1 00:00:02,759 --> 00:00:11,040 Speaker 1: Bloomberg Audio Studios, Podcasts, radio news. This is Bloomberg Intelligence 2 00:00:11,160 --> 00:00:13,240 Speaker 1: with Alex Steel and Paul Sweeney. 3 00:00:13,360 --> 00:00:16,560 Speaker 2: The real our performance has been in US corporate high yield. 4 00:00:16,760 --> 00:00:19,120 Speaker 3: Are the companies lean enough? Have they trimmed all the fats? 5 00:00:19,160 --> 00:00:22,320 Speaker 2: The semiconductor business is a really cyclical. 6 00:00:21,920 --> 00:00:26,080 Speaker 1: Business, breaking market headlines and corporate news from across the globe. 7 00:00:26,160 --> 00:00:28,640 Speaker 4: Do investors like the M and A that we've seen? 8 00:00:28,840 --> 00:00:32,280 Speaker 2: These are two big time blue chip companies. 9 00:00:32,040 --> 00:00:35,440 Speaker 4: Window between the peak and cunt changing super fast. 10 00:00:35,680 --> 00:00:40,720 Speaker 1: Bloomberg Intelligence with Alex Steele and Paul Sweeney on Bloomberg Radio. 11 00:00:42,159 --> 00:00:44,479 Speaker 2: On Today's Bloomberg Intelligence Show, we dig inside the big 12 00:00:44,479 --> 00:00:46,839 Speaker 2: business stories impacting Wall Street and the global markets. 13 00:00:46,960 --> 00:00:49,280 Speaker 4: Each and every week we provide in depth research and 14 00:00:49,360 --> 00:00:51,239 Speaker 4: data on some of the two thousand companies in one 15 00:00:51,280 --> 00:00:54,240 Speaker 4: hundred and thirty industries our analysts cover worldwide. 16 00:00:54,320 --> 00:00:56,960 Speaker 2: Today, we'll take a look at Moderna's new COVID shut 17 00:00:57,000 --> 00:00:57,840 Speaker 2: and vaccine trial. 18 00:00:58,240 --> 00:01:00,360 Speaker 4: Plus we'll take a look at how one university system 19 00:01:00,400 --> 00:01:02,920 Speaker 4: is benefiting from AI, crypto and power. 20 00:01:03,120 --> 00:01:05,319 Speaker 2: But first we moved to some news in the media space. 21 00:01:05,400 --> 00:01:07,639 Speaker 4: This week, we heard that Warner Brothers Discovery is splitting 22 00:01:07,640 --> 00:01:11,039 Speaker 4: into two independent companies, Global Networks and Streaming and Studios. 23 00:01:11,200 --> 00:01:14,640 Speaker 2: Global Networks will include entertainment, sports, and cable television brands 24 00:01:14,640 --> 00:01:18,039 Speaker 2: such as CNN, TNT, and TBS, and will hold a 25 00:01:18,080 --> 00:01:20,280 Speaker 2: twenty percent stake in Streaming and Studios. 26 00:01:20,319 --> 00:01:23,160 Speaker 4: Its separations expected to be completed by mid twenty twenty six, 27 00:01:23,200 --> 00:01:26,080 Speaker 4: allowing each company to pursue deals and investment opportunities on 28 00:01:26,120 --> 00:01:26,559 Speaker 4: their own. 29 00:01:26,920 --> 00:01:28,880 Speaker 2: For more on this and the latest media news, we 30 00:01:28,880 --> 00:01:31,800 Speaker 2: were joined by Githa Rang and Athan Bloomberg Intelligence, senior 31 00:01:31,840 --> 00:01:32,560 Speaker 2: media analysts. 32 00:01:32,840 --> 00:01:35,560 Speaker 4: We first asked Etha if she likes Warner's plan and 33 00:01:35,640 --> 00:01:37,560 Speaker 4: if it's at all surprising and exciting. 34 00:01:38,080 --> 00:01:40,760 Speaker 5: We like the plant. This has been many months in 35 00:01:40,800 --> 00:01:44,280 Speaker 5: the making, so last December they had actually reorganized the 36 00:01:44,319 --> 00:01:47,360 Speaker 5: existing business into these two separate units, the TV business 37 00:01:47,360 --> 00:01:49,840 Speaker 5: and then the streaming of the studio business, kind of 38 00:01:49,880 --> 00:01:52,840 Speaker 5: eventually paving the way for exactly the announcement. 39 00:01:53,480 --> 00:01:53,960 Speaker 6: I think the. 40 00:01:53,920 --> 00:01:55,720 Speaker 5: Surprising part and this is a little bit of a 41 00:01:55,880 --> 00:02:00,120 Speaker 5: pleasant surprise for Warner Brothers. Discovery has really been on 42 00:02:00,160 --> 00:02:02,760 Speaker 5: the debt side, so as you well know well the 43 00:02:02,840 --> 00:02:06,160 Speaker 5: linear TV business is challenged, but the bigger problem for 44 00:02:06,440 --> 00:02:09,920 Speaker 5: WBD has really been a huge amount of debt. And 45 00:02:10,000 --> 00:02:12,960 Speaker 5: this debt was really as part of the combination of 46 00:02:13,000 --> 00:02:15,560 Speaker 5: Warner Brothers and Discovery, which happened a few years ago. 47 00:02:15,880 --> 00:02:18,720 Speaker 5: At that point, the company had over fifty five billion 48 00:02:18,800 --> 00:02:22,080 Speaker 5: dollars in debt. They've paid about nineteen billion down, but 49 00:02:22,080 --> 00:02:24,560 Speaker 5: they still have thirty five billion. But what they're doing 50 00:02:24,600 --> 00:02:26,600 Speaker 5: now as part of this transaction is they have a 51 00:02:26,639 --> 00:02:29,639 Speaker 5: tender offer out there, really kind of looking to streamline 52 00:02:29,639 --> 00:02:32,000 Speaker 5: the capital structure. So when you have these two new 53 00:02:32,000 --> 00:02:34,960 Speaker 5: public companies, there's going to be a much more manageable 54 00:02:35,000 --> 00:02:37,320 Speaker 5: debt load at both of those companies. And I think 55 00:02:37,360 --> 00:02:40,640 Speaker 5: investors are really reacting positively to that news. 56 00:02:40,960 --> 00:02:41,200 Speaker 7: Keetha. 57 00:02:41,280 --> 00:02:43,359 Speaker 2: When they put the companies together, one of the arguments 58 00:02:43,440 --> 00:02:47,440 Speaker 2: was to create scale to compete against Netflix and Disney. 59 00:02:47,800 --> 00:02:48,520 Speaker 6: What happened to that. 60 00:02:48,560 --> 00:02:54,360 Speaker 5: Argument, Yeah, exactly, Paul. You know, yes, they did create 61 00:02:54,400 --> 00:02:57,080 Speaker 5: scale as far as the TV networks part of the 62 00:02:57,120 --> 00:03:00,560 Speaker 5: business was concerned. You know, you have Discuss, which is 63 00:03:00,600 --> 00:03:02,880 Speaker 5: really the leader when it comes to nonfiction. You have 64 00:03:03,080 --> 00:03:05,799 Speaker 5: you know, the Warner Networks and HBO, which is the 65 00:03:05,880 --> 00:03:08,840 Speaker 5: leader when it comes to fiction and quality dramas and 66 00:03:08,840 --> 00:03:12,080 Speaker 5: scripted series. And they thought that that would do well, 67 00:03:12,120 --> 00:03:15,799 Speaker 5: but unfortunately what happened is, you know, and all media companies, 68 00:03:15,840 --> 00:03:18,000 Speaker 5: as you will know Paul, have this conundrum because they 69 00:03:18,000 --> 00:03:20,040 Speaker 5: have the TV business, which brings in a lot of 70 00:03:20,040 --> 00:03:23,480 Speaker 5: the cash, but is literally a no growth business. In fact, 71 00:03:23,520 --> 00:03:26,160 Speaker 5: it does in decline. Both advertising as well as affiliate 72 00:03:26,160 --> 00:03:29,120 Speaker 5: fees are in decline. But then you had the streaming business, 73 00:03:29,120 --> 00:03:31,480 Speaker 5: which initially kind of had a little bit of trouble 74 00:03:32,200 --> 00:03:35,920 Speaker 5: because you know, in that whole game of subscribers and 75 00:03:35,960 --> 00:03:39,440 Speaker 5: that land gradt for subscribers, they actually ended up incurring 76 00:03:39,440 --> 00:03:42,320 Speaker 5: a huge amount of losses. But there is this whole 77 00:03:42,360 --> 00:03:46,000 Speaker 5: wave of content cost rationalization. We've seen a turnaround and 78 00:03:46,040 --> 00:03:48,640 Speaker 5: all of the streaming businesses and Warner Brothers Discovery actually 79 00:03:48,640 --> 00:03:50,920 Speaker 5: has kind of led the charge there. So they were 80 00:03:50,960 --> 00:03:54,000 Speaker 5: actually the first to get profitable in terms of streaming. 81 00:03:54,200 --> 00:03:56,960 Speaker 5: And so now we're seeing this huge disconnect, or at 82 00:03:57,080 --> 00:03:59,320 Speaker 5: least they are saying that there is this huge disconnect 83 00:03:59,320 --> 00:04:02,960 Speaker 5: between TV network's business and the streaming of the studios businesses, 84 00:04:02,960 --> 00:04:06,600 Speaker 5: which should arguably get a much higher multiple, and that's 85 00:04:06,640 --> 00:04:08,680 Speaker 5: kind of the reason for this split. So we've we're 86 00:04:08,680 --> 00:04:11,280 Speaker 5: seeing how multiple companies do this. Actually, so Comcast, which 87 00:04:11,280 --> 00:04:13,760 Speaker 5: has the NBC division, they're splitting out their cable networks. 88 00:04:13,960 --> 00:04:16,320 Speaker 5: We had Lions Skate and Stars, where you have Lions 89 00:04:16,320 --> 00:04:19,440 Speaker 5: Skate as an independent movie studio, Stars as the media networks, 90 00:04:19,480 --> 00:04:21,480 Speaker 5: and now you have Warner Brothers Discovery. So there's this 91 00:04:21,600 --> 00:04:25,280 Speaker 5: whole big movement now towards you know, this vertical kind 92 00:04:25,279 --> 00:04:27,719 Speaker 5: of separation if you will, I mean, do. 93 00:04:27,760 --> 00:04:30,280 Speaker 4: They all come together then and create kind of one 94 00:04:30,560 --> 00:04:33,479 Speaker 4: less great TV network thing? 95 00:04:34,720 --> 00:04:38,800 Speaker 5: Yeah, that's kind of the plan. So the most logical combination, 96 00:04:39,080 --> 00:04:41,560 Speaker 5: and this has been floated around for for months now, 97 00:04:41,680 --> 00:04:44,680 Speaker 5: is that with this news of the Comcast, you know, 98 00:04:44,720 --> 00:04:47,599 Speaker 5: the NBC cable network separation, who would have would that 99 00:04:47,680 --> 00:04:50,640 Speaker 5: become like this kind of roll up vehicle. And that's 100 00:04:50,720 --> 00:04:53,120 Speaker 5: kind of what you know, a lot of the industry 101 00:04:53,160 --> 00:04:55,320 Speaker 5: experts are thinking, they're expecting now that you have this 102 00:04:55,440 --> 00:04:59,000 Speaker 5: news with Warner Brothers Discovery, everybody's kind of expecting down 103 00:04:59,040 --> 00:05:02,240 Speaker 5: the road some common nation of maybe that Warner Brothers 104 00:05:02,240 --> 00:05:05,640 Speaker 5: Discovery TV assets along with the Comcast assets and who 105 00:05:05,680 --> 00:05:08,919 Speaker 5: knows who else kind of spins off their networks and 106 00:05:08,920 --> 00:05:12,040 Speaker 5: then that becomes this giant kind of TV network umbrella. 107 00:05:12,120 --> 00:05:15,200 Speaker 5: Going back to Paul's point about scale, because scale really 108 00:05:15,240 --> 00:05:16,599 Speaker 5: matters now at this business. 109 00:05:17,080 --> 00:05:21,359 Speaker 2: All right, how about Paramount you other sick child in 110 00:05:21,400 --> 00:05:22,920 Speaker 2: your coverage, what's going on there? 111 00:05:24,200 --> 00:05:26,720 Speaker 5: Yeah, So we really don't know what's going on there. 112 00:05:26,760 --> 00:05:28,800 Speaker 5: So there's been a lot of ups and downs, Paul, 113 00:05:28,920 --> 00:05:31,520 Speaker 5: with the whole closing of the deal. So the Paramount 114 00:05:31,560 --> 00:05:36,320 Speaker 5: sky Dance transaction, it was announced last year sometime in July. 115 00:05:36,960 --> 00:05:39,520 Speaker 5: It was supposed to close by the first half, by 116 00:05:39,560 --> 00:05:41,600 Speaker 5: the end of the first half of twenty twenty five, 117 00:05:42,000 --> 00:05:44,880 Speaker 5: but there's just been so many different press reports. They've 118 00:05:44,920 --> 00:05:47,760 Speaker 5: had to do different things to appease the current administration 119 00:05:47,960 --> 00:05:51,159 Speaker 5: to a peace President Trump, I'm not sure he is 120 00:05:51,240 --> 00:05:53,800 Speaker 5: yielding so easily. So we're actually it's still kind of 121 00:05:53,839 --> 00:05:59,040 Speaker 5: fifty to fifty Paul, whether that transaction actually, yeah, actually closes. 122 00:05:59,080 --> 00:06:01,039 Speaker 5: So there's just too many up in the air. And 123 00:06:01,040 --> 00:06:03,200 Speaker 5: then again there is the lingering question because we know 124 00:06:03,240 --> 00:06:07,800 Speaker 5: that Skydance was really only interested in the Paramount's studio business. 125 00:06:07,800 --> 00:06:10,039 Speaker 5: So again what they kind of do with the TV 126 00:06:10,160 --> 00:06:12,880 Speaker 5: networks business, what they do with the streaming business, that's 127 00:06:12,920 --> 00:06:16,880 Speaker 5: all a huge question mark. So visibility very very limited 128 00:06:16,960 --> 00:06:18,040 Speaker 5: right now for Paramount. 129 00:06:18,520 --> 00:06:20,960 Speaker 4: I guess I just wonder if you stick all the 130 00:06:21,000 --> 00:06:25,359 Speaker 4: cable networks together, how does that actually generate real income? 131 00:06:25,440 --> 00:06:27,400 Speaker 4: I mean, I know that's a cash cow to some extent, right, 132 00:06:27,400 --> 00:06:28,680 Speaker 4: but then you have a lot of debt and there's 133 00:06:28,720 --> 00:06:29,320 Speaker 4: no growth. 134 00:06:29,440 --> 00:06:31,280 Speaker 3: Like, what kind of asset is that? 135 00:06:32,839 --> 00:06:35,559 Speaker 5: Yeah, it's definitely a melting ice cube kind of an asset, 136 00:06:35,560 --> 00:06:38,200 Speaker 5: which is exactly what you know, the TV networks have been. 137 00:06:38,360 --> 00:06:41,320 Speaker 5: The argument that all of these media companies are making 138 00:06:41,360 --> 00:06:45,680 Speaker 5: alex is that somehow by kind of banding together, you know, 139 00:06:45,720 --> 00:06:47,680 Speaker 5: because each one of them will have one or two 140 00:06:47,760 --> 00:06:49,720 Speaker 5: networks that is kind of a must have networks. If 141 00:06:49,720 --> 00:06:53,160 Speaker 5: you're looking at Warner, you have CNN, you know. If 142 00:06:53,200 --> 00:06:56,480 Speaker 5: you're looking at again, if you're looking at the NBC networks, 143 00:06:56,520 --> 00:06:59,159 Speaker 5: you have USA, you have MSNBC. So you know, there 144 00:06:59,200 --> 00:07:01,560 Speaker 5: are definitely all going to be some must have networks 145 00:07:01,600 --> 00:07:04,920 Speaker 5: in each portfolio, and kind of putting them all together 146 00:07:05,080 --> 00:07:07,400 Speaker 5: will stem that rate of decliner. At least that is 147 00:07:07,440 --> 00:07:10,160 Speaker 5: the argument that they're making. But again we've seen that 148 00:07:10,280 --> 00:07:14,280 Speaker 5: court cutting has actually been far worse than what was 149 00:07:14,320 --> 00:07:17,800 Speaker 5: initially projected, so again it remains to be seen. But 150 00:07:17,880 --> 00:07:19,760 Speaker 5: the idea is they want to milk it till it 151 00:07:19,840 --> 00:07:20,680 Speaker 5: kind of runs dry. 152 00:07:21,080 --> 00:07:24,200 Speaker 2: Our thanks to get it Wrong Andathen Bloomberg Intelligence Senior media. 153 00:07:23,960 --> 00:07:27,680 Speaker 4: Analyst, we moved to some news at the world's largest retailer, Walmart. 154 00:07:27,960 --> 00:07:30,560 Speaker 2: This week we heard that Walmart's credit cards will once 155 00:07:30,560 --> 00:07:33,960 Speaker 2: again be issued by the consumer financing company Synchrony Financial. 156 00:07:34,200 --> 00:07:37,400 Speaker 2: Synchrony previously issued Walmart credit cards for nearly two decades 157 00:07:37,480 --> 00:07:38,400 Speaker 2: until twenty eighteen. 158 00:07:38,680 --> 00:07:41,080 Speaker 4: Walmart will now use its fintech startup One Paid a 159 00:07:41,120 --> 00:07:43,559 Speaker 4: partner with Synchrony, and they'll offer co branded and private 160 00:07:43,600 --> 00:07:45,360 Speaker 4: label cards in the US later this year. 161 00:07:45,640 --> 00:07:48,280 Speaker 2: This comes as Walmart makes a renewed push into financial 162 00:07:48,280 --> 00:07:50,760 Speaker 2: services and for more. We were joined by Ben Elliott, 163 00:07:50,760 --> 00:07:53,120 Speaker 2: Bloomberg Intelligence consumer finance analyst. 164 00:07:53,240 --> 00:07:55,840 Speaker 4: We first asked Ben for some background on Synchrony, which 165 00:07:55,960 --> 00:07:58,800 Speaker 4: initially lost a partnership with Walmart to Capital One. 166 00:07:59,160 --> 00:08:01,800 Speaker 8: Yes, so they had it for twenty years right up 167 00:08:01,880 --> 00:08:06,600 Speaker 8: until twenty eighteen when the renewal sort of negotiations between 168 00:08:06,600 --> 00:08:10,120 Speaker 8: the two companies got contentious. Walmart was demanding too much 169 00:08:10,200 --> 00:08:12,800 Speaker 8: for Synchrony, and so Synchrony sort of sort of backed down. 170 00:08:12,800 --> 00:08:14,560 Speaker 8: And at the time it was a really big deal, 171 00:08:15,400 --> 00:08:17,440 Speaker 8: and so this is an equally large deal that they're 172 00:08:17,480 --> 00:08:18,000 Speaker 8: coming back. 173 00:08:19,000 --> 00:08:19,800 Speaker 3: Why did it go away? 174 00:08:20,520 --> 00:08:23,800 Speaker 8: So the way Synchrony works is they have these large partners, 175 00:08:23,880 --> 00:08:26,119 Speaker 8: right the top five partners are more than fifty percent 176 00:08:26,120 --> 00:08:29,040 Speaker 8: of their net interest in fees. And what they do 177 00:08:29,080 --> 00:08:31,640 Speaker 8: is they share the economics with the partner programs and 178 00:08:31,720 --> 00:08:35,120 Speaker 8: something called a retailer share arrangement. So every couple of 179 00:08:35,240 --> 00:08:37,800 Speaker 8: years the partnerships are up for renewal. And Walmart is 180 00:08:37,800 --> 00:08:40,520 Speaker 8: a gigantic corporation. They have huge leverage and they were 181 00:08:40,520 --> 00:08:43,640 Speaker 8: demanding essentially more of the economics than Synchrony could provide 182 00:08:43,679 --> 00:08:44,719 Speaker 8: and still be profitable. 183 00:08:45,480 --> 00:08:49,040 Speaker 2: Ben talk to us about these kind of branded credit 184 00:08:49,040 --> 00:08:50,960 Speaker 2: cards if you will. I mean, my daughter is a 185 00:08:51,120 --> 00:08:54,840 Speaker 2: master at managing points and managing points and doing all 186 00:08:54,880 --> 00:08:57,320 Speaker 2: that kind of full time job it is, but it 187 00:08:57,320 --> 00:08:59,439 Speaker 2: pays off every time she's traveling somewhere it's oh, it's 188 00:08:59,440 --> 00:09:03,200 Speaker 2: on points points. Talk to us about that. The business 189 00:09:03,640 --> 00:09:05,800 Speaker 2: of those kinds of cards and kind of the economics. 190 00:09:06,840 --> 00:09:09,360 Speaker 8: Yeah, So Syncrety is not so much in that business. 191 00:09:09,800 --> 00:09:12,920 Speaker 8: They're in the business of providing a credit option, usually 192 00:09:13,000 --> 00:09:17,120 Speaker 8: to sort of a lower credit worthiness, lower income borrower 193 00:09:18,320 --> 00:09:21,240 Speaker 8: that is really focused on a single retail partner. So 194 00:09:21,240 --> 00:09:23,600 Speaker 8: this partnership is going to be there's gonna be two cards. 195 00:09:23,640 --> 00:09:25,520 Speaker 8: One's a general purpose card that kind of does what 196 00:09:25,520 --> 00:09:28,840 Speaker 8: you're talking about, but the rewards sort of value proposition 197 00:09:28,880 --> 00:09:30,959 Speaker 8: will typically be a little bit lower. The card will 198 00:09:31,000 --> 00:09:33,560 Speaker 8: be more accessible, and then the other card will be 199 00:09:33,679 --> 00:09:36,480 Speaker 8: just used at Walmart. And details are still pretty light 200 00:09:36,520 --> 00:09:39,280 Speaker 8: on what the reward structure might look like. But the 201 00:09:39,320 --> 00:09:43,200 Speaker 8: goal is to drive through put at Walmart and not 202 00:09:43,240 --> 00:09:45,120 Speaker 8: necessarily at sort of other retailers. 203 00:09:45,679 --> 00:09:48,360 Speaker 4: So they also have cards with like JC penny Low's 204 00:09:48,440 --> 00:09:51,640 Speaker 4: Amazon PayPal for example. And you mentioned sort of a 205 00:09:51,679 --> 00:09:55,080 Speaker 4: different type of band of consumer. How is that band 206 00:09:55,120 --> 00:09:56,120 Speaker 4: of consumer doing. 207 00:09:57,480 --> 00:10:00,959 Speaker 8: So Synchrony likes to say that they're managing, they're not thriving, 208 00:10:01,000 --> 00:10:04,560 Speaker 8: and they're not struggling. You know, this is a it's 209 00:10:04,800 --> 00:10:06,760 Speaker 8: sort of like a subset of wallet share, all right. 210 00:10:06,760 --> 00:10:10,120 Speaker 8: So the Syncrety is just seeing how these consumers are 211 00:10:10,120 --> 00:10:13,040 Speaker 8: behaving at a single retailer for the most part. But 212 00:10:13,080 --> 00:10:14,880 Speaker 8: there's not a lot of stress. But if you look 213 00:10:14,960 --> 00:10:18,400 Speaker 8: back at twenty eighteen when they first decided not to 214 00:10:18,440 --> 00:10:21,560 Speaker 8: renew the Walmart partnership, it's kind of overnight their charge 215 00:10:21,600 --> 00:10:25,640 Speaker 8: offs went down like sixty seventy basis points, so presumably 216 00:10:26,240 --> 00:10:30,040 Speaker 8: this particular customer set is charging off a little bit higher, 217 00:10:30,040 --> 00:10:33,360 Speaker 8: like maybe one percentage point higher than your typical borrower. 218 00:10:33,440 --> 00:10:35,840 Speaker 8: So there's going to be it's an interesting time for 219 00:10:35,920 --> 00:10:37,800 Speaker 8: Syncrony to go out and look for these sort of 220 00:10:37,840 --> 00:10:40,880 Speaker 8: more marginal buyers basically to get growth. 221 00:10:41,760 --> 00:10:44,680 Speaker 2: Ben your coverage of consumer finance companies, you get a 222 00:10:44,679 --> 00:10:46,760 Speaker 2: good view those companies, get a good view of how 223 00:10:46,800 --> 00:10:50,320 Speaker 2: the consumer is doing, how they're spending their money. What 224 00:10:50,360 --> 00:10:52,079 Speaker 2: are you hearing from these companies these days? 225 00:10:52,960 --> 00:10:55,360 Speaker 8: So if you look across spending categories, everything is still 226 00:10:55,440 --> 00:11:00,320 Speaker 8: typically growing a couple percentage points above GDP. There's one 227 00:11:00,360 --> 00:11:03,920 Speaker 8: obvious standout, which is travel, which is basically people cutting 228 00:11:03,920 --> 00:11:06,720 Speaker 8: back on their most incremental spend. But if you kind 229 00:11:06,720 --> 00:11:08,760 Speaker 8: of think about travel, right, you're booking your flights a 230 00:11:08,760 --> 00:11:12,400 Speaker 8: couple of months maybe a year in advance, and growth 231 00:11:12,400 --> 00:11:15,360 Speaker 8: in that category is down double digits. So if you 232 00:11:15,400 --> 00:11:19,160 Speaker 8: kind of extrapolate that forward, will we see similar shrinking 233 00:11:19,280 --> 00:11:23,280 Speaker 8: in hotel spending, entertainment, leisure things like that? You know, 234 00:11:23,360 --> 00:11:24,559 Speaker 8: could be a little bit of a canary in the 235 00:11:24,600 --> 00:11:25,640 Speaker 8: coal mine. 236 00:11:26,160 --> 00:11:30,959 Speaker 4: What is Synchrony's flexibility when dealing, when they're managing, when 237 00:11:30,960 --> 00:11:32,920 Speaker 4: they're saying that their consumer isn't thriving and they're not 238 00:11:33,000 --> 00:11:36,199 Speaker 4: dropping off, but they're managing. What does that translate for Synchrony. 239 00:11:37,200 --> 00:11:39,320 Speaker 8: Well, so this goes back to what we talked about 240 00:11:39,360 --> 00:11:43,000 Speaker 8: the retailer share arrangements. So you share both the profits 241 00:11:43,000 --> 00:11:46,600 Speaker 8: and you share the costs, right, so you know, if 242 00:11:46,679 --> 00:11:48,680 Speaker 8: charge offs were to rise, the retailer in this case, 243 00:11:48,720 --> 00:11:51,200 Speaker 8: Walmart is going to pick up some of those charge offs. 244 00:11:51,840 --> 00:11:53,600 Speaker 8: So that kind of like you know, softens the blow 245 00:11:53,640 --> 00:11:56,520 Speaker 8: a little bit for Synchrony as a as an issuer. 246 00:11:57,440 --> 00:11:59,600 Speaker 8: But they have other sort of tools in their toolbox. 247 00:11:59,640 --> 00:12:03,040 Speaker 8: One big one was the late fee, which CFPB had 248 00:12:03,080 --> 00:12:06,120 Speaker 8: been trying to cap at eight dollars instead of about 249 00:12:06,120 --> 00:12:08,800 Speaker 8: thirty dollars. But they can use those things like that 250 00:12:08,840 --> 00:12:11,160 Speaker 8: to incentivize borrowers to pay even when it gets to 251 00:12:11,160 --> 00:12:12,400 Speaker 8: be more painful. 252 00:12:12,920 --> 00:12:15,320 Speaker 2: Ben are your consumer finance companies? Are they talking about 253 00:12:15,360 --> 00:12:17,480 Speaker 2: credit quality concerns at this point? 254 00:12:17,559 --> 00:12:17,760 Speaker 6: Yet? 255 00:12:18,120 --> 00:12:22,720 Speaker 8: Credit quality is still great for companies like Amex, it's pristine, unimpeachable. 256 00:12:23,600 --> 00:12:26,240 Speaker 8: But the thing to look at is delinquency. Just the 257 00:12:26,280 --> 00:12:28,319 Speaker 8: mechanics the way charge offs work. First, you have to 258 00:12:28,360 --> 00:12:32,000 Speaker 8: go delinquent before you stop paying. And we're not really 259 00:12:32,040 --> 00:12:34,840 Speaker 8: seeing any sort of increase beyond kind of like seasonal 260 00:12:34,840 --> 00:12:35,960 Speaker 8: trends in delinquency. 261 00:12:36,640 --> 00:12:39,880 Speaker 2: Our thanks to Ben Elliott, Bloomberg Intelligence consumer finance analyst. 262 00:12:40,000 --> 00:12:41,640 Speaker 4: Coming up, we're going to break down the White House's 263 00:12:41,720 --> 00:12:43,360 Speaker 4: plans for nuclear energy. 264 00:12:43,640 --> 00:12:46,480 Speaker 2: You're listening to Bloomberg Intelligence on Bloomberg Radio, providing in 265 00:12:46,520 --> 00:12:48,760 Speaker 2: depth research and data on two thousand companies and one 266 00:12:48,800 --> 00:12:51,679 Speaker 2: hundred and thirty industries. You can access Bloomberg Intelligence via 267 00:12:51,720 --> 00:12:52,760 Speaker 2: b I go on the terminal. 268 00:12:52,840 --> 00:12:55,520 Speaker 4: I'm Paul Sweeney and a Malex Steel, and this is Bloomberg. 269 00:13:00,760 --> 00:13:04,480 Speaker 1: You're listening to the Bloomberg Intelligence Podcast. Catch us live 270 00:13:04,559 --> 00:13:07,640 Speaker 1: weekdays at ten am Eastern on Apple, Coarclay, and Android 271 00:13:07,679 --> 00:13:10,960 Speaker 1: Auto with the Bloomberg Business App. Listen on demand wherever 272 00:13:11,040 --> 00:13:14,559 Speaker 1: you get your podcasts, or watch us live on YouTube. 273 00:13:15,080 --> 00:13:17,320 Speaker 3: We moved next to the biotech space this week. 274 00:13:17,360 --> 00:13:19,760 Speaker 4: We were joined by Sam Fazzelli, Bloomberg Intelligence, Director of 275 00:13:19,800 --> 00:13:22,559 Speaker 4: Research for Global Industries and senior pharmaceutical analyst. 276 00:13:22,720 --> 00:13:24,960 Speaker 2: He joined to discuss the latest in the biotech space 277 00:13:25,000 --> 00:13:28,520 Speaker 2: from Moderness recent COVID vaccine approval and placebo trial to 278 00:13:28,679 --> 00:13:32,160 Speaker 2: new obesity drugs from the biotech company met Sarah. 279 00:13:32,320 --> 00:13:34,160 Speaker 4: We first began with the money side of things and 280 00:13:34,160 --> 00:13:36,480 Speaker 4: asked Sam for his take on why more biotech companies 281 00:13:36,480 --> 00:13:38,479 Speaker 4: are returning cash back to their shareholders. 282 00:13:39,080 --> 00:13:42,680 Speaker 6: So, I think companies are coming to a realization that 283 00:13:42,720 --> 00:13:46,800 Speaker 6: they can't just sit on a large pilot cash. The 284 00:13:46,920 --> 00:13:52,640 Speaker 6: latest one that just happened was seven hundred million dollars 285 00:13:52,640 --> 00:13:56,640 Speaker 6: in the bank, and the assets weren't particularly going in 286 00:13:56,760 --> 00:13:59,719 Speaker 6: the direction that athy shareholders were happy with, which is 287 00:13:59,720 --> 00:14:03,640 Speaker 6: why the company was sitting at a negative enterprise value 288 00:14:03,720 --> 00:14:06,120 Speaker 6: of like one hundred million or ninety million, depending on 289 00:14:06,160 --> 00:14:09,000 Speaker 6: when you're looking at it. And I think they thought, well, no, 290 00:14:09,080 --> 00:14:11,959 Speaker 6: actually two hundred eighty eight million. Sorry, they thought this 291 00:14:12,120 --> 00:14:14,400 Speaker 6: time to return some of that cash to shareholders. And 292 00:14:14,480 --> 00:14:18,320 Speaker 6: you're seeing more of this happening. Investors got tired of 293 00:14:18,360 --> 00:14:21,200 Speaker 6: companies essentially constantly saying, we'll find a better thing to 294 00:14:21,240 --> 00:14:24,200 Speaker 6: do with your cash, and they investors go, we know 295 00:14:24,240 --> 00:14:25,479 Speaker 6: what to do with our cash. 296 00:14:25,600 --> 00:14:28,120 Speaker 4: That is like a really weird thing for about tech company, right, 297 00:14:28,160 --> 00:14:30,960 Speaker 4: because this isn't the whole value proposition. Eventually, is that 298 00:14:31,040 --> 00:14:32,600 Speaker 4: you spend all this money on R ANDD to make 299 00:14:32,640 --> 00:14:35,359 Speaker 4: that super cool thing that's going to make up bazillion dollars. 300 00:14:36,080 --> 00:14:38,960 Speaker 6: Right, sure, Alex. But if you start off saying I 301 00:14:39,000 --> 00:14:40,760 Speaker 6: am the expert in this area, and I'm going to 302 00:14:40,800 --> 00:14:44,320 Speaker 6: take this expertise and translate this idea into a product, 303 00:14:44,800 --> 00:14:48,000 Speaker 6: and that doesn't work out, then you say, actually, I 304 00:14:48,080 --> 00:14:51,440 Speaker 6: have another idea that wasn't necessarily your expertise. That's where 305 00:14:51,520 --> 00:14:53,640 Speaker 6: investors get a little bit edgy. 306 00:14:54,720 --> 00:14:58,440 Speaker 2: Yeah, so, Sam, I know the FDA recently approved modarrens 307 00:14:58,600 --> 00:15:03,440 Speaker 2: new COVID BAX seen what's new about it and is 308 00:15:03,480 --> 00:15:03,920 Speaker 2: it better? 309 00:15:05,560 --> 00:15:10,960 Speaker 6: Well, actually, they did a real trial of comparing this 310 00:15:11,080 --> 00:15:13,320 Speaker 6: new version. I'll tell you what's new about it with 311 00:15:13,800 --> 00:15:17,800 Speaker 6: the standard vaccine spike facts that we've been getting. I 312 00:15:17,840 --> 00:15:19,520 Speaker 6: don't even know how to pronounce the new name m 313 00:15:19,560 --> 00:15:24,760 Speaker 6: next via something like that. I could never It's not 314 00:15:24,800 --> 00:15:27,680 Speaker 6: an easy roar rolling off the tongue. What they've done 315 00:15:27,720 --> 00:15:30,080 Speaker 6: is that they've taken the dose from fifty micrograms to 316 00:15:30,120 --> 00:15:33,200 Speaker 6: ten micrograms, and what that does is that it gives 317 00:15:33,240 --> 00:15:36,840 Speaker 6: you less reactions, and in fact, in this particular trial, 318 00:15:37,320 --> 00:15:40,760 Speaker 6: they showed even higher antibody responses compared to the old one. 319 00:15:40,840 --> 00:15:43,320 Speaker 6: So there is a small possibility it was only a 320 00:15:43,320 --> 00:15:47,440 Speaker 6: few ten percent or so higher. A small possibility you 321 00:15:47,480 --> 00:15:50,560 Speaker 6: get a much better efficacy in a real world setting. 322 00:15:50,960 --> 00:15:52,840 Speaker 6: But it seemed to go in that direction here, So 323 00:15:53,400 --> 00:15:55,920 Speaker 6: and that now is going to become the base of 324 00:15:55,920 --> 00:15:57,160 Speaker 6: all their vaccines going forward. 325 00:15:57,480 --> 00:15:59,680 Speaker 4: Right, But that's a good news if you take the 326 00:15:59,720 --> 00:16:02,080 Speaker 4: VACS scene. But then you're not allowed to get the 327 00:16:02,160 --> 00:16:05,600 Speaker 4: vaccine unless you have underlying commorbidities, right. 328 00:16:06,320 --> 00:16:08,480 Speaker 6: Yeah, alex is only you not allowed to get direction 329 00:16:10,200 --> 00:16:14,280 Speaker 6: because you don't have a whole bunch of the qualifying factors. 330 00:16:14,280 --> 00:16:18,200 Speaker 6: You're not old, you are, you're over sixty four, you're 331 00:16:18,240 --> 00:16:23,440 Speaker 6: not you're not come morbidity. Except the one thing you have, 332 00:16:23,600 --> 00:16:27,120 Speaker 6: which is something that doesn't show up in these conversations, 333 00:16:27,280 --> 00:16:30,680 Speaker 6: is a risk of a really bad reaction to COVID, right, 334 00:16:30,720 --> 00:16:33,440 Speaker 6: which is something that you've experienced. So what is going 335 00:16:33,480 --> 00:16:36,480 Speaker 6: on though, is that the company has whatever specifically, has 336 00:16:36,480 --> 00:16:39,000 Speaker 6: committed to the FDA to do a placebo control trial 337 00:16:39,560 --> 00:16:43,240 Speaker 6: in a fifty to sixty four year or sixty five 338 00:16:43,320 --> 00:16:48,440 Speaker 6: year group of individuals without come moobilities compared to a 339 00:16:48,440 --> 00:16:52,920 Speaker 6: placebo I eat nothing so that will be where they 340 00:16:53,000 --> 00:16:55,440 Speaker 6: will have to do this trial, and by committing to it, 341 00:16:55,440 --> 00:16:58,160 Speaker 6: this trial needs to be large in order to show 342 00:16:58,160 --> 00:16:59,960 Speaker 6: a difference. And I remember a whole bunch of people 343 00:17:00,160 --> 00:17:04,119 Speaker 6: going into these trials now with previous immunity, which means 344 00:17:04,400 --> 00:17:06,280 Speaker 6: the difference is going to be smaller, which means you're 345 00:17:06,280 --> 00:17:09,400 Speaker 6: going to need larger trials. So I hope it works 346 00:17:09,440 --> 00:17:13,520 Speaker 6: out and I hope the cost isn't punitive for modernaw. 347 00:17:13,880 --> 00:17:17,119 Speaker 2: New obesity data from a Newish biotech met Sarah and 348 00:17:17,160 --> 00:17:20,320 Speaker 2: their obesity issue. What's going on there? What do they 349 00:17:20,320 --> 00:17:21,000 Speaker 2: have for the market. 350 00:17:21,720 --> 00:17:25,280 Speaker 6: Yes, so they've got a new mechanism, which they're not 351 00:17:25,320 --> 00:17:27,920 Speaker 6: the only people following it. Lily's doing it, and I 352 00:17:28,160 --> 00:17:31,960 Speaker 6: was doing it Zealand and now in partnership with Rash 353 00:17:32,080 --> 00:17:35,320 Speaker 6: are doing it. And it's targeting not jlp ones but 354 00:17:35,480 --> 00:17:39,320 Speaker 6: amelin in the same sort of pathway of hormones that 355 00:17:41,200 --> 00:17:45,920 Speaker 6: hunger and satiety, et cetera, but slightly different. And the 356 00:17:45,920 --> 00:17:47,879 Speaker 6: theory is that you're going to get a drug that 357 00:17:48,480 --> 00:17:53,080 Speaker 6: is less difficult to tolerate. Nausea and vomiting is the 358 00:17:53,080 --> 00:17:55,520 Speaker 6: biggest one with these drugs because they impact the gut 359 00:17:55,880 --> 00:17:58,640 Speaker 6: and so here they've presented data that shows pretty good 360 00:17:59,160 --> 00:18:03,399 Speaker 6: weight loss the thirty six week readout, thirty six day readout, sorry, 361 00:18:03,440 --> 00:18:09,080 Speaker 6: five weeks, and you've got unfortunately one hundred percent nausea rates, 362 00:18:09,119 --> 00:18:15,159 Speaker 6: but they are at the very low grade. I is 363 00:18:15,400 --> 00:18:19,439 Speaker 6: just feeling a little I'm assuming yuck. And then what 364 00:18:19,480 --> 00:18:22,399 Speaker 6: you've got is that it only seems to majority of 365 00:18:22,400 --> 00:18:25,239 Speaker 6: them seem to pass after the first week. So I 366 00:18:25,240 --> 00:18:26,200 Speaker 6: think this is good. 367 00:18:26,359 --> 00:18:29,159 Speaker 2: Our thanks to Sam Fazzelli, Bloomberg Intelligence, Director of Research 368 00:18:29,200 --> 00:18:31,760 Speaker 2: for Global Industries and senior pharmaceuticals analysts. 369 00:18:31,800 --> 00:18:35,560 Speaker 4: We move next to the energy sector, specifically nuclear energy. Recently, 370 00:18:35,600 --> 00:18:38,280 Speaker 4: the White House announced it's gold a quadruple US nuclear 371 00:18:38,320 --> 00:18:40,159 Speaker 4: generation capacity by twenty fifty. 372 00:18:40,640 --> 00:18:43,280 Speaker 2: The goal is to have reliable energy supply to meet 373 00:18:43,280 --> 00:18:45,600 Speaker 2: the growing demand for artificial intelligence from more. 374 00:18:45,600 --> 00:18:48,200 Speaker 4: We were drawn by Scott Levine, Bloomberg Intelligence, senior Energy 375 00:18:48,240 --> 00:18:49,680 Speaker 4: and Industrial Services analyst. 376 00:18:49,920 --> 00:18:52,720 Speaker 2: We first asked Scott to explain the complicated relationship with 377 00:18:52,800 --> 00:18:55,720 Speaker 2: nuclear energy and what the Trump administration would like to 378 00:18:55,760 --> 00:18:56,119 Speaker 2: do with it. 379 00:18:56,760 --> 00:19:01,439 Speaker 9: Nuclear has always kind of been a bit of a 380 00:19:01,520 --> 00:19:05,560 Speaker 9: strange one for environmentalists and for the industry overall. You know, 381 00:19:05,600 --> 00:19:08,879 Speaker 9: it's an emissions free power source, right, which would seem 382 00:19:08,960 --> 00:19:16,040 Speaker 9: to align well with the goals of environmentalists. However, safety concerns, 383 00:19:16,160 --> 00:19:18,400 Speaker 9: you know, end up being an issue three Mile Island, 384 00:19:18,800 --> 00:19:24,399 Speaker 9: Fukushima and otherwise. And so you know, with the combination 385 00:19:24,560 --> 00:19:30,600 Speaker 9: of demand from AI for power of all types, coupled 386 00:19:30,640 --> 00:19:32,719 Speaker 9: with the fact that it is an emissions free power 387 00:19:32,760 --> 00:19:36,960 Speaker 9: source has really brought it back into the forefront and 388 00:19:38,359 --> 00:19:42,680 Speaker 9: supporting the AI demands story. So you have the demand 389 00:19:42,720 --> 00:19:46,919 Speaker 9: picture has clearly strengthened as a result of that. The 390 00:19:46,960 --> 00:19:49,280 Speaker 9: two things that really blew a hole in the story 391 00:19:49,320 --> 00:19:52,200 Speaker 9: the last time it was in vogue and the Obama 392 00:19:52,200 --> 00:19:56,600 Speaker 9: administration was really the shale revolution which made natural gas 393 00:19:56,640 --> 00:20:00,960 Speaker 9: so cheap as an alternative, and then in twenty eleven 394 00:20:01,000 --> 00:20:04,760 Speaker 9: Fukushima created all kinds of concerns there. So the two 395 00:20:05,280 --> 00:20:07,359 Speaker 9: really blew a hole in the story then. And now, 396 00:20:07,400 --> 00:20:09,600 Speaker 9: you know, in fifteen years has gone by since then, 397 00:20:10,080 --> 00:20:13,800 Speaker 9: and the memory has faded, and now it's back in 398 00:20:13,880 --> 00:20:15,480 Speaker 9: the forefront folks minds. 399 00:20:15,640 --> 00:20:20,119 Speaker 4: So expanding or keeping alive or recommissioning a nuclear plant 400 00:20:20,160 --> 00:20:22,280 Speaker 4: is one thing, and that's what we're doing three Mile Island. 401 00:20:22,400 --> 00:20:25,280 Speaker 4: We're getting it back up and running again. Then Constellation 402 00:20:25,480 --> 00:20:27,960 Speaker 4: also made that deal with Meta on Monday or Tuesday. 403 00:20:28,200 --> 00:20:30,920 Speaker 4: That is just continuing to expand. It's going to keep 404 00:20:30,920 --> 00:20:34,520 Speaker 4: going with its nuclear reactor, right, but building a new 405 00:20:34,560 --> 00:20:36,360 Speaker 4: one is like a whole different thing. 406 00:20:36,520 --> 00:20:37,719 Speaker 3: How expensive is that? 407 00:20:38,359 --> 00:20:42,240 Speaker 9: Yeah, so we've only built one plant in the last 408 00:20:42,359 --> 00:20:45,760 Speaker 9: thirty years in this country. It was in Georgia. It 409 00:20:45,920 --> 00:20:51,080 Speaker 9: was initially expected to cost under fifteen billion dollars and 410 00:20:51,119 --> 00:20:54,160 Speaker 9: take seven and a half years, and it ended up 411 00:20:54,280 --> 00:21:00,000 Speaker 9: costing over thirty billion dollars to complete and taking about 412 00:21:00,240 --> 00:21:03,040 Speaker 9: as long as expected. And that was the one that 413 00:21:03,119 --> 00:21:04,000 Speaker 9: got through, right. 414 00:21:04,240 --> 00:21:06,760 Speaker 4: Well, but President Trump and what he outlined those executive 415 00:21:06,880 --> 00:21:09,760 Speaker 4: orders is aimed to reduce the time and the money. 416 00:21:09,760 --> 00:21:11,560 Speaker 3: But does it kind of do it that much? 417 00:21:12,359 --> 00:21:16,600 Speaker 9: I mean in theory, In theory it's possible, yes, but 418 00:21:16,920 --> 00:21:19,360 Speaker 9: there's so much we don't know, right, I Mean, our 419 00:21:19,480 --> 00:21:23,200 Speaker 9: expectation would be that, you know, we may not even 420 00:21:23,320 --> 00:21:27,159 Speaker 9: see full sized reactors built at this point, right. Small 421 00:21:27,200 --> 00:21:30,560 Speaker 9: modular reactors, yes, where I want to go are being developed, 422 00:21:32,720 --> 00:21:34,639 Speaker 9: there are, you know, and so these are going to 423 00:21:34,720 --> 00:21:38,480 Speaker 9: be much more they're you know, modular built. They're smaller 424 00:21:38,520 --> 00:21:42,480 Speaker 9: in terms of the unionization. Uh, and so they could 425 00:21:42,560 --> 00:21:46,080 Speaker 9: be built conceivably behind the grid if the regulators can 426 00:21:46,119 --> 00:21:51,720 Speaker 9: get comfortable with the safety aspects. So uh uh it's conceivable. 427 00:21:51,960 --> 00:21:53,760 Speaker 9: But none of those have been built yet, right, So 428 00:21:53,840 --> 00:21:56,120 Speaker 9: a lot of it's still on the come uh and 429 00:21:56,400 --> 00:21:58,840 Speaker 9: a lot of will depend on the uh progress of 430 00:21:58,880 --> 00:22:01,240 Speaker 9: technology goes to the regulators, et cetera. 431 00:22:01,440 --> 00:22:04,040 Speaker 2: Is the technology there, because we've had people come through 432 00:22:04,040 --> 00:22:05,920 Speaker 2: here to kind of apply that it is there. 433 00:22:06,520 --> 00:22:09,800 Speaker 9: It is on paper. You know, there's a have we 434 00:22:09,840 --> 00:22:11,720 Speaker 9: built one of them? We have not built any of 435 00:22:11,760 --> 00:22:14,480 Speaker 9: them in the US. There have been a couple built 436 00:22:14,520 --> 00:22:19,159 Speaker 9: over seas. Only one design has been approved, and that 437 00:22:19,280 --> 00:22:23,760 Speaker 9: is New Scales small modular reactor, and that's basically mimics 438 00:22:24,280 --> 00:22:26,840 Speaker 9: a light water reactor. It's a smaller version of the 439 00:22:26,840 --> 00:22:29,119 Speaker 9: plants that are in service now. Two thirds are the 440 00:22:29,119 --> 00:22:32,119 Speaker 9: ones in service in the US or Westinghouse one third 441 00:22:32,240 --> 00:22:35,320 Speaker 9: give or takeer ge, and those are all light water reactors. 442 00:22:35,640 --> 00:22:37,600 Speaker 9: And then there's a whole other list of companies that 443 00:22:37,640 --> 00:22:42,119 Speaker 9: are building these more innovative technology gas cool reactors, salt 444 00:22:42,160 --> 00:22:45,320 Speaker 9: cool reactors. None of those are in service, right and 445 00:22:45,760 --> 00:22:48,639 Speaker 9: you know, half of those are in the process of 446 00:22:48,640 --> 00:22:51,080 Speaker 9: commercialization in some way, shape or form, but none have 447 00:22:51,119 --> 00:22:51,880 Speaker 9: been built here. 448 00:22:52,240 --> 00:22:57,600 Speaker 4: No, why is nuclear so interesting to hyperscalers Because. 449 00:22:57,359 --> 00:23:00,159 Speaker 9: It's emission's free, and because it runs twenty five or 450 00:23:00,240 --> 00:23:02,480 Speaker 9: by seven, right, And that's the big knock on wind 451 00:23:02,480 --> 00:23:06,000 Speaker 9: and solar, right, And so those two things in and 452 00:23:06,040 --> 00:23:09,119 Speaker 9: of themselves, they need to be twenty four x seven. 453 00:23:09,520 --> 00:23:12,000 Speaker 9: They need to be basedload in order to support data 454 00:23:12,040 --> 00:23:16,080 Speaker 9: center needs number one and number two missions free, you know, 455 00:23:16,160 --> 00:23:19,639 Speaker 9: supports the environmental mandates of the metas, the Googles, the 456 00:23:19,680 --> 00:23:23,720 Speaker 9: Microsoft's of the world. And those are two huge positives 457 00:23:23,720 --> 00:23:27,320 Speaker 9: that can't be ignored. So if indeed we need power 458 00:23:27,359 --> 00:23:29,080 Speaker 9: for a longer period of time than it's taken to 459 00:23:29,160 --> 00:23:33,679 Speaker 9: train these models, and all indications suggest that will be 460 00:23:33,800 --> 00:23:39,239 Speaker 9: the case for inferencing purposes nuclears, positives are really too 461 00:23:39,280 --> 00:23:40,000 Speaker 9: great to ignore. 462 00:23:40,640 --> 00:23:42,919 Speaker 2: But it's expensive. Yes, we're going to pay for this. 463 00:23:43,600 --> 00:23:46,520 Speaker 2: Federal governments can some subsides. Is the President posing that? 464 00:23:47,160 --> 00:23:49,199 Speaker 9: Yeah, they are proposing that. And that's really kind of 465 00:23:49,200 --> 00:23:51,399 Speaker 9: the big unknown right now. How much money are they 466 00:23:51,440 --> 00:23:56,680 Speaker 9: willing to put behind this? When they built the scale VC, sorry, 467 00:23:56,680 --> 00:24:00,840 Speaker 9: the Southern Company plant Vogel and Georgia. If I'm administration 468 00:24:00,920 --> 00:24:03,159 Speaker 9: put eight over eight billion loan guarantees towards that, and 469 00:24:03,240 --> 00:24:06,960 Speaker 9: it ended up costing thirty one to thirty four billion dollars. Yeah, 470 00:24:07,080 --> 00:24:10,359 Speaker 9: and so we're in an age now right where the 471 00:24:10,359 --> 00:24:15,000 Speaker 9: budgets are concerned, and some renewable projects are being canceled, 472 00:24:15,440 --> 00:24:19,200 Speaker 9: others are being allowed to move forward, whether it's hydrogen, 473 00:24:19,280 --> 00:24:22,359 Speaker 9: whether it's carbon capture, et cetera. So you know, Trump's 474 00:24:22,359 --> 00:24:26,960 Speaker 9: saying he loves nuclears is a big positive there. But 475 00:24:27,080 --> 00:24:30,640 Speaker 9: how much money they're willing to put behind specific projects 476 00:24:31,200 --> 00:24:32,320 Speaker 9: is really the key question. 477 00:24:32,520 --> 00:24:34,879 Speaker 4: And that's such an interesting point because therein lies the 478 00:24:34,960 --> 00:24:38,000 Speaker 4: problem with hyperscalers. They're not used to taking on that 479 00:24:38,119 --> 00:24:42,400 Speaker 4: particular kind of risk. Also, they need power yesterday. So 480 00:24:42,440 --> 00:24:44,359 Speaker 4: saying that we can get this to you, let's just 481 00:24:44,400 --> 00:24:46,400 Speaker 4: be generous and say seven, it would say four. 482 00:24:46,560 --> 00:24:48,200 Speaker 3: They need it yesterday. Four is not going to be 483 00:24:48,200 --> 00:24:48,640 Speaker 3: good enough. 484 00:24:48,640 --> 00:24:51,159 Speaker 4: So are they going to actually like help offset the 485 00:24:51,200 --> 00:24:53,480 Speaker 4: cost for something that won't be available to them in 486 00:24:53,520 --> 00:24:56,639 Speaker 4: four years in an industry like tech that changes really fast. 487 00:24:56,880 --> 00:24:58,800 Speaker 9: I mean, they have a look all every hyper scaler 488 00:24:58,840 --> 00:25:01,680 Speaker 9: has made positive comments regarding nuclear. Then it comes down 489 00:25:01,720 --> 00:25:04,600 Speaker 9: to like how much how subsidy is done. Is that exactly? 490 00:25:04,800 --> 00:25:08,280 Speaker 9: And so you know, the reality here is they need 491 00:25:08,280 --> 00:25:10,760 Speaker 9: interim solutions now to support the growth. They also need 492 00:25:10,800 --> 00:25:14,600 Speaker 9: longer term solutions. Nuclear certainly could be a longer term solution. 493 00:25:15,119 --> 00:25:17,760 Speaker 9: But you know, we'll see what the details are. We'll 494 00:25:17,760 --> 00:25:20,560 Speaker 9: see where the government's willing to subsidize a portion of 495 00:25:20,600 --> 00:25:23,480 Speaker 9: those investments. The one thing I can say is utilities 496 00:25:23,480 --> 00:25:25,320 Speaker 9: are probably going to be redis in to put a 497 00:25:25,359 --> 00:25:28,119 Speaker 9: lot of money behind this on their own without that backing, 498 00:25:28,400 --> 00:25:30,280 Speaker 9: given the history of the last three decades. 499 00:25:30,600 --> 00:25:33,320 Speaker 2: Our thanks to Scott Levine Bloomberg Intelligence senior Energy and 500 00:25:33,400 --> 00:25:34,400 Speaker 2: Industrial anast. 501 00:25:34,680 --> 00:25:36,280 Speaker 4: Coming up on the program, we're going to break down 502 00:25:36,280 --> 00:25:38,240 Speaker 4: the state of offshore wind in the US. 503 00:25:38,480 --> 00:25:41,439 Speaker 2: You're listening to Bloomberg Intelligence on Bloomberg Radio, providing in 504 00:25:41,440 --> 00:25:43,520 Speaker 2: depth research and data on two thousand companies and one 505 00:25:43,600 --> 00:25:46,680 Speaker 2: hundred and thirty industries. You can access Bloomberg Intelligence if yeah, 506 00:25:46,720 --> 00:25:47,960 Speaker 2: be I go on the terminal. 507 00:25:48,080 --> 00:25:50,760 Speaker 4: I'm Paul Sweeney and a Malex Steel and this is Bloomberg. 508 00:25:59,040 --> 00:26:02,760 Speaker 1: You're listening to the Bloomberg Intelligence podcast. Catch us live 509 00:26:02,840 --> 00:26:05,920 Speaker 1: weekdays at ten am heasterne on Apple Cocklay and Android 510 00:26:05,920 --> 00:26:09,240 Speaker 1: Auto with the Bloomberg Business App, listen on demand wherever 511 00:26:09,280 --> 00:26:13,080 Speaker 1: you get your podcasts, or watch us live on YouTube. 512 00:26:13,119 --> 00:26:16,000 Speaker 4: This week we focus on higher education in a story 513 00:26:16,080 --> 00:26:19,119 Speaker 4: titled Oil Rich University of Texas Cash is in on AI, 514 00:26:19,160 --> 00:26:21,480 Speaker 4: Crypto and Power. You can find it on Bloomberg dot 515 00:26:21,480 --> 00:26:22,480 Speaker 4: Com and the Terminal. 516 00:26:22,640 --> 00:26:24,960 Speaker 2: This story discusses how the University of Texas System is 517 00:26:25,000 --> 00:26:28,040 Speaker 2: generating cash from new projects on its land from a 518 00:26:28,040 --> 00:26:31,280 Speaker 2: mix of renewable energy, crypto and oil and natural gas 519 00:26:31,280 --> 00:26:32,080 Speaker 2: production from more. 520 00:26:32,080 --> 00:26:35,240 Speaker 4: We are joined by Janet Lauren, Bloomberg Higher Education finance reporter. 521 00:26:35,480 --> 00:26:37,639 Speaker 2: We first asked Janet to explain how the University of 522 00:26:37,640 --> 00:26:40,879 Speaker 2: Texas System is benefiting from AI, crypto and power. 523 00:26:41,320 --> 00:26:45,520 Speaker 10: So, the University of Texas System has lanned two point 524 00:26:45,600 --> 00:26:48,400 Speaker 10: one million acres in the premium basin that the State 525 00:26:48,440 --> 00:26:51,639 Speaker 10: of Texas set aside for higher education in the eighteen 526 00:26:51,720 --> 00:26:55,480 Speaker 10: hundreds when the land was supposed to be worthless. But 527 00:26:55,520 --> 00:26:59,320 Speaker 10: then something happened in nineteen twenty three struck oil and 528 00:26:59,359 --> 00:27:01,920 Speaker 10: for the first hundred years the University of Texas grew 529 00:27:01,920 --> 00:27:06,280 Speaker 10: its endowment with oil and gas, and now in the 530 00:27:06,320 --> 00:27:09,520 Speaker 10: next century they're looking for revenue from above the surface. 531 00:27:10,000 --> 00:27:13,000 Speaker 10: They've had, they've started with a few wind and solar facilities, 532 00:27:13,080 --> 00:27:17,639 Speaker 10: they have a crypto mining center, and they're looking to 533 00:27:17,760 --> 00:27:21,640 Speaker 10: expand to you know, augment their revenue from surface ventures. 534 00:27:22,040 --> 00:27:24,119 Speaker 3: So that's so fascinating to me. 535 00:27:24,200 --> 00:27:26,560 Speaker 4: How quickly are they diversifying, Like how quickly is the 536 00:27:26,600 --> 00:27:30,919 Speaker 4: money moving? And I wonder what policy in DC is 537 00:27:30,960 --> 00:27:34,399 Speaker 4: also sort of filtering down into what the university invests in. 538 00:27:35,240 --> 00:27:39,160 Speaker 10: Well, the university actually isn't really investing in anything. They 539 00:27:39,160 --> 00:27:42,680 Speaker 10: are the landholder, So they're signing lots of leases. 540 00:27:42,560 --> 00:27:44,480 Speaker 4: Sure, but they're like choosing to then maybe sign it 541 00:27:44,560 --> 00:27:46,240 Speaker 4: for one part of energy and not another. 542 00:27:46,320 --> 00:27:47,600 Speaker 3: One might say, well. 543 00:27:47,480 --> 00:27:51,120 Speaker 10: They're they're looking to find new revenue sources. They've had 544 00:27:51,119 --> 00:27:55,320 Speaker 10: a few wind and solar facilities on the land, and 545 00:27:55,520 --> 00:27:59,360 Speaker 10: they just signed a preliminary agreement to lease about two 546 00:27:59,400 --> 00:28:01,600 Speaker 10: hundred thousand acres or ten percent of their land to 547 00:28:01,640 --> 00:28:05,000 Speaker 10: a company called Apex Clean Energy for wind and solar. 548 00:28:05,160 --> 00:28:09,119 Speaker 10: And their customers include companies like Meta and the Army 549 00:28:09,240 --> 00:28:13,520 Speaker 10: and eBay. So and right now these are you know, 550 00:28:13,560 --> 00:28:16,440 Speaker 10: these things take years and years and years to build. 551 00:28:16,600 --> 00:28:19,159 Speaker 10: The wind and solar facilities I saw that are up 552 00:28:19,200 --> 00:28:21,280 Speaker 10: and running for a couple of years. You know, those 553 00:28:21,320 --> 00:28:23,679 Speaker 10: deals were initially signed several years ago, but it just 554 00:28:23,720 --> 00:28:26,879 Speaker 10: takes time. And there's new transmission lines that were just 555 00:28:26,920 --> 00:28:30,639 Speaker 10: approved in Texas in three of them at ten billion 556 00:28:30,680 --> 00:28:36,440 Speaker 10: dollars to move power into the Permian. So these wind 557 00:28:36,480 --> 00:28:39,800 Speaker 10: and solar are producing them and then these lines will 558 00:28:39,800 --> 00:28:40,920 Speaker 10: be able to take them. 559 00:28:41,320 --> 00:28:44,880 Speaker 2: It's you know, Texas is such an interesting, you know 560 00:28:44,920 --> 00:28:46,640 Speaker 2: place in the world for many reasons, one of which 561 00:28:46,680 --> 00:28:48,160 Speaker 2: is me. When I think of Texas, I think a 562 00:28:48,240 --> 00:28:50,920 Speaker 2: big oil you know, the oil rigs and cowboys and 563 00:28:50,920 --> 00:28:52,920 Speaker 2: all that kind of great stuff. But it's also like 564 00:28:53,200 --> 00:28:56,120 Speaker 2: the one of the biggest renewals places. They've got a 565 00:28:56,120 --> 00:28:57,640 Speaker 2: lot of wind, and I got a lot of sun, 566 00:28:57,680 --> 00:29:00,440 Speaker 2: and they got a lot of land. So how does 567 00:29:00,440 --> 00:29:01,920 Speaker 2: Texas kind of bounce those things? 568 00:29:02,000 --> 00:29:05,920 Speaker 10: Well, they need an all all, all in approach. And 569 00:29:06,680 --> 00:29:09,720 Speaker 10: the University of Texas has you know, really grown its endowment. 570 00:29:09,720 --> 00:29:12,200 Speaker 10: It's you know, forty eight billion, you know, coming close 571 00:29:12,240 --> 00:29:15,640 Speaker 10: to Harvard. And I did a story a couple of 572 00:29:15,720 --> 00:29:18,080 Speaker 10: years ago about their record year in oil. You know 573 00:29:18,600 --> 00:29:21,080 Speaker 10: a few years ago they got over two billion dollars 574 00:29:21,120 --> 00:29:22,320 Speaker 10: in oil and gas revenue. 575 00:29:23,680 --> 00:29:27,000 Speaker 4: Yeah, that's amazing and it's just cash into the into 576 00:29:27,040 --> 00:29:32,280 Speaker 4: the endowment. Can other universities replicate the monetization of their 577 00:29:32,360 --> 00:29:35,120 Speaker 4: land in a similar way, Like what what other universities 578 00:29:35,200 --> 00:29:36,000 Speaker 4: have this kind of option? 579 00:29:37,640 --> 00:29:41,280 Speaker 10: Everybody in Texas knows, never sell your mineral rights. But 580 00:29:41,400 --> 00:29:43,800 Speaker 10: you can't really come close to this, I mean rice 581 00:29:44,320 --> 00:29:47,440 Speaker 10: in Texas. They also have revenue coming from oil, you know, 582 00:29:47,480 --> 00:29:50,560 Speaker 10: from land, but nothing even comes close to this University 583 00:29:50,560 --> 00:29:53,920 Speaker 10: of Oklahoma. You know, I did a store several years 584 00:29:53,960 --> 00:29:56,160 Speaker 10: ago about you know, people gift them. 585 00:29:56,120 --> 00:29:57,680 Speaker 3: Land, they keep the mineral rights. 586 00:29:57,880 --> 00:30:01,400 Speaker 10: With fracking, they got you know, huge increases over time. 587 00:30:01,880 --> 00:30:04,240 Speaker 10: But you know, you just can't compare anything to two 588 00:30:04,280 --> 00:30:06,800 Speaker 10: million acres in the Permian basin, so one of the 589 00:30:06,880 --> 00:30:09,760 Speaker 10: they are the one of the largest landholders in Texas. 590 00:30:10,040 --> 00:30:12,000 Speaker 2: Still it's you have a great chart in here that 591 00:30:12,120 --> 00:30:15,680 Speaker 2: just kind of shows the growth of revenue from their 592 00:30:15,680 --> 00:30:18,720 Speaker 2: oil and gas business, which is still the vast majority 593 00:30:18,760 --> 00:30:22,479 Speaker 2: of it. But this surface piece sounds like it can 594 00:30:22,560 --> 00:30:23,680 Speaker 2: be totally incremental. 595 00:30:24,200 --> 00:30:27,240 Speaker 10: Yes, And you know the head of University Lands, which 596 00:30:27,280 --> 00:30:29,800 Speaker 10: is the unit of the University of Texas system that 597 00:30:29,880 --> 00:30:32,480 Speaker 10: runs it. You know, initially he's saying, we're kind of 598 00:30:32,480 --> 00:30:34,800 Speaker 10: looking for a couple of singles here and there test 599 00:30:34,880 --> 00:30:38,040 Speaker 10: the waters, and now they're looking for bigger projects where 600 00:30:38,080 --> 00:30:41,320 Speaker 10: they can have wind and solar power generation, you know, 601 00:30:41,360 --> 00:30:44,560 Speaker 10: on larger swaths of land to generate more money. Now 602 00:30:44,600 --> 00:30:47,720 Speaker 10: keep in mind, under these projects, the wind turbines that 603 00:30:47,760 --> 00:30:50,719 Speaker 10: I saw, they have oil underneath, and you know that 604 00:30:50,800 --> 00:30:53,000 Speaker 10: business is also working, so it's all concurrent. 605 00:30:53,680 --> 00:30:55,520 Speaker 2: All right, You've got I have to ask you this question. 606 00:30:55,560 --> 00:30:58,000 Speaker 2: Als can answer for you. There's a picture here an 607 00:30:58,040 --> 00:31:01,400 Speaker 2: operator flaring excess natural gas at a well at Ute 608 00:31:01,520 --> 00:31:05,880 Speaker 2: Manage Land in Cood, Texas. So there's gas escaping from 609 00:31:05,880 --> 00:31:07,160 Speaker 2: the well and they just kind of let it on 610 00:31:07,200 --> 00:31:08,680 Speaker 2: fire so it doesn't go into the atmosphere. 611 00:31:08,800 --> 00:31:11,440 Speaker 4: Yeah, I mean in theory, they want to capture it economically, 612 00:31:11,440 --> 00:31:13,320 Speaker 4: because if you capture it, you can then use it. 613 00:31:14,040 --> 00:31:16,600 Speaker 4: And also with any sort of environmental restrictions, you got 614 00:31:16,600 --> 00:31:19,920 Speaker 4: to capture it. But those restrictions are changing, let's say. 615 00:31:21,080 --> 00:31:23,480 Speaker 10: And down the road, maybe you can use that natural 616 00:31:23,520 --> 00:31:24,760 Speaker 10: gas to power. 617 00:31:24,480 --> 00:31:26,040 Speaker 4: A data So yeah, it's like you gotta make it 618 00:31:26,080 --> 00:31:27,720 Speaker 4: economic and if you can use it for something else, 619 00:31:27,880 --> 00:31:28,400 Speaker 4: that's where. 620 00:31:28,240 --> 00:31:28,720 Speaker 3: You got it. 621 00:31:28,800 --> 00:31:32,680 Speaker 4: Silly question, What are they using all this money for sports? 622 00:31:32,720 --> 00:31:34,720 Speaker 3: Teams like saying a good question. 623 00:31:35,040 --> 00:31:40,280 Speaker 10: So the money from oil gas goes to basically building things. 624 00:31:40,400 --> 00:31:43,480 Speaker 10: It's not for operations. So if you look at their campus, 625 00:31:44,000 --> 00:31:46,440 Speaker 10: you know, and we described in the story a couple 626 00:31:46,480 --> 00:31:49,920 Speaker 10: of buildings, you know, fifty million dollars for Texas A 627 00:31:49,960 --> 00:31:53,080 Speaker 10: and M's new business school. You know, tens of millions 628 00:31:53,120 --> 00:31:58,120 Speaker 10: of dollars for new hospital facilities. You know, they run 629 00:31:58,160 --> 00:32:01,920 Speaker 10: a bunch of medical schools, different different types of technology 630 00:32:01,920 --> 00:32:05,280 Speaker 10: within those medical schools and those health systems. You know, 631 00:32:05,600 --> 00:32:09,080 Speaker 10: I forget the number of schools between the two systems, 632 00:32:09,120 --> 00:32:11,160 Speaker 10: but it's something like twenty plus, you know, M. D. 633 00:32:11,320 --> 00:32:14,520 Speaker 10: Anderson Cancer Center. Ye, So they build buildings, all right. 634 00:32:14,520 --> 00:32:17,480 Speaker 4: Thanks to Janet Lauren, a Bloomberg Higher Education Finance reporter, 635 00:32:18,000 --> 00:32:20,320 Speaker 4: each week we take a look at research from Bloomberg 636 00:32:20,360 --> 00:32:23,080 Speaker 4: and EF previously known as New Energy Finance. 637 00:32:23,160 --> 00:32:25,320 Speaker 2: They're the team at Bloomberg that tracks and analyzes the 638 00:32:25,440 --> 00:32:29,560 Speaker 2: energy transition from commodities to power, transport, industries, buildings, and 639 00:32:29,640 --> 00:32:30,760 Speaker 2: agricultural sectors. 640 00:32:30,800 --> 00:32:33,720 Speaker 4: This week we looked at BNF's outlook for offshore wind 641 00:32:33,880 --> 00:32:35,960 Speaker 4: for more. We were joined by Oliver Metcalp Bloomberg B 642 00:32:36,000 --> 00:32:37,280 Speaker 4: and EM, head of wind Research. 643 00:32:37,480 --> 00:32:40,200 Speaker 2: We first s Oliver to discuss the state of offshore 644 00:32:40,280 --> 00:32:41,120 Speaker 2: wind in the US. 645 00:32:41,400 --> 00:32:43,400 Speaker 7: Well, offshore wind projects in the US at the moment 646 00:32:43,400 --> 00:32:47,160 Speaker 7: are facing a really, really difficult outlook. It's been tough 647 00:32:47,160 --> 00:32:49,760 Speaker 7: over the last few years. There have been rising costs, 648 00:32:49,880 --> 00:32:53,880 Speaker 7: supply chain bottlenecks that have hit the sector really hard. 649 00:32:54,000 --> 00:32:57,120 Speaker 7: High interest rates for such an expensive technology is also 650 00:32:57,160 --> 00:33:00,320 Speaker 7: something that raises costs a lot. There have been strong 651 00:33:00,360 --> 00:33:04,400 Speaker 7: political headwinds since the since the Trump administration took office. 652 00:33:05,200 --> 00:33:08,360 Speaker 7: So the Trump administration withdrew the permit for that Atlantic 653 00:33:08,400 --> 00:33:11,400 Speaker 7: Shores project. That was a project that had already faced 654 00:33:11,560 --> 00:33:14,000 Speaker 7: those higher costs I was talking about already facing a 655 00:33:14,000 --> 00:33:17,800 Speaker 7: lot of economic difficulties, and the removal of that permit 656 00:33:17,960 --> 00:33:20,720 Speaker 7: was that the final straw that really pushed the developers 657 00:33:20,720 --> 00:33:24,280 Speaker 7: over the edge. The project isn't completely canceled, so SHERL 658 00:33:24,280 --> 00:33:27,640 Speaker 7: and EDF that own that lease area that kind of 659 00:33:27,640 --> 00:33:30,640 Speaker 7: marine area are going to hold onto that lease. There's 660 00:33:30,680 --> 00:33:33,080 Speaker 7: potential that they could develop that in a different form 661 00:33:33,200 --> 00:33:35,680 Speaker 7: in the future if there's a more friendly administration to 662 00:33:35,680 --> 00:33:38,200 Speaker 7: off your wind. But yeah, a bit of a bleak 663 00:33:38,200 --> 00:33:40,160 Speaker 7: out outlook for the sector at the moment. In the US. 664 00:33:40,160 --> 00:33:43,600 Speaker 4: What about projects that already are outshore offshore and are 665 00:33:43,600 --> 00:33:46,240 Speaker 4: already producing. Could those lose their lease and get shut down. 666 00:33:47,000 --> 00:33:49,280 Speaker 7: It's not looking like that at the moment. So the 667 00:33:49,320 --> 00:33:52,520 Speaker 7: Trump administration put a stop work order on a currently 668 00:33:52,600 --> 00:33:56,360 Speaker 7: under construction project that would feed parent to New York 669 00:33:56,480 --> 00:33:59,960 Speaker 7: called Empire Wind that's getting developed by the big Norway 670 00:34:00,080 --> 00:34:05,360 Speaker 7: and oil men called Equinor. That and the Equinor had 671 00:34:05,360 --> 00:34:09,360 Speaker 7: already invested over a couple of billions of dollars in 672 00:34:09,400 --> 00:34:13,480 Speaker 7: that project. Thank thankfully for the sector, the stop work 673 00:34:13,560 --> 00:34:16,200 Speaker 7: order has been lifted. Now that's a good sign for 674 00:34:16,239 --> 00:34:19,840 Speaker 7: the other projects. There are five under construction US offshore 675 00:34:19,880 --> 00:34:23,120 Speaker 7: wind projects at the moment, So the fact that that 676 00:34:23,160 --> 00:34:25,120 Speaker 7: project was allowed to go ahead is a very very 677 00:34:25,120 --> 00:34:28,120 Speaker 7: good single signal for other investors that are building projects 678 00:34:28,200 --> 00:34:31,880 Speaker 7: like AUSTID, like you mentioned, that have projects in the pipeline. 679 00:34:32,680 --> 00:34:36,200 Speaker 7: So those five projects we're expecting to go ahead. All 680 00:34:36,239 --> 00:34:38,560 Speaker 7: the other ones kind of further out in the pipeline, 681 00:34:39,360 --> 00:34:43,520 Speaker 7: federal permitting of projects, federal leasing of new seabed areas 682 00:34:43,520 --> 00:34:47,400 Speaker 7: to build projects, the kind of developer, the development environment 683 00:34:47,440 --> 00:34:50,400 Speaker 7: has has ground to a standstill for those projects that 684 00:34:50,440 --> 00:34:52,200 Speaker 7: are a little bit further out into the pipeline in 685 00:34:52,440 --> 00:34:53,239 Speaker 7: US off your wind. 686 00:34:53,520 --> 00:34:55,839 Speaker 2: What's the rest of the world doing with offshore winning 687 00:34:55,880 --> 00:34:56,600 Speaker 2: these days? 688 00:34:57,400 --> 00:34:59,479 Speaker 7: Well, some of those effects that I was talking about 689 00:34:59,480 --> 00:35:01,720 Speaker 7: that have hit the U have hit other markets around 690 00:35:01,719 --> 00:35:05,080 Speaker 7: the world. So costs have risen globally, there have been 691 00:35:05,120 --> 00:35:07,480 Speaker 7: supply chain constraints, there have been high interest rates. That's 692 00:35:07,560 --> 00:35:10,680 Speaker 7: kind of a global story. But we're seeing a lot 693 00:35:10,719 --> 00:35:13,680 Speaker 7: of growth despite that around the world for offshore wind, 694 00:35:14,320 --> 00:35:18,400 Speaker 7: particularly European countries in the North Sea are building mega projects. 695 00:35:18,520 --> 00:35:22,520 Speaker 7: We're expecting the largest project in the world to start 696 00:35:23,080 --> 00:35:26,200 Speaker 7: to start commissioning their turbines next year, a project called 697 00:35:26,200 --> 00:35:28,960 Speaker 7: Doggerbank off the coast of the UK. And then we're 698 00:35:29,000 --> 00:35:31,600 Speaker 7: just beginning to see markets in Asia start to pick up. 699 00:35:31,640 --> 00:35:34,720 Speaker 7: So we're beginning to see the globalization of the offshore 700 00:35:34,719 --> 00:35:39,040 Speaker 7: wind industry. So that's markets like Taiwan, Japan, South Korea 701 00:35:39,440 --> 00:35:42,640 Speaker 7: starting to install their first commercial scale projects, and over 702 00:35:42,680 --> 00:35:45,800 Speaker 7: the next few years we're expecting them to start installing 703 00:35:45,880 --> 00:35:48,480 Speaker 7: kind of industrial sized projects that we're already seeing in 704 00:35:48,560 --> 00:35:49,040 Speaker 7: the North Sea. 705 00:35:49,160 --> 00:35:50,839 Speaker 4: You mentioned this earlier, but a couple of things that 706 00:35:50,880 --> 00:35:53,080 Speaker 4: sort of went wrong for offshore wind before the political 707 00:35:53,160 --> 00:35:57,160 Speaker 4: environment shifted was interest rates and also supply chain issues. 708 00:35:57,200 --> 00:35:58,640 Speaker 4: So a lot of at least of the way it 709 00:35:58,680 --> 00:36:00,840 Speaker 4: was described to me by some of the players, is 710 00:36:00,840 --> 00:36:02,600 Speaker 4: that they took on a lot of the commodity and 711 00:36:02,600 --> 00:36:06,319 Speaker 4: supply chain risk and they didn't properly share that with say, 712 00:36:06,400 --> 00:36:09,640 Speaker 4: customers and other developers, and that that really hurt them 713 00:36:09,800 --> 00:36:15,600 Speaker 4: during COVID. Have those two issues, though, sorted themselves out globally. 714 00:36:15,400 --> 00:36:18,840 Speaker 7: So there's a couple of different ways that those issues 715 00:36:18,840 --> 00:36:23,040 Speaker 7: are slowly starting to resolve themselves. So firstly, suppliers are 716 00:36:23,160 --> 00:36:26,160 Speaker 7: pushing to share a bit more of that risk when 717 00:36:26,160 --> 00:36:30,080 Speaker 7: they're signing contracts, so things like linking contract price, your 718 00:36:30,120 --> 00:36:35,200 Speaker 7: final contract price the customer pays to a steel price 719 00:36:35,239 --> 00:36:38,680 Speaker 7: index or a copper price index, for example, to partially 720 00:36:38,960 --> 00:36:43,320 Speaker 7: protect you from these commodity price movements. Another way that 721 00:36:43,400 --> 00:36:47,440 Speaker 7: government's reacting to this kind of thing is linking the 722 00:36:47,480 --> 00:36:50,600 Speaker 7: price of the subsidy you get paid too similar indexes, 723 00:36:50,640 --> 00:36:53,560 Speaker 7: So linking the price of subsidies to the consumer price 724 00:36:53,600 --> 00:36:57,000 Speaker 7: index to protect a developer against kind of some of 725 00:36:57,040 --> 00:37:01,000 Speaker 7: those inflationary impacts. Same goes for commodity prices. So there's 726 00:37:01,000 --> 00:37:03,880 Speaker 7: a bit a bit of a resolution on the policy side, 727 00:37:03,960 --> 00:37:05,760 Speaker 7: and then also a bit of a push from supply 728 00:37:05,840 --> 00:37:08,600 Speaker 7: chain contracts to protect themselves in some of the deals 729 00:37:08,640 --> 00:37:09,200 Speaker 7: they're signing. 730 00:37:10,200 --> 00:37:16,239 Speaker 2: What's the profitability of land based wind farms versus offshore. 731 00:37:17,640 --> 00:37:21,560 Speaker 7: It really depends in the market you're looking at. Typically, 732 00:37:21,680 --> 00:37:24,600 Speaker 7: the kind of required returns for an investor on an 733 00:37:24,640 --> 00:37:27,640 Speaker 7: onshore wind farm is lower than an offshore wind farm, 734 00:37:27,920 --> 00:37:31,759 Speaker 7: where we're kind of more looking kind of nine plus 735 00:37:32,239 --> 00:37:36,800 Speaker 7: internal rates of return on a project. Partially that's because 736 00:37:36,840 --> 00:37:39,799 Speaker 7: the perceived risks of building something on shore are lower 737 00:37:39,840 --> 00:37:42,000 Speaker 7: than building something offshore. Every time you need to fix 738 00:37:42,000 --> 00:37:45,000 Speaker 7: a turbine, kind of the whole construction process is just 739 00:37:45,040 --> 00:37:47,040 Speaker 7: much more difficult when you're doing it on water versus 740 00:37:47,080 --> 00:37:51,440 Speaker 7: when you're doing it just on land. And also on 741 00:37:51,520 --> 00:37:54,319 Speaker 7: shore wind projects have been operating, we've been building them 742 00:37:54,360 --> 00:37:57,240 Speaker 7: for a lot longer, and so just the perceived risks 743 00:37:57,560 --> 00:38:01,040 Speaker 7: and how we understand those risks, it's much further along 744 00:38:01,080 --> 00:38:03,600 Speaker 7: for on shore wind firms than on show wind firms. 745 00:38:03,800 --> 00:38:04,040 Speaker 7: All right. 746 00:38:04,040 --> 00:38:06,200 Speaker 4: Thanks to Oliver met Kaploomberg b A, the app head 747 00:38:06,280 --> 00:38:07,080 Speaker 4: of Wind Research. 748 00:38:07,560 --> 00:38:12,239 Speaker 1: This is the Bloomberg Intelligence podcast, available on Apple, Spotify, 749 00:38:12,400 --> 00:38:16,400 Speaker 1: and anywhere else you get your podcasts. Listen live each weekday, 750 00:38:16,600 --> 00:38:19,880 Speaker 1: ten am to noon Eastern on Bloomberg dot Com, the 751 00:38:19,960 --> 00:38:23,840 Speaker 1: iHeartRadio app, tune In, and the Bloomberg Business app. You 752 00:38:23,880 --> 00:38:27,160 Speaker 1: can also watch us live every weekday on YouTube and 753 00:38:27,360 --> 00:38:29,320 Speaker 1: always on the Bloomberg terminal