, of the two that you mentioned specifically, any of them, okay, Well, 0:13:23.760 --> 0:13:28.360 I would leave aside undergrounding wires because that's more of 0:13:28.360 --> 0:13:29.960 a climate mitigation thing. 0:13:30.040 --> 0:13:31.720 It's where you need to do it. 0:13:31.720 --> 0:13:34.680 It's very important. But in terms of solving the demand issue, 0:13:35.320 --> 0:13:37.640 the transmission thing breaks into sort of two parts, and 0:13:37.720 --> 0:13:40.040 the answer is yes and yes we need both. One 0:13:40.160 --> 0:13:44.200 is we need more transmission lines to move the energy 0:13:44.280 --> 0:13:48.199 around the country or at least around regions. But then 0:13:48.200 --> 0:13:53.760 we also need this thing which is grid innovation, which 0:13:53.880 --> 0:13:56.480 is a series of technologies which are not in the 0:13:56.800 --> 0:14:01.400 popular mindset, things like reconductoring, where you basically taking existing 0:14:01.640 --> 0:14:03.880 rights away in the towers and you take down the 0:14:04.760 --> 0:14:09.200 ceramic circular things and in some cases the wires and 0:14:09.240 --> 0:14:12.760 you what we call reconductoring, and you can get two 0:14:12.800 --> 0:14:16.120 to three times the amount of power over the same 0:14:16.240 --> 0:14:18.840 line and you don't need a ride away. It's cheaper 0:14:18.880 --> 0:14:21.240 and that's good for rate payers. And we just in 0:14:21.280 --> 0:14:23.880 fact publish a report about this today at the DOE 0:14:24.280 --> 0:14:27.880 called the Grid Innovation Liftoff Report, and so there's that, 0:14:28.040 --> 0:14:30.160 and there's a host of other things, but basically we 0:14:30.240 --> 0:14:31.760 need all of the above right now. 0:14:32.000 --> 0:14:34.640 And is this a federal funded issue or is this 0:14:34.680 --> 0:14:36.320 a federal end state issue? 0:14:36.320 --> 0:14:38.480 Doesn't go how local does it get? Because I think of. 0:14:38.720 --> 0:14:41.800 Texas with its own grid, and I'm wondering how should 0:14:41.800 --> 0:14:44.120 they be integrated, for example, the national grid. 0:14:44.240 --> 0:14:47.280 I mean going to want that, Yeah, exactly, Yeah, Paul, 0:14:47.320 --> 0:14:49.960 that's what I'm not touching. I mean, there's a reason 0:14:50.000 --> 0:14:53.480 that Texas is a sovereign onto itself when it comes 0:14:53.560 --> 0:14:58.560 to their electric system. But most so, we have a 0:14:58.560 --> 0:15:01.120 lot of financing tools in the tool chest, but most 0:15:01.160 --> 0:15:03.960 of them are set up as sort of matching funds. 0:15:04.000 --> 0:15:07.960 We put up up to fifty percent against fifty percent 0:15:08.040 --> 0:15:11.920 coming from basically anywhere else that's not federal government. So 0:15:11.960 --> 0:15:15.480 we say fifty plus percent from non federal sources, and 0:15:15.920 --> 0:15:18.600 if it states, if it's the private sector, that's all 0:15:18.600 --> 0:15:19.240 good with us. 0:15:19.320 --> 0:15:20.600 And that's what you need to see in order to 0:15:20.640 --> 0:15:23.600 commit the money after that. Yes, yeah, so how does 0:15:23.640 --> 0:15:24.400 this all square? 0:15:24.440 --> 0:15:26.840 So the stuff you're talking about, like reconstituting the grid 0:15:26.880 --> 0:15:29.240 like that, Like that's not sexy cool stuff like clean 0:15:29.280 --> 0:15:30.120 tech and hydrogen. 0:15:30.200 --> 0:15:32.200 Right, how much of your job. 0:15:32.120 --> 0:15:34.920 Is on the energy that we're going to need in 0:15:35.040 --> 0:15:37.040 fifty years, and how much of that is how do 0:15:37.080 --> 0:15:40.160 we get more transmission mechanisms, how do we get that 0:15:40.240 --> 0:15:43.360 plug that we can't get so we can change the grid? 0:15:44.360 --> 0:15:46.240 You know, Alex, I was getting a little hung up 0:15:46.280 --> 0:15:49.560 on what's actually sexy in the world of electricity. But 0:15:49.720 --> 0:15:52.720 I'm glad that you can distinguish between hydrogen on one 0:15:53.120 --> 0:15:55.800 in transmission. But what I'd say is, first of all, 0:15:55.920 --> 0:15:59.000 nothing that if I thought that what I was doing 0:15:59.120 --> 0:16:02.480 was just affecting the twenty fifty like you know, at 0:16:02.520 --> 0:16:03.920 my age, I wouldn't be doing it. 0:16:04.200 --> 0:16:04.720 But we are. 0:16:04.720 --> 0:16:08.360 We're aiming for the Biden administration goal of zero carbon 0:16:09.040 --> 0:16:13.440 electric sector by twenty thirty five, and so, but you're 0:16:13.680 --> 0:16:16.560 the premise of your question is correct because of this 0:16:16.760 --> 0:16:20.520 new awareness of demand issues. I would say that what 0:16:20.760 --> 0:16:23.000 I've been focused on my two years at the DOE 0:16:23.200 --> 0:16:25.560 is what does the system look like sort of between 0:16:25.560 --> 0:16:28.840 twenty twenty eight to twenty thirty five, first of a kind, 0:16:29.000 --> 0:16:34.360 fast following commercial but because of this new concern, I 0:16:34.360 --> 0:16:38.000 think we're gonna be even looking at more three to 0:16:38.120 --> 0:16:40.640 five year solutions. And that's where things like the grid 0:16:40.640 --> 0:16:43.480 innovations are important, because that's a three to five year solution. 0:16:44.000 --> 0:16:46.360 David, what are you seeing from the major utility companies 0:16:46.400 --> 0:16:49.000 in the United States? Are they making the investments they 0:16:49.080 --> 0:16:51.640 need to make to make this transition? 0:16:52.280 --> 0:16:55.600 Will they be allowed to maybe allow exactly. 0:16:56.400 --> 0:16:58.880 Well, it's I mean, first of all, I think what 0:16:58.960 --> 0:17:00.920 I would say just in the last year and talking 0:17:00.960 --> 0:17:05.160 to the utility cos and I would bet a lot 0:17:05.200 --> 0:17:06.679 of money that you're going to be talking to some 0:17:06.840 --> 0:17:10.359 here on your show today so they can probably speak 0:17:10.400 --> 0:17:14.560 for themselves, is first of all, there's now universal concern 0:17:14.720 --> 0:17:17.679 about this, where that didn't exist a year before. I 0:17:17.720 --> 0:17:21.800 think they're still in the situation where their chief financial 0:17:21.800 --> 0:17:24.720 officers are saying, look, this is a really expensive time 0:17:24.800 --> 0:17:27.679 to raise money in the private sector. And we have 0:17:27.760 --> 0:17:31.280 a program within our Loan Program Office called the seventeen 0:17:31.320 --> 0:17:35.280 oh six program, which utilities qualify for and at current 0:17:35.359 --> 0:17:40.600 prevailing interest rates, the interest advantage, but I'm told by 0:17:40.720 --> 0:17:44.160 utilities is somewhere between one hundred and fifteen and two 0:17:44.240 --> 0:17:47.679 hundred basis points and we go large. I mean, we 0:17:47.720 --> 0:17:50.280 have two hundred and fifty billion dollars of loan capacity. 0:17:50.400 --> 0:17:53.400 So we're working with a bunch of utilities to see 0:17:53.440 --> 0:17:56.560 if that could become part of their cap structure. But 0:17:56.640 --> 0:17:59.040 as you say, they're under pressure not to raise rates. 0:17:59.080 --> 0:18:03.040 And it's just the nature of investment in electric infrastructure 0:18:03.160 --> 0:18:05.960 is like you build something today, you know it has 0:18:05.960 --> 0:18:08.480 to be paid for today. The benefits of it, you know, 0:18:08.680 --> 0:18:10.159 play out over fifty years. 0:18:10.760 --> 0:18:12.600 But so it is attention. 0:18:12.800 --> 0:18:14.679 But no one wants to run out of power. 0:18:14.960 --> 0:18:17.639 No, And I guess one of the key issues that 0:18:17.680 --> 0:18:21.080 I feel like has really pivoted interest in the sector 0:18:21.200 --> 0:18:23.480 is AI and data centers. Right, Like we all knew 0:18:23.480 --> 0:18:25.080 you got to plug in an EV that's going to 0:18:25.119 --> 0:18:27.879 use electricity. We all knew that stuff. But now that 0:18:27.960 --> 0:18:31.399 people really seem to care, because tech companies care. Do 0:18:31.440 --> 0:18:33.359 you spend a lot of time talking in tech companies? 0:18:33.359 --> 0:18:34.680 Do they call you oral they call someone else in 0:18:34.720 --> 0:18:35.280 your office? 0:18:36.280 --> 0:18:40.000 Increasingly? If you would, I would say, you know the 0:18:40.040 --> 0:18:43.240 dee why I got their head? Sort of their natural constituencies, 0:18:43.400 --> 0:18:48.120 like you know, traditional energy companies, new energy companies, but 0:18:48.160 --> 0:18:50.680 the tech companies have loomed larger and larger and have 0:18:50.800 --> 0:18:53.960 become more and more frequent visitors and at very high 0:18:54.080 --> 0:18:57.760 levels too, not just you know, the data center person, 0:18:57.920 --> 0:19:00.879 like the senior executives of these and that's very important 0:19:00.880 --> 0:19:03.479 because I think they're a huge partner in this. And 0:19:04.359 --> 0:19:07.800 you know, the thing about electricity is we always say 0:19:07.920 --> 0:19:11.199 the era of big power plants, supply would be added 0:19:11.200 --> 0:19:13.760 in big chunks, but demand would grow and there'd be 0:19:13.800 --> 0:19:17.679 occasional imbounces. But now with these data centers, demand is 0:19:17.720 --> 0:19:21.639 growing in these big chunks and in specific places which 0:19:21.680 --> 0:19:25.000 they won't tell you where they are, right because that's 0:19:25.400 --> 0:19:29.240 that's one of their competitive secrets, right, So we need 0:19:29.280 --> 0:19:31.440 to have a partnership with them, and overall, I think 0:19:31.440 --> 0:19:32.240 it's a great thing. 0:19:32.800 --> 0:19:34.360 All right, David, thanks a lot. It was really great 0:19:34.359 --> 0:19:36.240 to get your perspective. I really enjoyed talking to you. 0:19:36.320 --> 0:19:39.439 Thank you so much for David Crean, Undersecretary for Infrastructure 0:19:39.480 --> 0:19:40.640 at the DOE. 0:19:40.880 --> 0:19:42.680 You really read that book, I'm I did. 0:19:43.440 --> 0:19:46.720 Yep. Keith grossmaner recommendation, you win, yeps. Very good. 0:19:49.320 --> 0:19:53.200 You're listening to the Bloomberg Intelligence Podcast. Catch us live 0:19:53.280 --> 0:19:55.960 weekdays at ten am Eastern on fo car Play and 0:19:56.040 --> 0:19:59.040 enroud outo with the Bloomberg Business App, Listen on demand 0:19:59.040 --> 0:20:03.400 wherever you get your podcasts, or watch us live on YouTube. 0:20:03.840 --> 0:20:06.240 Paul and I we are here in our Continental Hotel 0:20:06.280 --> 0:20:08.600 right here in midtown Manhattan at the Bloomberg a NEF Summit. 0:20:08.720 --> 0:20:11.159 We have global leaders, you have thought leaders, you have 0:20:11.240 --> 0:20:14.480 CEOs kind of getting together and discussing the clean energy, 0:20:14.520 --> 0:20:17.000 green energy transition, how to get there, and also how 0:20:17.040 --> 0:20:19.440 to satisfy the demand for power that we're seeing right now, 0:20:19.480 --> 0:20:23.119 which is enormous. Joining us here now on site is 0:20:23.119 --> 0:20:28.240 Pedro Pizarro, President and CEO of Edison International. And that's 0:20:28.280 --> 0:20:30.119 just two buckets for you, right like, how do you 0:20:30.160 --> 0:20:32.960 decarbonize the grid and get to that goal? And then 0:20:33.040 --> 0:20:35.680 how do you match the power demand today from data 0:20:35.720 --> 0:20:39.399 centers AI to people wanted charging their evs at home. 0:20:40.240 --> 0:20:43.040 Let's go to the ladder first. What kind of demand 0:20:43.040 --> 0:20:44.760 are you seeing? Who's calling you up? 0:20:45.280 --> 0:20:48.160 Well, I can tell you from a Southern California Edison perspective, 0:20:48.240 --> 0:20:52.159