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Speaker 1: Bloomberg Audio Studios, Podcasts, Radio News. Hello and welcome to

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Speaker 1: another episode of The Odd Laws podcast. I'm Joe Wisenthal

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Speaker 1: and I'm Tracy Alloway. Tracy, I saw an interesting headline

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Speaker 1: this morning, just one good point. I saw a million

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Speaker 1: interesting headlines, but one that sort of caught my mind,

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Speaker 1: sort of market moving, is that there was this comment

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Speaker 1: from Jensen Wong. He was at a conference, the CEES conference,

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Speaker 1: and he was talking about how in the future, I

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Speaker 1: guess their chips are getting more efficient as chips send

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Speaker 1: to do that they may not need as much intense

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Speaker 1: cooling infrastructure or cooling equipment for future data centers. And

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Speaker 1: a bunch of those like cooling names like train technology.

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Speaker 1: They're like really getting clobbered because we know those have

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Speaker 1: been like some of the big winners from the AI boom.

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Speaker 2: I can hear all the private equity shops that bought

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Speaker 2: each back outfit streaming from over here. No, it is

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Speaker 2: a really interesting headline, right because you think about this

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Speaker 2: as a technology space. AI is technology, but it has

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Speaker 2: this huge infrastructure aspect attached to it. Infrastructure investors, from

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Speaker 2: what I understand, you know, historically have tended to like

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Speaker 2: relatively stable returns. Right, You invest in it because you

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Speaker 2: expect this to be a pretty reliable business. But because

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Speaker 2: you have infrastructure that is now tied to tech, it

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Speaker 2: seems like there's a pretty big risk that like every year,

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Speaker 2: every two years or maybe even months now, there's going

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Speaker 2: to be some huge tech upgrade that just changes the

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Speaker 2: equation entirely.

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Speaker 1: This is a good point, Like I think, like the

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Speaker 1: first time years and years ago I started hearing about

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Speaker 1: infrastructure investing is like, oh, we bought a toll road, right,

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Speaker 1: we bought an airport, and airports by and large they

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Speaker 1: don't get disrupted very much, or a toll roads, like

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Speaker 1: the basic business of some of these things has remained stable.

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Speaker 1: But yeah, to your point, especially now that there's such

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Speaker 1: a link with tech, they's just like the sort of

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Speaker 1: volatility of what's going to win out or what's needed

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Speaker 1: seems highly uncertain.

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Speaker 3: Yeah.

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Speaker 2: And of course the other obvious thing going on at

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Speaker 2: the moment is everyone's talking about AI valuations. Is the

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Speaker 2: build out getting ahead of itself? And are all these

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Speaker 2: companies actually going to be able to generate enough cash

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Speaker 2: flow that backs up all this investment spend?

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Speaker 1: You know the other thing too, and It's something that

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Speaker 1: we've observed, which is if you go back to infrastructure

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Speaker 1: investing is not a new thing by any stretch, but

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Speaker 1: you go back to the twenty tens, and so much

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Speaker 1: of the money that was made then is sort of

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Speaker 1: like financial engineering, financial opportunities who had dry powder at

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Speaker 1: a time when everyone is broke and so forth. And

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Speaker 1: one of the themes that's recurring over and over again

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Speaker 1: these days is just like to make money, it feels

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Speaker 1: like you really have to get your hands dirty. Physical

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Speaker 1: things of all sorts, and physical things have just been

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Speaker 1: in our face constantly since COVID, and then it's accelerated

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Speaker 1: because of there's so much public money pouring into this,

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Speaker 1: so governments around the world really opening up the tabs.

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Speaker 1: And then over the weekend we're recording this January sixth,

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Speaker 1: by the way, obviously the Maduro News and so then

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Speaker 1: there's all of this stuff. It was like, oh, who's

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Speaker 1: going to rebuild all of that oil infrastructure if that

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Speaker 1: oil is ever going to profitably be tabbed? Like this

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Speaker 1: is just sort of the physical world is sort of

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Speaker 1: like the story of our time.

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Speaker 2: Are people talking about public private partnerships? Yet I feel

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Speaker 2: like this is another cyclical thing that just pops up

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Speaker 2: every once in a while. I'm going to do let's

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Speaker 2: bring in our guests, and while we do that, I'm

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Speaker 2: going to do a news trend search to see where

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Speaker 2: we are in the public private partnership cycle.

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Speaker 1: Yes, let's bring our guests. Well, we really do have

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Speaker 1: the perfect guest, lots of experience in this realm. We're

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Speaker 1: going to be speaking with Tyler Rosenligd. He's a portfolio

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Speaker 1: manager globalisted Infrastructure and natural resource equities at Cohen and Steers.

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Speaker 1: So we're going to talk about all this stuff. Tyler,

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Speaker 1: thank you so much for coming on Outla, Thanks for

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Speaker 1: having me.

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Speaker 3: I'm real excited.

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Speaker 1: What's your job? What do you do? Why are we

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Speaker 1: talking to you? What's going and Steers, Let's let's get

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Speaker 1: that out of the Yeah.

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Speaker 3: So, Conan Steers were a long only asset manager. We

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Speaker 3: primarily invest in real assets and alternative income strategies. So

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Speaker 3: we're you know, managing mutual funds and ETFs, active ETFs

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Speaker 3: and separate accounts for institutional investors. Focused on a couple

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Speaker 3: niche things, primarily real assets strategies here and now. So

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Speaker 3: that's things like listed ruts, which were really well known

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Speaker 3: for commodities. And then where I help is our global

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Speaker 3: listed infrastructure and our natural resource equity strategies. So these

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Speaker 3: are long only strategies. Investing across in infrastructure, it's you

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Speaker 3: know we call the cute subsectors, so that's communications, things

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Speaker 3: like cell towers, data centers, and satellites. Utilities, so this

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Speaker 3: is electric, gas, water, renewables, transportation, the toll roads that

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Speaker 3: you talked about, toll roads, airports, marine ports, and freight rails.

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Speaker 3: And then e energy is misstream pipelines and so forth.

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Speaker 3: So we try to look at everything and give investors

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Speaker 3: exposure to what is really a dynamic and exciting place.

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Speaker 2: So how busy have you been over the past year

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Speaker 2: or two.

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Speaker 3: It's been very busy. I Mean, my joke used to

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Speaker 3: be that I invent and all the old economy stuff.

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Speaker 3: Now it's like the new economy stuff, and it's the

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Speaker 3: stuff that people are really excited about. And I'd say

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Speaker 3: we've seen a lot of these trends kind of coming

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Speaker 3: for a long time, and we've talked about them for

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Speaker 3: probably a decade, but they've really only surfaced kind of

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Speaker 3: to the front page of Bloomberg every morning in the

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Speaker 3: last eighteen months, and I think that's really exciting, and

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Speaker 3: we've been really busy because there's lots of new opportunities.

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Speaker 3: We see investment cases in traditional utilities, tons of new alternatives, nuclear, renewables, pipelines,

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Speaker 3: lots of new businesses, capital formation, great opportunities.

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Speaker 2: And what's the balance of power actually like between investors

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Speaker 2: and the companies that need investment at the moment, because

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Speaker 2: I imagine it could go either way right now, Like

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Speaker 2: the energy needs for data centers are absolutely massive, so

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Speaker 2: it needs tons and tons of capital. But at the

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Speaker 2: same time, a lot of investors, as we've been discussing,

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Speaker 2: have been very, very eager to identify opportunities and get

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Speaker 2: their foot in the door.

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Speaker 3: Yeah. I mean in the world that I live in,

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Speaker 3: which is the sort of hard asset economy, i'd say

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Speaker 3: having capital is very important. But we're now at a

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Speaker 3: place in the cycle where the investment needs are so

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Speaker 3: big that it's creating pretty big challenges for companies. And

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Speaker 3: take the utility sector as an example. Eighteen months ago,

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Speaker 3: if you said, hey, utility capex is going to accelerate

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Speaker 3: and earnings growth is going to accelerate, every utility investor

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Speaker 3: would say that's great. We've gone to such a level

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Speaker 3: now that it's actually really nuanced answer. You know, there

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Speaker 3: is so much capital required in utility investment today that

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Speaker 3: it's really causing affordability problems and some utilities we think

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Speaker 3: are really going to struggle because elections are being one

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Speaker 3: about utility bills. Other utilities. On the other hand, actually

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Speaker 3: you invite data centers into your service territory and it

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Speaker 3: lowers bills, and so today, I actually think from an

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Speaker 3: active management perspective, the dispersion in terms of outcomes and

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Speaker 3: investment opportunities is as wide as it's ever been. So

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Speaker 3: that's a really good thing for us as investors, and

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Speaker 3: I think it's not going to end. You know, we

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Speaker 3: think these are structural, secular trends that are here for

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Speaker 3: a while, and we don't think that is a fad.

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Speaker 3: From an infrastructure investment perspective, we.

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Speaker 1: Just real quickly, data center's lowering bills. Headlines like that

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Speaker 1: don't go viral. What's that all about.

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Speaker 3: Yeah, it's very nuanced. So if you think about the

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Speaker 3: utility business model, you know, very simplistically, the utility invests

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Speaker 3: in its rate base. So let's say their rate base

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Speaker 3: is ten billion dollars. They're allowed a return on equity,

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Speaker 3: maybe it's ten percent. They aren't a billion dollars. This

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Speaker 3: is very simple math. Isn't how it exactly works. But

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Speaker 3: then they charge their cost to customers, and that's their

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Speaker 3: revenue requirement what we as bill payers pay. You double

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Speaker 3: your rate base. If you don't increase your customers, you

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Speaker 3: could actually double your costs. And that's a lot of

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Speaker 3: what's happening here in New York City and Washington, DC

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Speaker 3: and other places. There are some utilities that are long

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Speaker 3: generation or they're long power. So just think about that

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Speaker 3: very simplistically. You've got a utility, it's got a rate base,

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Speaker 3: and inside that rate base, every rate payer is paying

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Speaker 3: for power that's not actually being used. Bring a data

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Speaker 3: center into that service territory. The data center itself might

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Speaker 3: consume that power, and you, as the ratepayer, are not

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Speaker 3: actually going to be burdened by that cost in your

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Speaker 3: monthly bill. And so for us, we think it's really important.

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Speaker 3: You've got to understand the regulation, who the commissioners are,

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Speaker 3: what their power systems are, like their generation and so forth.

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Speaker 3: And there are examples of data centers being really good

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Speaker 3: for both the utility and the customer. But that's again,

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Speaker 3: it's very nuanced, and it really depends on where you

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Speaker 3: are and sort of what your asset base looks like.

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Speaker 2: I talk a little bit more about that because we've

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Speaker 2: done episodes on the political risks involved with the data

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Speaker 2: center build out, and this seems to be something that

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Speaker 2: is really gaining traction, especially as we go into the

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Speaker 2: midterms and we see politicians sort of, you know, laying

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Speaker 2: down their positions on this particular issue. But how feasible

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Speaker 2: is it that you could get a data center that

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Speaker 2: could actually in some way improve the electricity market in

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Speaker 2: a particular state or location. And then I imagine that

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Speaker 2: you have to have a lot of room, right to

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Speaker 2: have a data center, you have to have water access

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Speaker 2: and things like that. It can't be good ever.

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Speaker 3: Oh definitely, we're not saying it's going everywhere. I mean,

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Speaker 3: i'd go the opos and say it's really actually bad

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Speaker 3: in a lot of places, and then it's really good

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Speaker 3: in some places. And so it really depends on all

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Speaker 3: the things that you just laid out, which is, do

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Speaker 3: you have the generation, do you have the water, do

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Speaker 3: you have everything else? What you're seeing now in utilities

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Speaker 3: is data center tariffs that are being kind of negotiated

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Speaker 3: and going through the utility regulation process today. And we've

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Speaker 3: seen some examples in Wisconsin, for instance, where effectively the

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Speaker 3: data center has zero impact on the local rate pair.

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Speaker 3: The hyperscaler in Wisconsin has agreed to guarantee a return

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Speaker 3: on a rate base for the capex that the utility

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Speaker 3: is spending. It's not going to impact the rate payers

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Speaker 3: there at all, and so it's kind of done off

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Speaker 3: of the back of the utility customer. There's other places though,

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Speaker 3: where they're still working through those utility contracts or we'll see,

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Speaker 3: but hey, you could have big stranded asset risk. Utility

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Speaker 3: is going to spend a couple of billion dollars. They're

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Speaker 3: going to make sure that the data center has power

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Speaker 3: and electricity. Maybe the data center leaves five years from

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Speaker 3: now and then everybody's gonna be stuck with a stranded assets.

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Speaker 3: So no, definitively take a step back. You know, we

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Speaker 3: think the world needs more energy, we think the world

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Speaker 3: needs more power. It's gonna service data centers, it's going

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Speaker 3: to service industrial customers, residential customers, sort of everything, evs,

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Speaker 3: you name it. But that's gonna come with the tension

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Speaker 3: of rising bills, and that's going to be a challenge

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Speaker 3: for some places and an opportunity for others.

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Speaker 1: I'm curious. We'll get into all all these details and stuff,

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Speaker 1: but I'm actually I'm very curious about how you work

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Speaker 1: and how you figure this stuff out. I have to imagine,

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Speaker 1: for as long as you've been working on this, there

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Speaker 1: must be new things every day, because, as Tracy mentioned,

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Speaker 1: we've it's gone from this sort of like a lot

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Speaker 1: of staid, stable operations to high tech and there's so

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Speaker 1: much uncertainty. How do you work, Like, how do you

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Speaker 1: learn about things? Do you have a team of analysts

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Speaker 1: that talk to us about like the process for wrapping

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Speaker 1: your heads around so much novelty? Yeah?

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Speaker 3: So you know, we've got a great team on our

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Speaker 3: infrastructure team. There's four portfolio managers and sort of we

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Speaker 3: kind of break the world up by geography. We have

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Speaker 3: one PM in London and who helps us with our

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Speaker 3: European infrastructure investments, and then three here in New York

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Speaker 3: with varying expertise, and then we have seven analysts and

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Speaker 3: they're sort of our boots on the ground. I mean.

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Speaker 3: Conan Steers was founded as a real estate investor back

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Speaker 3: in nineteen eighty six, and our perspective was be on

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Speaker 3: the ground, be walking properties, be touring assets, because you

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Speaker 3: can find unique insights if you do that sort of thing.

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Speaker 3: So we want to have this big team that is

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Speaker 3: sector specialists, that really understands the utilities, the regulation behind it,

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Speaker 3: what's going on in local politics, going in touring assets,

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Speaker 3: talking to local professionals, and trying to find kind of

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Speaker 3: where we can see unique insights and where hey, the

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Speaker 3: regulation is getting a lot better, or there's this unique

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Speaker 3: contract that we think is going to be really beneficial

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Speaker 3: to this small local utility, or hey, what's going on

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Speaker 3: in New Jersey, what's going on in Virginia? In New

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Speaker 3: York City, how's that going to affect things as well?

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Speaker 3: And so I think it's important to have this team

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Speaker 3: do really detailed fundamental work. And for us as investors,

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Speaker 3: I'm our CIO would characterize us as thematically informed relative

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Speaker 3: value investors. So let's find good themes that are underappreciated

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Speaker 3: and underpriced and then find the best investment opportunities to

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Speaker 3: take advantage of those. And if you do that, we

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Speaker 3: think you can generate really good investment results.

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Speaker 2: My favorite form of self side research remains the analyst

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Speaker 2: going on field trips. So now I'm imagining everyone's staring

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Speaker 2: at a data center in New Jersey or something. I

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Speaker 2: know you're not self side, but speaking of that, though,

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Speaker 2: how do deals actually land on your desk? And I

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Speaker 2: say that realizing that I'm talking as if someone's like

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Speaker 2: mailing out offer letters to you and it's actually landing

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Speaker 2: on your desk. How do deals or potential opportunities get

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Speaker 2: to your screen?

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Speaker 3: So we're public markets investors, so we're just trying to

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Speaker 3: find listed securities and figure out which ones we think

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Speaker 3: our best position for the next one year, three or

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Speaker 3: five years. And so we're constantly invested. So as we

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Speaker 3: raise capital via open un neutual funds or through our

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Speaker 3: active ETFs, through through separate accounts, it kind of comes

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Speaker 3: in and then we have our core strategy that's invested

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Speaker 3: at all times. And for us, it's about being positioned

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Speaker 3: in a way that we think will do a lot

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Speaker 3: better than the benchmarks that we're measured against. And so

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Speaker 3: for us, it's sort of your traditional equity research function

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Speaker 3: where we are constantly trying to make sure that we

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Speaker 3: are leading edge in terms of what's happening in markets

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Speaker 3: and identify, Hey, we think that this thing is going

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Speaker 3: to happen to the North Dakota utility as they invite

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Speaker 3: a local data center customer there. That's underappreciated by the market.

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Speaker 3: And so it's the fundamental boots on the ground stuff

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Speaker 3: that everybody does, and we just think that we've got

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Speaker 3: some unique processes and unique ways to tap it.

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Speaker 1: At what point did it sort of dawn on you

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Speaker 1: or dawn on the market, et cetera that a lot

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Speaker 1: of companies that we had long associated with being sort

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Speaker 1: of classically cyclical companies can be t secular winners. Now

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Speaker 1: I'm thinking of like a Caterpillar, we should just sort

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Speaker 1: of imagine buy and large. Here's a company whose fortunes

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Speaker 1: rise and fall with GDP. Right, the economy is growing, well,

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Speaker 1: they're probably going to have a lot of people are

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Speaker 1: gonna be buying equipment to break ground. You get a recession,

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Speaker 1: people buy less of it. And then something changed and

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Speaker 1: you look at a chart of like a Caterpillar is like, Okay,

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Speaker 1: this is no longer a cyclical company. When did this

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Speaker 1: start to like take hold or sort of dawn on people?

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Speaker 1: Something was changing.

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Speaker 3: Yeah, So I'd start with, so I have kind of

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Speaker 3: the dual function where I oversee help oversee our infrastructure

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Speaker 3: strategies and our natural resource equity strategies. And I'd say

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Speaker 3: on that side of the house, so that's investing in

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Speaker 3: things like the entire energy value chain, the metals and

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Speaker 3: mining value chain, the ag value chain. You've seen a

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Speaker 3: lot more of like the Caterpillar type transitions that you

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Speaker 3: just alluded to, which is, hey, this hyper cyclical business

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Speaker 3: that suddenly is being valued like it's not a cyclical

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Speaker 3: So I'd start with things always have cycles, and so

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Speaker 3: it might be perceived as not cyclical now, but maybe

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Speaker 3: it will become cyclical again in the future. But our

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Speaker 3: view would be, hey, these cycles are actually higher and

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Speaker 3: deeper and lasting a lot longer. And one of the

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Speaker 3: big drivers has been a lot of the natural resources

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Speaker 3: world has been a capital starve for a while, and

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Speaker 3: in that process, many sectors and industries have consolidated quite

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Speaker 3: a bit, and so the expertise has really accrued to

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Speaker 3: just a couple players. And if you think about that

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Speaker 3: and you say, hey, one of the things that we

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Speaker 3: believe about natural resources is that we've exited what we

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Speaker 3: talked about as the era of abundance, and we've entered

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Speaker 3: the air of scarcity. We just don't have enough of

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Speaker 3: all the stuff that we need for the economy to grow.

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Speaker 3: And the companies that actually facilitate ending that scarcity, there's

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Speaker 3: just not as many of them, because again, there's been

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Speaker 3: massive consolidation in these sectors that we think will be persistent,

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Speaker 3: will allow them to earn above average returns, have a

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Speaker 3: lot more predictable growth for a long time, and then

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Speaker 3: we'll reassess in the future and maybe the competition will

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Speaker 3: be invited back and they're going to go back in

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Speaker 3: the other way. But we think it's really early in

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Speaker 3: a lot of these trends, and the sort of secular

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Speaker 3: growth and the reduction in volatility of that growth is

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Speaker 3: very different now than it was ten years ago.

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Speaker 2: So I take the point about consolidation and that you're

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Speaker 2: working on, you know, pretty long timelines. But how do

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Speaker 2: you guard against, you know, the possibility that, as with

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Speaker 2: everything infrastructure related and energy related, certainly it seems like

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Speaker 2: we always end up with overcapacity at some point in

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Speaker 2: the cycle. How do you avoid that?

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Speaker 3: Can't avoid it? Okay, that will happen, right like on

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Speaker 3: the commodity cycle. The cure for low prices, low prices,

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Speaker 3: the cure for high prices, high prices. The same thing

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Speaker 3: on the infrastructure side. Although infrastructure, again it's generally assets

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Speaker 3: that are monopolistic, either by regulation or by competitive dynamic.

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Speaker 3: You know, you think about the US freight rails. You

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Speaker 3: can't really build a new one, and so the competition

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Speaker 3: there is going to come from new technologies like autonomous

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Speaker 3: trucks and other things. You think about, things like airports,

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Speaker 3: even utilities. I mean, these are local monopolies. So in

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Speaker 3: infrastructure that sort of over build, I mean it would

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Speaker 3: happen on the power side, and it will happen at

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Speaker 3: some point, like what would happened with shale pipelines in

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Speaker 3: North America. Right in twenty ten, we thought oil production

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Speaker 3: was going to go up a lot. We built a

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Speaker 3: lot of pipelines by twenty fifteen, twenty sixteen, and oil

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Speaker 3: price has declined. We didn't need all those pipelines in

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Speaker 3: the short term. Cause a lot of turmoil. And so

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Speaker 3: to answer your question directly, you can't avoid it, but

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Speaker 3: we as investors, our job is to try to sidestep it.

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Speaker 3: Understand when's the market getting too excessive in terms of

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Speaker 3: its expectations.

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Speaker 1: Tell us about right now January twenty twenty six, within

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Speaker 1: the realm of say US energy and US energy infrastructure.

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Speaker 1: We all know the headlines, and we've done a million

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Speaker 1: episodes on them. There's so much demand for electricity, all right,

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Speaker 1: I get that point. But talk to us specifically about

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Speaker 1: what are we seeing right now? What is the math

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Speaker 1: that you see out there? And maybe to frame it, like,

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Speaker 1: how would this conversation be different even in say January

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Speaker 1: twenty twenty four, January twenty twenty five.

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Speaker 3: Perfect, So let's actually let's not start with the US.

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Speaker 3: Let's start with the okay, because I think it's let's

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Speaker 3: start as big as we go and then we can

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Speaker 3: drill down a lot of people. For the last like

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Speaker 3: six years, when they talked about global energy demand, we

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Speaker 3: think they did it the wrong way that they focused

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Speaker 3: on the supply side, where they said, hey, the government

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Speaker 3: has these targets or we have this sort of goal

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Speaker 3: to have global warming be xyz. This is what the

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Speaker 3: supply would have to look like to satisfy that world.

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Speaker 3: And we said, you know, why don't we start with demand?

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Speaker 3: You know, what do we think global energy demand is

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Speaker 3: going to be in the next two decades. Then let's

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Speaker 3: figure out how we're going to supply it. So global

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Speaker 3: energy demand, it's a pretty easy model. It's kind of

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Speaker 3: three factors, you know. The first thing that you care

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Speaker 3: about is global population growth. All l sql more people,

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Speaker 3: more energy is consumed. Not talking oil or cool it's

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Speaker 3: energy and aggregate. The second thing that you think about

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Speaker 3: is the global economy. Bigger economy, all lseql more energy consumption.

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Speaker 3: The third one is pretty tricky, and that's the energy

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Speaker 3: intensity of economic growth. That is, hey, how good are

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Speaker 3: we at converting an energy input into a unit of

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Speaker 3: economic output. So what we did a couple of years

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Speaker 3: ago is we said, hey, let's try to predict those

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Speaker 3: things in the very long run. The first thing is, hey,

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Speaker 3: population growth, we think it's decelerating, but it's still positive.

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Speaker 3: So in twenty forty there's going to be a lot

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Speaker 3: more people in the world than there were in twenty

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Speaker 3: twenty four. Economic growth, we think it's going to slow

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Speaker 3: but still be pretty positive. Maybe it used to be

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Speaker 3: three percent, now it's two point seven. That means more

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Speaker 3: energy demand. And then we said, hey, let's assume we

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Speaker 3: get a lot more energy efficient, We're going to be

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Speaker 3: a lot better at consuming and converting energy into economic growth.

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Speaker 3: And that's a comfortable assumption, you know, two years ago,

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Speaker 3: because government policy was mandating it, consumer preferences were mandating it,

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Speaker 3: and also technologies were getting better. When you put those

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Speaker 3: three things together, what you saw was global energy demand

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Speaker 3: rising from about one hundred and seventy eight thousand tarawad hours,

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Speaker 3: which is you know, big number, but one hundred and

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Speaker 3: seventy eight thousand to two hundred and twenty twenty forty.

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Speaker 3: That's a big increase in global energy demand. And again

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Speaker 3: that assumes a big increase in energy efficiency. So then

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Speaker 3: peel back one layer. How does renewables fit into this, Well,

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Speaker 3: we also want to reduce coal consumption. So if you

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Speaker 3: think about this, hey, we're going from one eighty to

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Speaker 3: two twenty. We want to reduce the amount of coal

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Speaker 3: we consume. Renewables we need to add sixty thousand tarot

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Speaker 3: wet hours or fifty five thousand tariowot hours of supply.

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Speaker 3: It's a huge number. That's basically recreating the entire global

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Speaker 3: crude oil industry that's been around for one hundred years

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Speaker 3: in the next sixteen. So what's changed in the last

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Speaker 3: twelve months that global energy demand assumption for twenty forty

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Speaker 3: has risen. Our confidence that we're getting less energy intense

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Speaker 3: has gone down because a lot of this economic growth

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Speaker 3: is very energy intensive, and so we've been in this

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Speaker 3: energy addition world, this need to produce really more of everything,

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Speaker 3: and it's only becoming more of an issue and a

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Speaker 3: challenge and an opportunity for the energy industry.

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Speaker 2: Actually reminds me. I wanted to ask you, can you

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Speaker 2: talk about the decarbonization initiatives from some of the hyperscalers

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Speaker 2: themselves and how you're judging Yeah, yeah, yeah.

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Speaker 3: So there's sort of like three competing factors when you're

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Speaker 3: thinking about energy. So so one is you want the

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Speaker 3: energy system to be stable, You want to be clean,

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Speaker 3: and you want more of it. I think five years

432
00:21:21,359 --> 00:21:25,480
Speaker 3: ago it was clean, stable more in that order, we

433
00:21:25,520 --> 00:21:28,000
Speaker 3: want clean energy, we want it to be stable, and

434
00:21:28,000 --> 00:21:30,640
Speaker 3: we want to have more. Today it's it's kind of flipped, right,

435
00:21:31,080 --> 00:21:34,119
Speaker 3: we need more. It has to be stable, and then

436
00:21:34,160 --> 00:21:36,240
Speaker 3: we do want it to be clean, but we can't

437
00:21:36,280 --> 00:21:39,080
Speaker 3: necessarily sacrifice the clean for the more and the stable

438
00:21:39,119 --> 00:21:41,480
Speaker 3: part of it. And so I think everybody is well

439
00:21:41,480 --> 00:21:44,000
Speaker 3: intentioned and doing the right things, which is, Hey, let's

440
00:21:44,040 --> 00:21:47,880
Speaker 3: try to transition the dirtiest stuff away, move from coal

441
00:21:47,920 --> 00:21:51,159
Speaker 3: into natural gas hyper scalers who have a lot of cash.

442
00:21:51,480 --> 00:21:55,280
Speaker 3: Let's try to reindustrialize the nuclear economy. Let's continue to

443
00:21:55,280 --> 00:21:59,760
Speaker 3: make investments in SMRs and existing reactors, turning them on.

444
00:22:00,280 --> 00:22:02,919
Speaker 3: Let's try to get more geothermal and other things in

445
00:22:02,960 --> 00:22:05,000
Speaker 3: the Hey, let's get more of it. Let's make sure

446
00:22:05,000 --> 00:22:07,080
Speaker 3: it's stable, let's make it as clean as possible. And

447
00:22:07,119 --> 00:22:09,680
Speaker 3: then once we've kind of gotten there on the build out,

448
00:22:09,760 --> 00:22:11,480
Speaker 3: we can start to shut down the stuff we don't

449
00:22:11,480 --> 00:22:13,399
Speaker 3: want and really just rely on the stuff that we

450
00:22:13,400 --> 00:22:17,080
Speaker 3: do want. But again, the three factors have changed, and

451
00:22:17,160 --> 00:22:19,520
Speaker 3: I think that that's really shifted market perceptions on what

452
00:22:19,560 --> 00:22:20,960
Speaker 3: the energy industry should look like.

453
00:22:21,280 --> 00:22:23,399
Speaker 1: Have they acknowledged that they've changed or is this just

454
00:22:23,440 --> 00:22:26,399
Speaker 1: a quiet they've changed but we're not getting they're certainly

455
00:22:26,480 --> 00:22:29,360
Speaker 1: not putting press releases about it. But you know, how

456
00:22:29,560 --> 00:22:30,320
Speaker 1: is it just you.

457
00:22:30,280 --> 00:22:32,280
Speaker 3: Know, I think change. I think it's it's actually a

458
00:22:32,320 --> 00:22:34,440
Speaker 3: little bit more acknowledged than people would say out loud,

459
00:22:34,520 --> 00:22:36,640
Speaker 3: Like I get yelled at sometimes when I talk about

460
00:22:36,680 --> 00:22:40,280
Speaker 3: specific stocks. But there's a UK based major energy company

461
00:22:40,280 --> 00:22:43,000
Speaker 3: that you know went one way and then they've very

462
00:22:43,000 --> 00:22:45,600
Speaker 3: publicly gone the other way. Yeah, and I think you

463
00:22:45,640 --> 00:22:47,880
Speaker 3: know that's that's normal when you see sort of market

464
00:22:47,880 --> 00:22:48,760
Speaker 3: conditions shift like.

465
00:22:48,760 --> 00:22:52,120
Speaker 1: This random question the year twenty forty, are we still

466
00:22:52,119 --> 00:22:54,399
Speaker 1: going to be using coal in this country.

467
00:22:54,400 --> 00:22:57,760
Speaker 3: In our model? Our model is global, so this country

468
00:22:57,840 --> 00:23:00,280
Speaker 3: versus the world. Let's just focus on the world. World.

469
00:23:00,760 --> 00:23:04,960
Speaker 3: We have coal supply or sort of coal generation cut

470
00:23:05,000 --> 00:23:09,320
Speaker 3: in half by twenty forty. I think that's ambitious. I

471
00:23:09,359 --> 00:23:11,840
Speaker 3: would hope that it was zero, but the sort of

472
00:23:11,920 --> 00:23:15,760
Speaker 3: energy pragmatists would say, hey, around the world coal will

473
00:23:15,760 --> 00:23:18,160
Speaker 3: be relied upon for a really long time. It will

474
00:23:18,160 --> 00:23:21,280
Speaker 3: be a much lower percentage of energy markets, and we

475
00:23:21,320 --> 00:23:23,639
Speaker 3: think it will sort of decline over time. But again,

476
00:23:23,840 --> 00:23:27,240
Speaker 3: the idea of zero coal around the world by twenty forty,

477
00:23:27,240 --> 00:23:29,320
Speaker 3: I think is highly unlikely.

478
00:23:29,800 --> 00:23:32,200
Speaker 2: Since we're talking about energy on a global scale. Talk

479
00:23:32,240 --> 00:23:35,119
Speaker 2: to us about what you're seeing or expecting out of China,

480
00:23:35,240 --> 00:23:39,080
Speaker 2: because this is the other source of a million headlines nowadays,

481
00:23:39,200 --> 00:23:41,840
Speaker 2: or at least a million headlines with very very large

482
00:23:41,960 --> 00:23:44,440
Speaker 2: numbers in them about what China is doing in terms

483
00:23:44,480 --> 00:23:46,840
Speaker 2: of building out its energy capacity. Yeah.

484
00:23:46,920 --> 00:23:48,840
Speaker 3: I think part of it is you think about the

485
00:23:48,880 --> 00:23:51,639
Speaker 3: global geopolitics and you say, like, well, why are some

486
00:23:51,840 --> 00:23:56,320
Speaker 3: places more aggressively pursuing alternatives versus traditional and why did

487
00:23:56,320 --> 00:23:58,800
Speaker 3: Europe do as much renewables as they did, And a

488
00:23:58,800 --> 00:24:00,480
Speaker 3: lot of that has to do with taking advantage of

489
00:24:00,480 --> 00:24:02,480
Speaker 3: what you're endowed with or not. So Here in North

490
00:24:02,520 --> 00:24:06,159
Speaker 3: America we have plentiful natural gas and crude oil, and

491
00:24:06,200 --> 00:24:09,520
Speaker 3: our need to invest in renewables from a cost perspective

492
00:24:09,600 --> 00:24:13,000
Speaker 3: is different than Europe, where they are an importer, and

493
00:24:13,080 --> 00:24:15,320
Speaker 3: so the way to sort of convert from being an

494
00:24:15,320 --> 00:24:17,720
Speaker 3: importer to self sufficient is to harness what you've got.

495
00:24:18,000 --> 00:24:19,439
Speaker 3: If you've got a lot of wind and you've got

496
00:24:19,440 --> 00:24:21,840
Speaker 3: a lot of sun, you're going to want to overinvest there.

497
00:24:22,240 --> 00:24:24,879
Speaker 3: I think China depends on the world for energy supply

498
00:24:25,280 --> 00:24:27,159
Speaker 3: and they're trying to reduce that and I want to

499
00:24:27,160 --> 00:24:30,680
Speaker 3: be more independent. They're going all in on nuclear, They're

500
00:24:30,800 --> 00:24:34,720
Speaker 3: investing massive amounts in their nuclear economy, cold generation as well,

501
00:24:34,800 --> 00:24:37,080
Speaker 3: kind of everything, and I think just an effort to

502
00:24:37,400 --> 00:24:40,200
Speaker 3: be more self sufficient. But that's not China specific, right,

503
00:24:40,200 --> 00:24:42,640
Speaker 3: that's kind of like every country right now is doing

504
00:24:42,680 --> 00:24:45,040
Speaker 3: a similar thing. And trying to be a little bit

505
00:24:45,080 --> 00:24:48,439
Speaker 3: more self sufficient in a post COVID, post Russia Ukraine,

506
00:24:48,960 --> 00:24:50,800
Speaker 3: rising geopolitical tension sort of world.

507
00:24:51,200 --> 00:24:53,840
Speaker 1: I think I'm very skeptical that we're going to have

508
00:24:53,840 --> 00:24:56,520
Speaker 1: a nuclear renaissance in the US. Like, I know, there's

509
00:24:56,520 --> 00:24:58,720
Speaker 1: tons of headlines and I'm sure there's a few of

510
00:24:58,720 --> 00:25:01,960
Speaker 1: those places that are going to get restarted. I am

511
00:25:02,000 --> 00:25:04,879
Speaker 1: not an expert, so it's it's just my gut. Is

512
00:25:05,000 --> 00:25:07,199
Speaker 1: am I off the mark? Were we looking on that?

513
00:25:07,240 --> 00:25:07,320
Speaker 2: So?

514
00:25:07,320 --> 00:25:09,480
Speaker 3: I think it really depends on what you mean by

515
00:25:09,560 --> 00:25:11,119
Speaker 3: a nuclear renaissance.

516
00:25:10,640 --> 00:25:12,520
Speaker 2: So give us a time frame, get.

517
00:25:12,960 --> 00:25:16,159
Speaker 1: Like, okay, here's my I don't even why am I

518
00:25:16,280 --> 00:25:18,639
Speaker 1: making predictions. I don't know anything about this stuff, but

519
00:25:18,680 --> 00:25:22,040
Speaker 1: like I would be surprised if I'm on polymarket or something.

520
00:25:22,040 --> 00:25:24,560
Speaker 1: I would imagine that there's not what's that plant in

521
00:25:24,600 --> 00:25:27,359
Speaker 1: Georgia that came online, the vogal, the vulgal plant, Like,

522
00:25:27,760 --> 00:25:29,560
Speaker 1: I don't think there's going to be another Vocal in

523
00:25:29,600 --> 00:25:30,520
Speaker 1: the next twenty years.

524
00:25:30,600 --> 00:25:32,840
Speaker 3: I disagree. I'll kind of talk you through why, But

525
00:25:33,000 --> 00:25:35,159
Speaker 3: let me let me tell you about what the nuclear renaissance.

526
00:25:35,200 --> 00:25:37,600
Speaker 3: And again I'm talking kind of global as opposed to

527
00:25:37,640 --> 00:25:39,480
Speaker 3: just us, but we can definitely talk about US two.

528
00:25:39,520 --> 00:25:41,280
Speaker 3: So take another step. I like to take a lot

529
00:25:41,280 --> 00:25:41,760
Speaker 3: of step backs.

530
00:25:41,760 --> 00:25:44,439
Speaker 1: As you can tell, we're going to talk about the galaxy.

531
00:25:44,119 --> 00:25:46,879
Speaker 3: Go no data centers in space in this conversation, I

532
00:25:46,880 --> 00:25:47,399
Speaker 3: promise no.

533
00:25:47,560 --> 00:25:48,600
Speaker 1: Actually that.

534
00:25:50,600 --> 00:25:53,200
Speaker 3: Yeah, okay, So why why are we talking about nuclear? Right?

535
00:25:53,240 --> 00:25:55,960
Speaker 3: It's pretty simple, break the world into traditional and alternative.

536
00:25:56,400 --> 00:25:59,040
Speaker 3: Good thing about traditional, so things like natural gas and

537
00:25:59,080 --> 00:26:02,280
Speaker 3: coal is it's reliable twenty four to seven three sixty

538
00:26:02,280 --> 00:26:05,600
Speaker 3: five energy. Unfortunately, it has the emissions profile we don't like.

539
00:26:06,160 --> 00:26:08,920
Speaker 3: Alternatives let's just call it wind and solar has the

540
00:26:08,960 --> 00:26:12,040
Speaker 3: emissions profile we want, but it's intermittent and variable. If

541
00:26:12,080 --> 00:26:15,120
Speaker 3: you're a data center CEO, you're feeling pretty good about

542
00:26:15,119 --> 00:26:17,440
Speaker 3: your business today, you kind of wake up with night

543
00:26:17,440 --> 00:26:20,320
Speaker 3: sweats about the power going out. Right, you cannot lose power.

544
00:26:20,359 --> 00:26:23,120
Speaker 3: You have a very expensive metal shell that's cooling servers

545
00:26:23,119 --> 00:26:26,520
Speaker 3: and providing electricity and energy, which means, hey, I can't

546
00:26:26,600 --> 00:26:31,000
Speaker 3: take the intermittency. I've got to use the baseload. Nuclear

547
00:26:31,040 --> 00:26:33,239
Speaker 3: is sort of the one resource that can kind of

548
00:26:33,280 --> 00:26:35,840
Speaker 3: serve both masters. It is twenty four to seven three

549
00:26:35,920 --> 00:26:39,480
Speaker 3: sixty five low, variable cost, very high capacity factor and

550
00:26:39,520 --> 00:26:42,200
Speaker 3: it's also pretty clean, and so that's kind of why

551
00:26:42,200 --> 00:26:44,400
Speaker 3: we're talking about nuclear. There was an episode of maybe

552
00:26:44,400 --> 00:26:46,600
Speaker 3: a couple months ago where you said, hey, nuclear batteries.

553
00:26:46,880 --> 00:26:48,960
Speaker 2: Yeah, I was about to ask you the same question.

554
00:26:49,200 --> 00:26:52,280
Speaker 3: Well, go, I think I mean it's all about energy storage. Yeah.

555
00:26:52,280 --> 00:26:54,800
Speaker 3: The whole thing is like, hey, how do I store

556
00:26:54,920 --> 00:26:56,800
Speaker 3: energy to use it when I want it? Like coal

557
00:26:57,040 --> 00:27:00,719
Speaker 3: is effectively an energy battery, natural gas is an energy battery.

558
00:27:00,720 --> 00:27:02,840
Speaker 3: There's just no batteries for wind and solar that are

559
00:27:03,040 --> 00:27:05,119
Speaker 3: viable today. But I'd love to solve that problem. That

560
00:27:05,520 --> 00:27:06,520
Speaker 3: would help in a lot of ways.

561
00:27:06,520 --> 00:27:09,000
Speaker 2: But back to the nuclear can hold solar energy in

562
00:27:09,040 --> 00:27:09,480
Speaker 2: your hand?

563
00:27:09,640 --> 00:27:12,320
Speaker 3: Can't? I wish you could and me, well, one day

564
00:27:12,320 --> 00:27:13,760
Speaker 3: you will, but but we think it's going to take

565
00:27:13,800 --> 00:27:15,560
Speaker 3: quite a while to do that. But okay, so the

566
00:27:15,640 --> 00:27:19,880
Speaker 3: nuclear renaissance, we've been shutting down nuclear generation capacity around

567
00:27:19,880 --> 00:27:21,159
Speaker 3: the world for the last two decades.

568
00:27:21,480 --> 00:27:26,440
Speaker 1: So step one is including in famously sunny Germany everywhere.

569
00:27:26,520 --> 00:27:28,840
Speaker 3: So step one is like, let's just not shut it down.

570
00:27:29,040 --> 00:27:30,959
Speaker 3: We think we're in like the seventh inning of that

571
00:27:31,000 --> 00:27:32,880
Speaker 3: ball game, Like we're not shutting it down.

572
00:27:33,000 --> 00:27:34,440
Speaker 1: Yea, it's something yeah.

573
00:27:34,440 --> 00:27:36,400
Speaker 3: So so phase two is like, well, can we turn

574
00:27:36,440 --> 00:27:38,360
Speaker 3: on any of the stuff that we recently turned off?

575
00:27:38,440 --> 00:27:40,320
Speaker 3: You know, we're in like the fifth inning of that game.

576
00:27:40,720 --> 00:27:43,000
Speaker 3: I think that sort of is going from a slow

577
00:27:43,000 --> 00:27:44,919
Speaker 3: bleed to hey flat and then slow growth. So the

578
00:27:44,920 --> 00:27:47,240
Speaker 3: next couple of years are about hey turning on three

579
00:27:47,240 --> 00:27:50,480
Speaker 3: mile Islan in other places, Phase three, which would be

580
00:27:50,640 --> 00:27:52,280
Speaker 3: I think we're in the second and third inning and

581
00:27:52,280 --> 00:27:54,600
Speaker 3: we're going to start to see some acceleration. Here would

582
00:27:54,600 --> 00:27:58,520
Speaker 3: be the sort of brown field inside the fence nuclear

583
00:27:58,600 --> 00:28:02,479
Speaker 3: facility build out. Hey, you worry about nimby issues, site supply,

584
00:28:02,680 --> 00:28:05,040
Speaker 3: security safety. I think that's been talked about here as well.

585
00:28:05,320 --> 00:28:07,280
Speaker 3: We do think that that's going to start to pick up,

586
00:28:07,280 --> 00:28:10,320
Speaker 3: but that's like a twenty thirty two to twenty thirty

587
00:28:10,400 --> 00:28:14,240
Speaker 3: five in service and then we talk about SMRs and

588
00:28:14,880 --> 00:28:18,440
Speaker 3: thorium and other opportunities. I think that'll happen, but it's

589
00:28:18,480 --> 00:28:21,040
Speaker 3: like twenty thirty five to twenty forty. So that's still

590
00:28:21,080 --> 00:28:23,199
Speaker 3: a renaissance to me. Were we're taking something that we

591
00:28:23,200 --> 00:28:26,720
Speaker 3: were sort of allowing to slowly melt and we're sort

592
00:28:26,760 --> 00:28:28,800
Speaker 3: of refreezing it and then we're building it. And that's

593
00:28:28,880 --> 00:28:30,520
Speaker 3: that's okay, just yes or no.

594
00:28:30,560 --> 00:28:34,480
Speaker 1: By the year twenty forty in the United States, will

595
00:28:34,520 --> 00:28:35,520
Speaker 1: we see you.

596
00:28:35,520 --> 00:28:37,360
Speaker 2: Guys are going to start a polymarket contract.

597
00:28:37,400 --> 00:28:38,400
Speaker 1: Yeah, it will.

598
00:28:38,440 --> 00:28:41,400
Speaker 3: We get another vote, so ill I've got this like

599
00:28:41,480 --> 00:28:43,880
Speaker 3: internal bet, so I have to say yes. But there

600
00:28:43,920 --> 00:28:47,719
Speaker 3: is a caveat no utility will do it themselves. Yeah,

601
00:28:47,880 --> 00:28:51,960
Speaker 3: there is I'd say zero chance that a utility will say, hey,

602
00:28:52,040 --> 00:28:55,640
Speaker 3: we're willing to do a greenfield new nuclear facility with

603
00:28:55,800 --> 00:29:00,920
Speaker 3: no cost overrun risk. But I think the cost over

604
00:29:00,960 --> 00:29:04,320
Speaker 3: run risk will get covered by the government. So we're

605
00:29:04,320 --> 00:29:06,200
Speaker 3: starting to see some of this stuff. We're seeing it

606
00:29:06,200 --> 00:29:09,479
Speaker 3: across the natural resources economy right where the US government

607
00:29:09,520 --> 00:29:12,160
Speaker 3: is taking direct equity stakes and they're having a more

608
00:29:12,200 --> 00:29:16,680
Speaker 3: directly interventionist approach to all of critical minerals and resources.

609
00:29:16,720 --> 00:29:18,520
Speaker 3: So what would I do if I was sort of

610
00:29:18,520 --> 00:29:21,520
Speaker 3: the energies are I would say, Hey, I'm the US government.

611
00:29:21,760 --> 00:29:25,760
Speaker 3: I'm going to backstop guarantee cost over run risk for

612
00:29:25,880 --> 00:29:29,480
Speaker 3: ten nuclear generation facilities across the US. I'm going to

613
00:29:29,480 --> 00:29:31,160
Speaker 3: make sure they get built. I'm going to sort of

614
00:29:31,160 --> 00:29:33,880
Speaker 3: shoulder the excess cost burden, and then maybe at the

615
00:29:33,960 --> 00:29:35,280
Speaker 3: end of this, I'm just going to sell it to

616
00:29:35,280 --> 00:29:37,720
Speaker 3: the highest bidder. So let's just make up the numbers.

617
00:29:37,760 --> 00:29:40,240
Speaker 3: Maybe it costs one hundred billion dollars for the US

618
00:29:40,320 --> 00:29:43,280
Speaker 3: government to do that. Maybe those ten facilities get sold

619
00:29:43,320 --> 00:29:46,320
Speaker 3: for fifty billion dollars and the taxpayer has taken a

620
00:29:46,320 --> 00:29:49,080
Speaker 3: fifty billion dollar loss. But here we've got ten new

621
00:29:49,120 --> 00:29:52,800
Speaker 3: generators providing sort of cheap and clean energy. Maybe they

622
00:29:52,800 --> 00:29:54,959
Speaker 3: can sell it for one hundred and fifty and actually

623
00:29:55,040 --> 00:29:58,280
Speaker 3: sort of help the deficit situation. But so get to

624
00:29:58,280 --> 00:30:00,560
Speaker 3: answer a question. I think it's going to happen, But

625
00:30:00,680 --> 00:30:02,600
Speaker 3: I mean one of my key messages, it's not going

626
00:30:02,680 --> 00:30:05,760
Speaker 3: to happen alone. Like these supply chains are not going

627
00:30:05,840 --> 00:30:09,520
Speaker 3: to come about because of market forces. You're not seeing

628
00:30:09,520 --> 00:30:12,200
Speaker 3: a reaction in copper production, you're not seeing a reaction

629
00:30:12,280 --> 00:30:15,720
Speaker 3: in uranium mining, You're not seeing a reaction. Nuclear generation

630
00:30:16,560 --> 00:30:20,560
Speaker 3: without direct government sort of intervention has a little bit

631
00:30:20,560 --> 00:30:24,360
Speaker 3: of a negative connotation, but direct government catalyst, you know.

632
00:30:24,400 --> 00:30:26,400
Speaker 3: And but I think that that's going to happen, and

633
00:30:26,520 --> 00:30:27,480
Speaker 3: we're starting to see it.

634
00:30:43,200 --> 00:30:45,680
Speaker 2: This reminds me. I did pull up the chart of

635
00:30:45,720 --> 00:30:48,360
Speaker 2: the number of times public and private partnerships are being

636
00:30:48,400 --> 00:30:52,960
Speaker 2: mentioned in news stories, and yeah, spiking into late twenty

637
00:30:53,000 --> 00:30:57,560
Speaker 2: twenty four and twenty five. So we're back. But okay,

638
00:30:57,600 --> 00:30:59,680
Speaker 2: talk to us a little bit more. Why doesn't the

639
00:30:59,720 --> 00:31:04,320
Speaker 2: market it like signal work for something like uranium or

640
00:31:04,360 --> 00:31:05,600
Speaker 2: you mentioned copper as well.

641
00:31:06,080 --> 00:31:09,520
Speaker 3: Yeah, I think honestly, these are sort of markets that

642
00:31:09,560 --> 00:31:13,400
Speaker 3: have been sort of forgotten by investors, and companies are

643
00:31:13,400 --> 00:31:17,240
Speaker 3: still being penalized for increasing capex and increasing supply.

644
00:31:17,400 --> 00:31:20,280
Speaker 2: So it's kind of the shale story, the shale stories.

645
00:31:20,600 --> 00:31:22,320
Speaker 3: So you look at sort of at the end of

646
00:31:22,400 --> 00:31:25,200
Speaker 3: last year, some of the major mining companies talked about

647
00:31:25,200 --> 00:31:28,880
Speaker 3: their twenty twenty six capex. Most of them sort of

648
00:31:29,080 --> 00:31:33,200
Speaker 3: cut capex expectations or at least relative to consensus came

649
00:31:33,240 --> 00:31:36,760
Speaker 3: in below. That's weird, right, Copper prices all time highs,

650
00:31:37,040 --> 00:31:40,600
Speaker 3: Goal prices all time highs. Shouldn't the miners be increasing

651
00:31:40,600 --> 00:31:43,880
Speaker 3: their capac and inviting that supply response we talked about earlier.

652
00:31:44,200 --> 00:31:46,400
Speaker 3: The investors just revolt, They say.

653
00:31:46,320 --> 00:31:48,320
Speaker 2: No, Mas, we want the discipline.

654
00:31:48,360 --> 00:31:51,600
Speaker 3: You've destroyed so much value, and they did, right, Shale

655
00:31:51,720 --> 00:31:54,560
Speaker 3: destroyed a lot of value twenty ten to twenty twenty,

656
00:31:54,640 --> 00:31:58,320
Speaker 3: and so it's not going to happen naturally. And maybe

657
00:31:58,320 --> 00:32:00,840
Speaker 3: that's okay because you know, these these management teams, I mean,

658
00:32:00,840 --> 00:32:03,760
Speaker 3: they should continue to be held to the discipline. But

659
00:32:03,920 --> 00:32:06,040
Speaker 3: we do need the supply, and so that's why I

660
00:32:06,040 --> 00:32:09,040
Speaker 3: think that the government is going to try to get

661
00:32:09,040 --> 00:32:11,280
Speaker 3: it moving. And we've seen examples of that, right, you

662
00:32:11,320 --> 00:32:14,400
Speaker 3: saw some rare earth stuff last year, lithium stuff last year.

663
00:32:14,480 --> 00:32:18,320
Speaker 3: Obviously the big nuclear backstop of contracts and so forth

664
00:32:18,360 --> 00:32:20,080
Speaker 3: that was announced in the A lot of it is

665
00:32:20,120 --> 00:32:22,320
Speaker 3: not well defined, but we're going to start to get

666
00:32:22,320 --> 00:32:23,840
Speaker 3: some more definition behind this stuff.

667
00:32:23,960 --> 00:32:26,400
Speaker 1: You can't blame the shareholders. I mean, it must be

668
00:32:26,520 --> 00:32:29,960
Speaker 1: so sick you have these prices shooting through the moon.

669
00:32:30,360 --> 00:32:32,000
Speaker 1: It's like, why not just take the cash?

670
00:32:32,240 --> 00:32:36,840
Speaker 3: You know, I mean as a long term oriented as

671
00:32:36,840 --> 00:32:40,160
Speaker 3: a shareholder, as a shareholder, you know, I think, listen

672
00:32:40,200 --> 00:32:43,040
Speaker 3: at these prices. Returns on a lot of projects actually

673
00:32:43,120 --> 00:32:46,280
Speaker 3: look pretty good, but you worry about administration changes and

674
00:32:46,320 --> 00:32:49,600
Speaker 3: you worry about the supply response. And honestly, these companies

675
00:32:49,640 --> 00:32:52,480
Speaker 3: did really poorly for a long time, and so the

676
00:32:52,560 --> 00:32:55,960
Speaker 3: spreadsheet math might say, hey, you start drilling again, but

677
00:32:56,280 --> 00:32:59,720
Speaker 3: the sort of history would say no, no, the returns need

678
00:32:59,760 --> 00:33:02,240
Speaker 3: to be way better to justify that, and I think

679
00:33:02,240 --> 00:33:04,640
Speaker 3: it's a rational response by the investor base. But I

680
00:33:04,640 --> 00:33:07,280
Speaker 3: think step one is, like people need to start looking

681
00:33:07,320 --> 00:33:09,920
Speaker 3: at the again, the old economy stuff again, but it's

682
00:33:09,960 --> 00:33:11,880
Speaker 3: the new economy stuff. People need to be looking at

683
00:33:12,000 --> 00:33:14,600
Speaker 3: natural resources stocks, they need to be looking at infrastructure stocks.

684
00:33:14,600 --> 00:33:17,280
Speaker 3: They need to be feeling good about them providing capital

685
00:33:17,280 --> 00:33:20,440
Speaker 3: to these companies, and then you will get that supply response.

686
00:33:20,440 --> 00:33:21,920
Speaker 3: But again it's early in.

687
00:33:21,920 --> 00:33:25,000
Speaker 2: The cycle on the topic of natural resources and maybe

688
00:33:25,000 --> 00:33:28,680
Speaker 2: investor reluctance. We're recording this on January sixth, and the

689
00:33:28,720 --> 00:33:31,360
Speaker 2: big news in the markets is, of course, what happened

690
00:33:31,400 --> 00:33:34,760
Speaker 2: over the weekend in Venezuela. I'm sure that's not your

691
00:33:34,840 --> 00:33:39,360
Speaker 2: particular area of expertise, but you know, as an infrastructure investor,

692
00:33:39,440 --> 00:33:41,560
Speaker 2: when you look at a place like Venezuela, where we

693
00:33:41,680 --> 00:33:45,840
Speaker 2: hear they need billions of dollars of capital, yeah, to

694
00:33:45,880 --> 00:33:48,720
Speaker 2: get the oil industry up and running, what do you

695
00:33:48,760 --> 00:33:49,840
Speaker 2: think about that situation?

696
00:33:50,320 --> 00:33:52,600
Speaker 3: Yeah, So let me just talk about it strictly from

697
00:33:52,640 --> 00:33:54,800
Speaker 3: like an investor perspective or how you would sort of

698
00:33:54,840 --> 00:33:58,600
Speaker 3: think about that. Being an infrastructure investor, we care a

699
00:33:58,640 --> 00:34:01,440
Speaker 3: lot about one risk that very few people spend a

700
00:34:01,480 --> 00:34:03,480
Speaker 3: lot of time on So if you're to say, hey, Tyler,

701
00:34:03,800 --> 00:34:06,000
Speaker 3: you talked about the data center CEO staying up a

702
00:34:06,040 --> 00:34:07,960
Speaker 3: knife for losing power. What keeps you up at night?

703
00:34:08,360 --> 00:34:11,719
Speaker 3: For us, it's regulatory risk. Right, you're investing in airports

704
00:34:11,800 --> 00:34:14,920
Speaker 3: and utilities and things like that that are governed by

705
00:34:14,960 --> 00:34:19,440
Speaker 3: a regulator. We worry about surprise, and you get regulatory

706
00:34:19,480 --> 00:34:22,400
Speaker 3: surprise here. Right. You look at what happens with utilities

707
00:34:22,400 --> 00:34:26,000
Speaker 3: in Illinois, you look at what's happening with FURK and

708
00:34:26,040 --> 00:34:28,120
Speaker 3: as they sort of change things. So we spend a

709
00:34:28,160 --> 00:34:28,920
Speaker 3: lot of time on I.

710
00:34:28,920 --> 00:34:30,680
Speaker 1: Don't know anything about utilities in Illinois.

711
00:34:31,360 --> 00:34:35,600
Speaker 3: Well, like, hey, the utilities spend some CAPEX and they said, hey,

712
00:34:35,600 --> 00:34:37,839
Speaker 3: we want a high return, we want to get that

713
00:34:37,880 --> 00:34:40,040
Speaker 3: in our rate base, and the regulator just says no,

714
00:34:40,680 --> 00:34:43,000
Speaker 3: you know, And so we talk about our boots on

715
00:34:43,040 --> 00:34:44,880
Speaker 3: the ground investing. It's trying to make sure that we

716
00:34:45,120 --> 00:34:49,240
Speaker 3: understand those very difficult things to figure out before everybody

717
00:34:49,280 --> 00:34:51,920
Speaker 3: else does. So take it to Venezuela, Like if I

718
00:34:52,120 --> 00:34:56,239
Speaker 3: was to make a large foreign direct investment there from

719
00:34:56,280 --> 00:35:00,640
Speaker 3: an infrastructure and resources perspective, I would really really want

720
00:35:00,680 --> 00:35:06,839
Speaker 3: to understand the legal constructs surrounding that and that's really

721
00:35:06,920 --> 00:35:11,439
Speaker 3: challenging in the midst of regime change, and so I'm

722
00:35:11,520 --> 00:35:13,640
Speaker 3: very hopeful, like I think everybody would say, hey, we're

723
00:35:13,640 --> 00:35:16,560
Speaker 3: hopeful that things get resolved quickly and then you sort

724
00:35:16,560 --> 00:35:18,640
Speaker 3: of figure it all out very fast. But it's going

725
00:35:18,680 --> 00:35:21,279
Speaker 3: to take a while, I think before you actually start

726
00:35:21,320 --> 00:35:25,040
Speaker 3: to see some investments because you, as an infrastructure investor,

727
00:35:25,080 --> 00:35:28,719
Speaker 3: that risk of expropriation nationalization is very high, and so

728
00:35:28,960 --> 00:35:31,200
Speaker 3: you don't want to go and suddenly see your assets

729
00:35:31,200 --> 00:35:34,200
Speaker 3: stranded there. So maybe that answers your question, But again,

730
00:35:34,320 --> 00:35:36,879
Speaker 3: a lot of it is about understanding regulation and law

731
00:35:36,920 --> 00:35:39,080
Speaker 3: and what's happening in politics and so forth.

732
00:35:39,160 --> 00:35:41,360
Speaker 1: Well, I'm mostly curious. I mean, we had President Trump

733
00:35:41,440 --> 00:35:45,000
Speaker 1: is obviously very excited about the opportunities to rebuild that

734
00:35:45,160 --> 00:35:48,279
Speaker 1: infrastructure and for American companies to come in and be

735
00:35:48,320 --> 00:35:51,120
Speaker 1: part of that. But Oil West Texas it said fifty

736
00:35:51,160 --> 00:35:57,320
Speaker 1: seven dollars a barrel, setting aside the obvious highly uncertain

737
00:35:57,360 --> 00:36:01,239
Speaker 1: regulatory environment of Venezuela. Don't know what like pencils out

738
00:36:01,239 --> 00:36:04,040
Speaker 1: at fifty seven. I'm curious. You know, you mentioned pipelines

739
00:36:04,120 --> 00:36:06,880
Speaker 1: like during the twenty tens or sort of you know,

740
00:36:06,920 --> 00:36:10,040
Speaker 1: there's a lot of anti pipeline politics, and I assume

741
00:36:10,120 --> 00:36:13,319
Speaker 1: that the current administration is much more you know, green

742
00:36:13,400 --> 00:36:16,320
Speaker 1: light for pipelines. But who wants to build new pipelines

743
00:36:16,360 --> 00:36:17,160
Speaker 1: at these prices?

744
00:36:17,239 --> 00:36:20,160
Speaker 3: Yeah, so I'll use my favorite acronym, but I've got

745
00:36:20,160 --> 00:36:22,200
Speaker 3: to give credit to Paul Sankie at Sankey Research because

746
00:36:22,200 --> 00:36:24,200
Speaker 3: he's the one that coined it. But so a decade ago,

747
00:36:24,239 --> 00:36:26,239
Speaker 3: we had a Nimbi world, which is like not in

748
00:36:26,239 --> 00:36:30,560
Speaker 3: my backyard. That world transitioned to a bananas world. Bananas

749
00:36:30,600 --> 00:36:35,520
Speaker 3: has built absolutely nothing anywhere near anything, right, So the

750
00:36:35,560 --> 00:36:38,640
Speaker 3: bananas world existed from like twenty eighteen to twenty twenty four.

751
00:36:38,680 --> 00:36:40,720
Speaker 3: And when I say banana's world, that's about the ability

752
00:36:40,760 --> 00:36:43,680
Speaker 3: to build infrastructure. Okay, not any other bananas out there.

753
00:36:43,760 --> 00:36:43,920
Speaker 2: Right.

754
00:36:44,320 --> 00:36:46,799
Speaker 3: That does feel like it's changing a little bit in that, Hey,

755
00:36:47,239 --> 00:36:49,040
Speaker 3: there's starting to be a little bit more sort of

756
00:36:49,320 --> 00:36:53,800
Speaker 3: certainty and sort of based in DC desire to build stuff.

757
00:36:53,920 --> 00:36:56,040
Speaker 3: And so you're starting to see a little bit of

758
00:36:56,440 --> 00:37:00,200
Speaker 3: pipeline construction activity heating back up. We went from a

759
00:37:00,239 --> 00:37:02,480
Speaker 3: world where, hey, we're never going to build another pipeline

760
00:37:02,520 --> 00:37:04,880
Speaker 3: in North America. I think that's changing. It's going to

761
00:37:04,920 --> 00:37:06,600
Speaker 3: be a get a lot more pragmatic than it was

762
00:37:06,640 --> 00:37:09,040
Speaker 3: in twenty ten to twenty fifteen. But you're starting to

763
00:37:09,040 --> 00:37:11,040
Speaker 3: see this sort of willingness to make these investments. But

764
00:37:11,120 --> 00:37:12,920
Speaker 3: again it comes because the sort of.

765
00:37:13,040 --> 00:37:16,040
Speaker 1: Did a math out, like what pipeline is economical at

766
00:37:16,080 --> 00:37:16,600
Speaker 1: current price?

767
00:37:16,680 --> 00:37:18,279
Speaker 3: It's all a function of what the customers wi want

768
00:37:18,320 --> 00:37:20,760
Speaker 3: to pay, right and if you've got natural gas prices

769
00:37:20,760 --> 00:37:22,600
Speaker 3: in the high threes, and if you've got sort of

770
00:37:22,600 --> 00:37:25,880
Speaker 3: wide or oil differentials and other things like a lot

771
00:37:25,920 --> 00:37:28,080
Speaker 3: of the pipeline activity that we're seeing today is natural

772
00:37:28,080 --> 00:37:31,560
Speaker 3: gas pipelines feeding the data centers their willingness to pay

773
00:37:31,600 --> 00:37:34,800
Speaker 3: us pretty high. And so that's really where we're It's

774
00:37:34,880 --> 00:37:36,840
Speaker 3: not an oil pipeline world today. It's a it's a

775
00:37:36,920 --> 00:37:38,160
Speaker 3: natural gas pipeline world.

776
00:37:38,360 --> 00:37:40,759
Speaker 2: We go from we have no bananas to yes, we

777
00:37:40,800 --> 00:37:41,719
Speaker 2: have no bananas.

778
00:37:41,800 --> 00:37:43,319
Speaker 1: I love that, Please enjoy it.

779
00:37:43,640 --> 00:37:46,800
Speaker 2: Please enjoy my nineteen twenties cultural references.

780
00:37:47,640 --> 00:37:52,880
Speaker 1: Going back to US energy and electricity, again, every headline

781
00:37:52,960 --> 00:37:55,160
Speaker 1: or everyone person is like, you know, we have the chips,

782
00:37:55,200 --> 00:37:58,319
Speaker 1: we have the CEA Energy is the bottle deck. You

783
00:37:58,360 --> 00:38:00,720
Speaker 1: hear that over and over again, and I think Jensen

784
00:38:00,920 --> 00:38:04,120
Speaker 1: long said that again today and that CS energy is

785
00:38:04,120 --> 00:38:06,680
Speaker 1: the bottom night. Except we all know this, right, So

786
00:38:07,160 --> 00:38:09,160
Speaker 1: in my mind it's like, oh, it's all priced in.

787
00:38:09,280 --> 00:38:13,680
Speaker 1: But like, as an investor, what parts of this energy

788
00:38:13,719 --> 00:38:17,560
Speaker 1: story to you still feel underappreciated or where are there's

789
00:38:17,600 --> 00:38:21,799
Speaker 1: still opportunities in a story where there's like literally anyone

790
00:38:22,000 --> 00:38:24,200
Speaker 1: is aware of this fact the electricity constraints.

791
00:38:24,280 --> 00:38:27,880
Speaker 3: Yeah, So i'd start with we agree electricity is constrained,

792
00:38:27,920 --> 00:38:30,239
Speaker 3: the demand is going to keep rising. I would note

793
00:38:30,280 --> 00:38:32,399
Speaker 3: it's not just data centers. Like, we spent a lot

794
00:38:32,400 --> 00:38:35,520
Speaker 3: of time thinking about US energy markets, and they went

795
00:38:35,560 --> 00:38:38,280
Speaker 3: from zero growth in terms of electricity demand from twentousy

796
00:38:38,360 --> 00:38:40,880
Speaker 3: and seven to twenty twenty. They've been growing like one

797
00:38:40,560 --> 00:38:42,399
Speaker 3: and one and a half percent recently, we think it's

798
00:38:42,400 --> 00:38:44,279
Speaker 3: going to go to two and a half percent per year.

799
00:38:44,600 --> 00:38:47,319
Speaker 3: Doesn't seem like a big number, but going from zero

800
00:38:47,360 --> 00:38:48,960
Speaker 3: percent to two and a half percent and a big

801
00:38:48,960 --> 00:38:52,520
Speaker 3: industrial system is a huge one. Only about half of

802
00:38:52,520 --> 00:38:55,439
Speaker 3: it is data centers. There's lots of electricity demand coming

803
00:38:55,440 --> 00:38:58,360
Speaker 3: from evs and from the industrial system and so forth.

804
00:38:58,680 --> 00:39:01,839
Speaker 3: But where do we see the opportunity I'd start with

805
00:39:02,239 --> 00:39:07,080
Speaker 3: certain utilities. So utilities today actually trade at a lower

806
00:39:07,120 --> 00:39:09,640
Speaker 3: multiple than they did a few years ago, and growth

807
00:39:09,719 --> 00:39:12,120
Speaker 3: rates are a little bit higher than they used to be,

808
00:39:12,239 --> 00:39:14,000
Speaker 3: So that's like a little bit of an odd thing

809
00:39:14,040 --> 00:39:17,480
Speaker 3: to see. However, what we think is, hey, the average

810
00:39:17,560 --> 00:39:20,680
Speaker 3: utility is going to see some challenges from affordability issues

811
00:39:20,680 --> 00:39:25,160
Speaker 3: and from regulation, but the best utilities are not trading

812
00:39:25,160 --> 00:39:27,239
Speaker 3: at a lot higher multiple than the average utility, and

813
00:39:27,280 --> 00:39:29,839
Speaker 3: their growth rate differential is way better. So to put

814
00:39:29,840 --> 00:39:33,160
Speaker 3: some numbers around it, eight years ago, you had to

815
00:39:33,200 --> 00:39:37,400
Speaker 3: pay an eleven percent premium to get one percent better growth.

816
00:39:37,560 --> 00:39:39,520
Speaker 3: So the average utility group was going to grow six

817
00:39:39,680 --> 00:39:41,759
Speaker 3: best in class utility was going to grow seven. You

818
00:39:41,800 --> 00:39:45,520
Speaker 3: had to pay an eleven percent higher multiple for that trade. Today,

819
00:39:46,280 --> 00:39:50,120
Speaker 3: the fastest growing utilities only trade six percent more expensive,

820
00:39:50,440 --> 00:39:53,960
Speaker 3: so actually cheaper relative to the average. They're going to

821
00:39:53,960 --> 00:39:57,240
Speaker 3: grow two percent more so instead of six and a half,

822
00:39:57,400 --> 00:40:00,560
Speaker 3: it's going to be eight and a half. That's pretty right.

823
00:40:00,640 --> 00:40:02,080
Speaker 3: You're paying lower absolut multiples.

824
00:40:02,400 --> 00:40:02,680
Speaker 1: Theory.

825
00:40:03,360 --> 00:40:05,640
Speaker 3: I think people are worried about regulation. I think people

826
00:40:05,719 --> 00:40:08,760
Speaker 3: are worried about rising interest rates, They're worried about affordability,

827
00:40:08,960 --> 00:40:11,200
Speaker 3: and what you're going to see is the pack will

828
00:40:11,239 --> 00:40:14,279
Speaker 3: separate over the next three years. So it's rational that

829
00:40:14,400 --> 00:40:16,279
Speaker 3: sort of the world has compressed in the way that

830
00:40:16,320 --> 00:40:19,120
Speaker 3: it has from a utility perspective. But I think over time,

831
00:40:19,680 --> 00:40:23,160
Speaker 3: those that are able to execute will really be rewarded.

832
00:40:23,680 --> 00:40:26,520
Speaker 3: Outside that, I mean the picks and shovels types of

833
00:40:26,560 --> 00:40:30,120
Speaker 3: companies to the data center and reindustrialization build out, we

834
00:40:30,160 --> 00:40:32,399
Speaker 3: still see a lot of opportunity and multiples are up,

835
00:40:32,760 --> 00:40:36,120
Speaker 3: but they're becoming more predictable. Their growth rates are accelerating.

836
00:40:36,239 --> 00:40:37,760
Speaker 3: It's more structural in nature.

837
00:40:37,920 --> 00:40:40,440
Speaker 1: Who are some of those companies. Yeah, I measured Caterpillar,

838
00:40:40,480 --> 00:40:40,920
Speaker 1: but that's like.

839
00:40:41,120 --> 00:40:43,560
Speaker 3: Yeah, I mean the engineering and construction companies that are

840
00:40:43,560 --> 00:40:46,120
Speaker 3: helped building the large scale infrastructure and so forth would

841
00:40:46,120 --> 00:40:48,319
Speaker 3: definitely fall in that bucket. Yet we look at some

842
00:40:48,400 --> 00:40:52,040
Speaker 3: of the companies that are like aluminum smelters and so forth. Again,

843
00:40:52,040 --> 00:40:54,799
Speaker 3: these are highly consolidated industries relative to where they were

844
00:40:55,160 --> 00:40:58,160
Speaker 3: a couple decades ago. And so this is like it's

845
00:40:58,239 --> 00:40:59,800
Speaker 3: the gold rush. Who made all the money and the

846
00:40:59,800 --> 00:41:02,120
Speaker 3: gold rush it was the Levi's and the picks and

847
00:41:02,120 --> 00:41:04,680
Speaker 3: shovels companies, And I kind of think that's where we are.

848
00:41:05,000 --> 00:41:07,759
Speaker 3: You might get the best, like absolute returns and some

849
00:41:07,880 --> 00:41:10,360
Speaker 3: of the direct ways to play this, but they might

850
00:41:10,440 --> 00:41:12,719
Speaker 3: come with a lot more volatility, and we think the

851
00:41:12,760 --> 00:41:15,200
Speaker 3: sort of at least risk adjusted returns are more in

852
00:41:15,239 --> 00:41:16,200
Speaker 3: the picks and shovels.

853
00:41:16,520 --> 00:41:19,279
Speaker 2: Speaking of volatility very quickly, one of the interesting things

854
00:41:19,280 --> 00:41:22,279
Speaker 2: that happened last year in data center world was we

855
00:41:22,360 --> 00:41:24,680
Speaker 2: had that big outage at the CME, which was the

856
00:41:24,719 --> 00:41:27,840
Speaker 2: result of an outage at one particular data center that

857
00:41:27,920 --> 00:41:30,200
Speaker 2: was run by an operator called I want to say,

858
00:41:30,239 --> 00:41:33,360
Speaker 2: cyrus one. Yeah, yeah, you know, you talked about the

859
00:41:33,400 --> 00:41:36,840
Speaker 2: CEO staying up late at night worrying about exactly this scenario.

860
00:41:37,239 --> 00:41:39,799
Speaker 2: But do you, as an investor in the infrastructure have

861
00:41:39,840 --> 00:41:42,040
Speaker 2: to worry about operational risk as well? And then how

862
00:41:42,040 --> 00:41:43,120
Speaker 2: do you actually assess that?

863
00:41:43,400 --> 00:41:46,120
Speaker 3: Yeah, we do. I mean, let's use pipelines as like

864
00:41:46,160 --> 00:41:48,759
Speaker 3: the best example. Right, if you own a company that

865
00:41:48,840 --> 00:41:50,880
Speaker 3: owns oil pipelines and they have an oil spill, like

866
00:41:50,920 --> 00:41:52,560
Speaker 3: that is a big problem. So so we get a

867
00:41:52,600 --> 00:41:54,200
Speaker 3: lot of questions on hey, how do you think about

868
00:41:54,400 --> 00:41:56,719
Speaker 3: ESG and integrate ESG and so forth. And one of

869
00:41:56,760 --> 00:41:58,279
Speaker 3: the key things that we do is we think about

870
00:41:58,320 --> 00:42:00,759
Speaker 3: the incentives and we think about how these companies are

871
00:42:00,760 --> 00:42:04,440
Speaker 3: doing maintaining their assets, and what their local shareholder relationships

872
00:42:04,440 --> 00:42:06,600
Speaker 3: are like, and what the integrity of what they own

873
00:42:06,640 --> 00:42:11,040
Speaker 3: and operate are because yeah, with infrastructure, operational risks have

874
00:42:11,280 --> 00:42:14,759
Speaker 3: major asset impairment risks with them. And so again for us,

875
00:42:14,800 --> 00:42:17,640
Speaker 3: it's this big team around the world trying to do

876
00:42:17,680 --> 00:42:20,839
Speaker 3: what we can to talk to not the CEO, but

877
00:42:20,920 --> 00:42:23,399
Speaker 3: the plant managers and the sort of next rung down

878
00:42:23,760 --> 00:42:26,160
Speaker 3: and ask one CEO what he thinks about the assets

879
00:42:26,200 --> 00:42:28,600
Speaker 3: of another company and are they maintaining them well, and

880
00:42:28,600 --> 00:42:31,400
Speaker 3: try to get some insights there, because yeah, it's a

881
00:42:31,480 --> 00:42:33,200
Speaker 3: key risk, something that that we worry about.

882
00:42:33,320 --> 00:42:35,880
Speaker 1: So we're kind of in a post banana world in

883
00:42:35,920 --> 00:42:39,440
Speaker 1: the sense that from the DC perspective, you know, I

884
00:42:39,480 --> 00:42:42,600
Speaker 1: think the administration clearly has a much more liberal attitude

885
00:42:42,600 --> 00:42:46,399
Speaker 1: towards approving various things. On the other hand, and we've

886
00:42:46,400 --> 00:42:48,879
Speaker 1: talked about this recently on the show quite a bit,

887
00:42:49,440 --> 00:42:53,799
Speaker 1: the local backlash, particularly to data center Suddenly people are

888
00:42:53,840 --> 00:42:57,520
Speaker 1: really anxious about that. We see these town hall meetings

889
00:42:57,560 --> 00:43:02,040
Speaker 1: going viral and there's misinformation of out there. Something when

890
00:43:02,080 --> 00:43:05,880
Speaker 1: you think about like the utilities that are the rapidly

891
00:43:05,960 --> 00:43:08,680
Speaker 1: growing ones, the ones for whom there's perhaps an opportunity

892
00:43:08,719 --> 00:43:11,920
Speaker 1: because they don't trade at a premium that is consistent

893
00:43:12,040 --> 00:43:15,560
Speaker 1: with their growth potential. Do you worry about that aspect

894
00:43:15,600 --> 00:43:19,320
Speaker 1: and do much time thinking about like, yes, on paper,

895
00:43:19,360 --> 00:43:21,520
Speaker 1: we know there's tons of plans to build more here,

896
00:43:21,600 --> 00:43:25,880
Speaker 1: et cetera, But will it actually happen given the realities

897
00:43:25,880 --> 00:43:26,880
Speaker 1: of local politics.

898
00:43:27,000 --> 00:43:28,759
Speaker 3: Yeah, I mean i'd start with there's been a lot

899
00:43:28,760 --> 00:43:31,600
Speaker 3: of data center backlash and is it appropriate or not?

900
00:43:31,800 --> 00:43:34,200
Speaker 3: I mean there are some utilities whose bills went up

901
00:43:34,200 --> 00:43:37,479
Speaker 3: fifteen percent last year. Yeah, So and you think about

902
00:43:37,480 --> 00:43:40,719
Speaker 3: a data center company that doesn't create any jobs in

903
00:43:40,760 --> 00:43:42,719
Speaker 3: the local market. I mean there's construction jobs, but then

904
00:43:42,760 --> 00:43:44,560
Speaker 3: once the data center's running, it's just kind of like

905
00:43:44,600 --> 00:43:47,400
Speaker 3: a big empty shell with some refrigeration and some power,

906
00:43:47,760 --> 00:43:49,840
Speaker 3: and you're not really doing a lot for the local economy.

907
00:43:49,920 --> 00:43:53,520
Speaker 3: So you're sort of local residential customer who's paying fifteen

908
00:43:53,560 --> 00:43:56,680
Speaker 3: percent more and it's not seeing any sort of economic

909
00:43:56,719 --> 00:43:59,480
Speaker 3: benefit to the local area from that. That is inviting

910
00:43:59,680 --> 00:44:01,960
Speaker 3: a re ale response from the regulator to say, hey,

911
00:44:01,960 --> 00:44:03,880
Speaker 3: we actually it's not in our best interest to do this,

912
00:44:04,520 --> 00:44:08,040
Speaker 3: And so we spend a lot of time on who

913
00:44:08,120 --> 00:44:10,880
Speaker 3: is on the utility commissions. Are they elected or they appointed?

914
00:44:10,920 --> 00:44:13,720
Speaker 3: Because because that can matter what has been the bill pressure.

915
00:44:13,840 --> 00:44:17,120
Speaker 1: I take it the elected ones are more sensitive towards.

916
00:44:16,920 --> 00:44:20,120
Speaker 3: All LSEQL unelected commission. You're saying, hey, they want to

917
00:44:20,160 --> 00:44:21,839
Speaker 3: stay elected, and so are they're going to do things

918
00:44:21,880 --> 00:44:24,879
Speaker 3: that are more beneficial to the local electorate than someone

919
00:44:24,880 --> 00:44:27,560
Speaker 3: that's government appointed or governor appointed, who would maybe do

920
00:44:27,600 --> 00:44:29,440
Speaker 3: something that's Hey, I know the bills might go up

921
00:44:29,440 --> 00:44:31,120
Speaker 3: a little bit, but but we actually want to invite this.

922
00:44:31,320 --> 00:44:33,759
Speaker 3: I mean, just to put the magnitude of the opportunity.

923
00:44:33,800 --> 00:44:36,359
Speaker 3: So there's a utility in the Midwest. It's been around

924
00:44:36,360 --> 00:44:39,440
Speaker 3: for about one hundred years. It currently has a system

925
00:44:39,480 --> 00:44:43,200
Speaker 3: that's about eleven gigawatts, So one gigawott is about a

926
00:44:43,280 --> 00:44:45,719
Speaker 3: million people. It's like the city of Denver. So this

927
00:44:46,080 --> 00:44:49,520
Speaker 3: Midwest utility eleven gigawatts took them one hundred years to

928
00:44:49,560 --> 00:44:53,320
Speaker 3: get there. They currently have data center demand to build

929
00:44:53,560 --> 00:44:57,359
Speaker 3: fifteen gigawots. Think about that, right one hundred years ago?

930
00:44:57,360 --> 00:44:58,680
Speaker 1: The quest today and I want to looked as up.

931
00:44:58,719 --> 00:45:00,480
Speaker 1: What utility can I.

932
00:45:00,440 --> 00:45:01,080
Speaker 3: Get yelled at?

933
00:45:01,120 --> 00:45:03,279
Speaker 1: By fine, we'll look at up, We'll look at it.

934
00:45:03,280 --> 00:45:04,240
Speaker 3: We'll get up separately.

935
00:45:04,280 --> 00:45:06,960
Speaker 2: Well, use data powered AI platforms to figure it out.

936
00:45:07,040 --> 00:45:09,239
Speaker 3: Yeah, something. They'll kick me out of the table if

937
00:45:09,280 --> 00:45:11,520
Speaker 3: I give too many specific stocks. But no, you just

938
00:45:11,520 --> 00:45:13,640
Speaker 3: think about that right, one hundred years ago to eleven

939
00:45:13,760 --> 00:45:16,840
Speaker 3: and like by tomorrow they want another fifteen that is

940
00:45:16,920 --> 00:45:20,520
Speaker 3: really expensive, and so you're seeing this tension and I

941
00:45:20,560 --> 00:45:22,200
Speaker 3: think that's that's reasonable.

942
00:45:22,440 --> 00:45:24,839
Speaker 2: Do you play power Grid ever? Do you know that game?

943
00:45:24,960 --> 00:45:26,040
Speaker 3: No? But I feel like I should.

944
00:45:26,200 --> 00:45:28,279
Speaker 2: It's a board game. It's a board game where you're

945
00:45:28,280 --> 00:45:31,160
Speaker 2: in charge of supplying electricity to various cities. It's kind

946
00:45:31,160 --> 00:45:31,439
Speaker 2: of fun.

947
00:45:31,520 --> 00:45:34,320
Speaker 3: I played the board game Pandemic in like late nineteen

948
00:45:34,480 --> 00:45:36,680
Speaker 3: and look what that led to. So maybe I'm a

949
00:45:36,680 --> 00:45:37,759
Speaker 3: little bit scary.

950
00:45:38,480 --> 00:45:41,120
Speaker 2: It's your fault. Well play power Grid and then we

951
00:45:41,120 --> 00:45:44,680
Speaker 2: can all enjoy an efficient electricity system. Maybe maybe things

952
00:45:44,680 --> 00:45:45,160
Speaker 2: will change.

953
00:45:45,320 --> 00:45:47,759
Speaker 1: That was a great conversation, Tyler Rosenlick, Thank you so

954
00:45:47,840 --> 00:45:50,200
Speaker 1: much for coming on odd lot. So let's stay in touch.

955
00:45:50,480 --> 00:45:54,080
Speaker 1: Now we're going to use our AI skills to backwards

956
00:45:54,120 --> 00:45:55,880
Speaker 1: figure out what that one hundred years.

957
00:45:55,880 --> 00:45:59,040
Speaker 2: To draw energy from the data centers, to crunch the numbers.

958
00:45:58,680 --> 00:46:14,520
Speaker 1: Crunch the numbers, claw or whatever. Yeah, Tracy, I really

959
00:46:14,600 --> 00:46:17,680
Speaker 1: enjoyed that. It does feel as though if you're in

960
00:46:17,719 --> 00:46:20,480
Speaker 1: the right place right now, there's just a mountain of

961
00:46:20,480 --> 00:46:22,200
Speaker 1: money coming. I mean, who knows if you're like going

962
00:46:22,239 --> 00:46:24,840
Speaker 1: to get it. But you know, between all of them,

963
00:46:25,040 --> 00:46:28,640
Speaker 1: he talked about every country wanting to have more domestic

964
00:46:28,800 --> 00:46:32,120
Speaker 1: energy security, the secular trends, et cetera. If you're in

965
00:46:32,200 --> 00:46:35,279
Speaker 1: the right place, government spending more money, it feels like

966
00:46:36,200 --> 00:46:37,719
Speaker 1: you could get you stand in the right way of

967
00:46:37,760 --> 00:46:40,600
Speaker 1: an absolute fire hose of money right now in this space.

968
00:46:40,800 --> 00:46:43,360
Speaker 2: I mean it feels to me, and you know, he

969
00:46:43,440 --> 00:46:46,040
Speaker 2: kind of said it, but the government is the key risk,

970
00:46:46,600 --> 00:46:50,200
Speaker 2: the regulatory risk. And also I take his point about

971
00:46:50,320 --> 00:46:54,280
Speaker 2: even though maybe the numbers pencil out at current commodity levels,

972
00:46:54,440 --> 00:46:56,640
Speaker 2: if you look at future demand and stuff like that,

973
00:46:57,480 --> 00:46:59,799
Speaker 2: it might not work because your assumption is, well, you know,

974
00:47:00,040 --> 00:47:03,120
Speaker 2: in three years will have a new administration, yeah, or

975
00:47:03,280 --> 00:47:06,680
Speaker 2: maybe in another ten years the pendulum will swing back

976
00:47:06,719 --> 00:47:10,400
Speaker 2: towards clean energy or something like that. So that to

977
00:47:10,440 --> 00:47:11,759
Speaker 2: me seems to be the big risk.

978
00:47:12,040 --> 00:47:14,279
Speaker 1: Just on the Venezuela point, I mean, it's gonna be

979
00:47:14,320 --> 00:47:16,839
Speaker 1: a hard sell. I mean, imagine, who wants to plony

980
00:47:16,920 --> 00:47:20,759
Speaker 1: up one hundred billion dollars and granted shared between a

981
00:47:20,760 --> 00:47:24,719
Speaker 1: bunch of different companies. Presumably it's still the same old

982
00:47:24,960 --> 00:47:28,680
Speaker 1: regime there hasn't been, you know, and then all the

983
00:47:28,760 --> 00:47:31,120
Speaker 1: uncertainty there and then the fact that you know, oil

984
00:47:31,280 --> 00:47:33,680
Speaker 1: just isn't as valuable as it was several years.

985
00:47:33,760 --> 00:47:36,239
Speaker 2: Who are the brave cell side analysts that are going

986
00:47:36,320 --> 00:47:39,120
Speaker 2: to go on a field chirp to Venezuela in order

987
00:47:39,160 --> 00:47:43,080
Speaker 2: to inform their research on time like PDVSA bonds or something.

988
00:47:43,200 --> 00:47:46,560
Speaker 1: Yeah, definitely need we need a sell side report, like

989
00:47:46,719 --> 00:47:49,200
Speaker 1: because the thing that's fun about the reports that you

990
00:47:49,360 --> 00:47:51,319
Speaker 1: like is they often take a lot of pictures. Oh yeah,

991
00:47:51,320 --> 00:47:54,040
Speaker 1: so we need someone to do report, like go into

992
00:47:54,200 --> 00:47:58,759
Speaker 1: the paveous facilities, like just someone takes a thousand photographs

993
00:47:58,800 --> 00:48:02,880
Speaker 1: of like here is the state of this product, this facility.

994
00:48:02,440 --> 00:48:06,120
Speaker 2: This spot goes an oil tanker being loaded up in

995
00:48:06,239 --> 00:48:08,879
Speaker 2: Venezuela and tell us everything that you see.

996
00:48:08,680 --> 00:48:11,279
Speaker 1: How is it, how efficient is it, and so forth,

997
00:48:11,320 --> 00:48:13,520
Speaker 1: what it would actually take to repair.

998
00:48:13,239 --> 00:48:14,600
Speaker 2: It to I feel like I need to add a

999
00:48:14,640 --> 00:48:17,920
Speaker 2: disclaimer onto that. Please do not go to Venezuela and

1000
00:48:18,040 --> 00:48:20,480
Speaker 2: do all this on our account. On our account, No,

1001
00:48:21,200 --> 00:48:23,239
Speaker 2: we're not asking anyone to go to Venezuela.

1002
00:48:23,280 --> 00:48:26,640
Speaker 1: We're asking someone in a professional capacity to whose job

1003
00:48:27,160 --> 00:48:29,960
Speaker 1: would be to go there anyway, to please include a

1004
00:48:29,960 --> 00:48:33,319
Speaker 1: lot of pictures in the cell side report. But we're

1005
00:48:33,360 --> 00:48:35,040
Speaker 1: not asking you to do it on our behalf.

1006
00:48:35,200 --> 00:48:36,839
Speaker 2: Is that big enough cavea? Are we going to get

1007
00:48:37,440 --> 00:48:38,319
Speaker 2: the lawyers?

1008
00:48:38,560 --> 00:48:42,319
Speaker 1: We got to reverse engineer what that utility company is

1009
00:48:42,360 --> 00:48:44,520
Speaker 1: in the Midwest, because those numbers are staggering. I mean

1010
00:48:44,560 --> 00:48:47,560
Speaker 1: the fact that what is it eleven gigles? By the way,

1011
00:48:47,640 --> 00:48:51,680
Speaker 1: can I on the side here, yeah, energy math, I

1012
00:48:51,760 --> 00:48:54,160
Speaker 1: have the hardest time wrapping my hedge around.

1013
00:48:54,320 --> 00:48:57,000
Speaker 2: I was thinking that like measuring one gigawat as like

1014
00:48:57,160 --> 00:49:00,160
Speaker 2: powering Denver was actually a really really useful.

1015
00:49:00,960 --> 00:49:03,320
Speaker 1: Except the prom is already I always forget that. But okay,

1016
00:49:03,360 --> 00:49:05,520
Speaker 1: one giglet denver, one gign.

1017
00:49:05,239 --> 00:49:07,840
Speaker 2: Just tattoo it onto your arm, Joe, because you know

1018
00:49:08,000 --> 00:49:09,799
Speaker 2: that's a useful fact that you're probably going to be

1019
00:49:09,800 --> 00:49:10,879
Speaker 2: referencing for many years.

1020
00:49:10,920 --> 00:49:11,040
Speaker 3: TI.

1021
00:49:11,160 --> 00:49:13,440
Speaker 1: And then a gigle WoT is different than a gigwatt hour,

1022
00:49:13,600 --> 00:49:16,560
Speaker 1: and so these are like separate things and so forth.

1023
00:49:16,760 --> 00:49:19,560
Speaker 1: But the idea that here one hundred years took them

1024
00:49:19,800 --> 00:49:22,000
Speaker 1: took them one hundred years to get to eleven gigawads,

1025
00:49:22,120 --> 00:49:26,880
Speaker 1: and now they're projecting fifteen gigawads. More staggering, staggering numbers.

1026
00:49:26,920 --> 00:49:29,320
Speaker 1: And I guess it makes sense why literally every company

1027
00:49:29,800 --> 00:49:32,000
Speaker 1: in this space is saying it's not chips, it's not

1028
00:49:32,160 --> 00:49:35,480
Speaker 1: it's the energy. On the other hand, maybe we have

1029
00:49:35,560 --> 00:49:39,000
Speaker 1: some incredible technological breakthrough, a deep seek moment for chips,

1030
00:49:39,280 --> 00:49:42,879
Speaker 1: and these chips use you know, one hundredth of the electricity.

1031
00:49:42,320 --> 00:49:44,520
Speaker 2: That could have well, I mean again, going back to

1032
00:49:44,560 --> 00:49:46,719
Speaker 2: how we started the episode, you kind of saw a

1033
00:49:46,800 --> 00:49:48,720
Speaker 2: hint of that potential today.

1034
00:49:48,880 --> 00:49:50,440
Speaker 1: So such a fascinating space.

1035
00:49:50,560 --> 00:49:52,239
Speaker 2: Absolutely, shall we leave it there?

1036
00:49:52,280 --> 00:49:52,960
Speaker 1: Let's leave it there.

1037
00:49:53,000 --> 00:49:55,440
Speaker 2: This has been another episode of the All Thoughts podcast.

1038
00:49:55,520 --> 00:49:58,040
Speaker 2: I'm Tracy Alloway. You can follow me at Tracy All

1039
00:49:58,120 --> 00:49:58,359
Speaker 2: the Way.

1040
00:49:58,480 --> 00:50:00,520
Speaker 1: And I'm Joe wisanth Thought. You can follow me at

1041
00:50:00,520 --> 00:50:04,239
Speaker 1: The Stalwart. Follow our producers Carmen Rodriguez at Carmen Arman,

1042
00:50:04,320 --> 00:50:07,680
Speaker 1: dash Ol Bennett at Dashbott and Kelbrooks at Kelbrooks and

1043
00:50:07,719 --> 00:50:10,040
Speaker 1: for more Odd Lots content, go to Bloomberg dot com

1044
00:50:10,040 --> 00:50:12,560
Speaker 1: slash odd Lots for the daily newsletter and all of

1045
00:50:12,560 --> 00:50:14,759
Speaker 1: our episodes and You can chat about all of these

1046
00:50:14,800 --> 00:50:18,200
Speaker 1: topics twenty four to seven in our discord discord dot

1047
00:50:18,239 --> 00:50:20,000
Speaker 1: gg slash odlocks.

1048
00:50:19,800 --> 00:50:21,840
Speaker 2: And if you enjoy odd Lots. If you like it

1049
00:50:21,880 --> 00:50:24,400
Speaker 2: when we do these energy episodes, then please leave us

1050
00:50:24,440 --> 00:50:27,800
Speaker 2: a positive review on your favorite podcast platform. And remember,

1051
00:50:27,920 --> 00:50:30,279
Speaker 2: if you are a Bloomberg subscriber, you can listen to

1052
00:50:30,480 --> 00:50:33,319
Speaker 2: all of our episodes absolutely ad free. All you need

1053
00:50:33,360 --> 00:50:35,960
Speaker 2: to do is find the Bloomberg channel on Apple Podcasts

1054
00:50:36,040 --> 00:51:04,080
Speaker 2: and follow the instructions there. Thanks for listening, Stood in

1055
00:51:04,280 --> 00:51:04,320
Speaker 2: a