WEBVTT - Nike’s Comeback Is Taking Shape as Sports Focus Pays Off 

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<v Speaker 1>Bloomberg Audio Studios, podcasts, radio news. You're listening to the

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<v Speaker 2>Thank you reporting.

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<v Speaker 3>It's the numbers a better expect The number socks up

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<v Speaker 3>almost five percent, although it's still down about three percent

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<v Speaker 3>a year to date, but maybe a little bit of

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<v Speaker 3>turnaround there working through the inventory is Some smart folks

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<v Speaker 3>have told me about the niket you story. One of

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<v Speaker 3>those is Punam Goyle. She's a senior US e commerce

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<v Speaker 3>and retail analysts for Bloomberg Intelligence. Put them, is the

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<v Speaker 3>turnaround at Nike?

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<v Speaker 2>Is it kind of turning? Is it working?

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<v Speaker 4>It's working. I think yesterday was the first sign that

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<v Speaker 4>Nike is able to pick up momentum. Sales on a

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<v Speaker 4>reported basis, we're up a one percent. Inventories we're down

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<v Speaker 4>two percent. This is exactly what we wanted to see.

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<v Speaker 4>We wanted to see inventories aligned with sales. So while

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<v Speaker 4>the work isn't done and it's not over and it's

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<v Speaker 4>not a straight lineup, we do see momentum building. What

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<v Speaker 4>they're doing is working. The new products, the innovation, the

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<v Speaker 4>focus on wholesale, it's all coming together. There are still

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<v Speaker 4>some pitfalls. China is still sluggish, and we'll need to

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<v Speaker 4>wait and see what happens there as well as with

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<v Speaker 4>its Converse brand.

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<v Speaker 5>Okay, so China's definitely an issue. Converse is work in progress.

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<v Speaker 5>When I look at the revenue line, the top line,

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<v Speaker 5>what I see is direct revenue fell four percent, wholesale

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<v Speaker 5>revenue rose seven percent. Just break that down for us

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<v Speaker 5>in terms of what that means direct revenue versus wholesale revenue.

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<v Speaker 4>Sure, so direct revenue composers of stores which were actually

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<v Speaker 4>up one percent. So that shows us that the innovation

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<v Speaker 4>and the new products which are flowing through their own

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<v Speaker 4>stores is working. What made the DTC revenue go down

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<v Speaker 4>four percent was that digital was down twelve percent. No

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<v Speaker 4>surprise here. This is where they're clearing all that excess inventory.

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<v Speaker 4>So this channel will be pressured for a couple of quarters. Still,

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<v Speaker 4>wholesale up seven percent a great, great number. I mean,

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<v Speaker 4>it just shows that coming back into partnerships with foult

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<v Speaker 4>Locker in a more meaningful way, getting on Amazon dot

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<v Speaker 4>Com all these efforts are paying off, and they're where

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<v Speaker 4>the customer is. They're gaining their shelf space back and

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<v Speaker 4>the customers are responding favorably.

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<v Speaker 3>You know that Nike brand is such a powerful and

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<v Speaker 3>powerful brand.

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<v Speaker 2>I think of it like Coca Cola or Apple. It's

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<v Speaker 2>so powerful.

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<v Speaker 3>Yet some of those American brands in China under pressure,

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<v Speaker 3>and I'm wondering, just with the geopolitics, is Nike a

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<v Speaker 3>brand where that might be feeling some anti American sentiment

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<v Speaker 3>from consumers.

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<v Speaker 4>So that has happened in the past, there have been

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<v Speaker 4>boycotts against US American brands. We don't think that's the

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<v Speaker 4>issue yet from what we're hearing, but we do think

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<v Speaker 4>that the issue is more product at Nike in China,

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<v Speaker 4>so they do need to ramp a product and they

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<v Speaker 4>do have a lot of access inventory there, more so

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<v Speaker 4>than they do in the US today. So that's also

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<v Speaker 4>a work in progress that they need to get through.

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<v Speaker 2>Let's talk about profitability.

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<v Speaker 5>Margins declined due to higher discounts and then also the

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<v Speaker 5>higher tariffs in North America. I look at gross margin

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<v Speaker 5>forty two point two percent last year. At this time

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<v Speaker 5>it was more than forty five percent. Now the forty

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<v Speaker 5>two point two percent was better than estimated. How long

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<v Speaker 5>is it going to take for Nike to turn that around.

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<v Speaker 4>I think we have quite some time to get back

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<v Speaker 4>up to historical margins. In fact, you know, on the

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<v Speaker 4>call yesterday they said that they do still aspire to

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<v Speaker 4>reach double digit EBIT margin. EBIT margins in the quarter

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<v Speaker 4>that they just reported was only at seven point one percent,

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<v Speaker 4>So that's a long runway. We don't think it's any

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<v Speaker 4>time soon. And the hit from tariffs is building, not reducing.

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<v Speaker 4>They had expected a billion dollars the last time they

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<v Speaker 4>spoke to us, and yesterday that one to one point

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<v Speaker 4>five billion dollars and access costs from tariffs.

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<v Speaker 3>How much are they passing along to the retailer versus

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<v Speaker 3>taking that in their margin, Because I mean, Nike is

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<v Speaker 3>probably just a great example of how compans are trying

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<v Speaker 3>to deal.

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<v Speaker 2>With the tariffs.

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<v Speaker 4>Yes, I think they're doing this actually very smartly. They're

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<v Speaker 4>not increasing prices on products that are under one hundred dollars,

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<v Speaker 4>but they are taking prices up on sneakers that are

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<v Speaker 4>above that price point. So if you think about moving

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<v Speaker 4>prices up, it's very easy to say the price of

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<v Speaker 4>milk went up from three dollars to three point fifty.

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<v Speaker 4>But when you're looking at a pair of sneakers, especially

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<v Speaker 4>a new launch, you have no comparison, So you can

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<v Speaker 4>go ahead and price up your new innovation and the

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<v Speaker 4>customer may not even recognize that there was a material

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<v Speaker 4>price increase, and that customer has a little bit more

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<v Speaker 4>flexibility to stretch their wallet's at that price point.

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<v Speaker 5>Punam, if you are heading up on Holdings or Adidas

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<v Speaker 5>or Sketchers or you know, any of the Hoka what

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<v Speaker 5>would you be thinking looking at this set of results.

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<v Speaker 4>So Sketchers, I think is in a different league than Nike.

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<v Speaker 4>It's it's a little bit different. It's a value play,

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<v Speaker 4>and I think they don't compete directly like an Adidas

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<v Speaker 4>or an On or a Hokah would with them. Adidas

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<v Speaker 4>is doing really well on its franchise lifestyle shoes, and

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<v Speaker 4>I think Nike, what you heard yesterday, was doing well

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<v Speaker 4>in performance. So two still very distinct categories. Though for

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<v Speaker 4>On and hok I think it's a little bit of

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<v Speaker 4>a different story because what I heard from that call

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<v Speaker 4>yesterday was that running was back on. It's doing phenomenally well,

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<v Speaker 4>and that is where hogaying on both took share from Nike,

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<v Speaker 4>so I would be just, you know, a little concerned

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<v Speaker 4>and just make sure that I keep my game on

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<v Speaker 4>when it comes to innovation, because at the end of

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<v Speaker 4>the day, product is what's going to drive how sales.

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<v Speaker 4>Moment we'll go moving forward.

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<v Speaker 2>Stay with us. More from Bloomberg Intelligence coming up after this.

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<v Speaker 1>You're listening to the Bloomberg Intelligence podcast. Catch us live

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<v Speaker 3>Another IPO priced here Neptune Flood Insurance NP is the

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<v Speaker 3>ticker and joining us from.

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<v Speaker 2>The New York stock Et chains forst Trevor Burgess. He's

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<v Speaker 2>the CEO.

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<v Speaker 3>Trevor, thanks so much for joining us, your congratulations on

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<v Speaker 3>the ipo is a price at twenty dollars.

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<v Speaker 2>I'm looking at the Bloomberg terminal now. Weve got a

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<v Speaker 2>bid of.

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<v Speaker 3>Twenty two and a half in the ask of twenty

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<v Speaker 3>two and three quarters, so maybe they'll finally get this

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<v Speaker 3>thing opened. If I were running your deal, Trevor, I

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<v Speaker 3>would have had this open at ten thirty. No later, Trevor,

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<v Speaker 3>talk to us about your business model flood insurance. You

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<v Speaker 3>guys have exposure to Florida. Nobody provides insurance in Florida.

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<v Speaker 3>What's your business model?

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<v Speaker 6>Yeah, So Neptune is an artificial intelligence company that does

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<v Speaker 6>a really good job at underwriting flood risk for global

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<v Speaker 6>insurance and reinsurance company. So we don't actually take the risk.

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<v Speaker 6>We build technology that does a really good job at

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<v Speaker 6>analyzing that risk and making sure it's some thing that

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<v Speaker 6>the global insurance markets want to take on. Which makes

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<v Speaker 6>us the largest competitor to the National Flood Insurance Program,

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<v Speaker 6>which is the federal government's program, which was the only

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<v Speaker 6>way to buy flood insurance for a long time until

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<v Speaker 6>Neptune came along. Happens to be that the government's closed today.

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<v Speaker 6>So Neptune is the only game in town right now,

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<v Speaker 6>which is exciting for us, obviously, because we want to

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<v Speaker 6>help those thirteen hundred consumers who are trying to buy

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<v Speaker 6>their house today and who need flood insurance.

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<v Speaker 7>We're the solution.

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<v Speaker 2>So, Trevor, let me ask you.

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<v Speaker 5>There's been a lot of complaints about the federal flood

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<v Speaker 5>insurance program.

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<v Speaker 2>What is broken with it?

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<v Speaker 5>Why is it something that people are not on board

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<v Speaker 5>with or people can't get when they need.

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<v Speaker 7>Well.

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<v Speaker 6>There are a couple of ways to look at the

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<v Speaker 6>NFIPECE problems, but the biggest one is that they've lost

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<v Speaker 6>nearly forty billion dollars in their history. They're paying millions

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<v Speaker 6>of dollars a day in debt payments to the US Treasury.

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<v Speaker 6>So it's just an unsustainable program and it doesn't offer

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<v Speaker 6>a product that consumers want. They only go up to

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<v Speaker 6>two hundred and fifty thousand dollars of coverage on your house.

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<v Speaker 6>Neptune offers up to seven million.

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<v Speaker 7>Dollars of coverage. We'll also cover.

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<v Speaker 6>Your Airbnb or your hotel if you're flooded out of

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<v Speaker 6>your room. If you are with the NFIP, you're just

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<v Speaker 6>out of luck. If you have a flooding, there's no

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<v Speaker 6>money for that hotel.

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<v Speaker 3>So who are your clients, Trevor. Are they the insurance

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<v Speaker 3>companies and reinsurans themselves.

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<v Speaker 7>We get to have two clients.

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<v Speaker 6>We serve those global insurans and reinsurans who are looking

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<v Speaker 6>to put money to work in the flood insurance space.

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<v Speaker 6>And importantly, our customer is the American homeowner and business owner.

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<v Speaker 6>We provide residential and commercial policies to protect your home.

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<v Speaker 6>We compete with the NFIP every day that they're open.

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<v Speaker 6>Today they happen to be closed fair enough.

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<v Speaker 5>Fair enough in terms of which states are most affected,

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<v Speaker 5>Paul mentioned obviously Flora, But is there, I mean, floods.

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<v Speaker 2>Seem to happen.

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<v Speaker 5>Yes, flood seemed to happen to every state, including those

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<v Speaker 5>that are inland. Is there any area in the country

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<v Speaker 5>that is more relatively shielded from flood risk?

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<v Speaker 6>Not really. If it can rain where you live, then

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<v Speaker 6>it can flood. And we saw that in the month

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<v Speaker 6>of July. They were major floods in twenty three states

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<v Speaker 6>in this nation. That means that everyone is really at

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<v Speaker 6>risk and needs to have flood insurance. But unfortunately, because

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<v Speaker 6>of the government's program, only four percent of Americans have

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<v Speaker 6>coverage today. Neptune is trying to change that. We want

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<v Speaker 6>to get many, many more Americans protected from this most

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<v Speaker 6>dangerous peril. You've seen these hurricanes when they hit, the

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<v Speaker 6>tragic flooding that took place in North Carolina and in

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<v Speaker 6>Texas recently. Neptune is here to make sure all of

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<v Speaker 6>those homes are protected.

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<v Speaker 2>Trevor is flooding.

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<v Speaker 3>Is that a risk that is going up in frequency

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<v Speaker 3>and in damage? And if so, why is it happen.

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<v Speaker 7>It's happening.

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<v Speaker 6>The answer is yes, and it's happening because the climate

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<v Speaker 6>is changing. It's undeniable that the sea level in Key West,

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<v Speaker 6>Florida is nearly a foot higher than when I was born.

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<v Speaker 6>The temperature in the Gulf and in the Atlantic is

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<v Speaker 6>warmer than it was ten years ago. That added heat

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<v Speaker 6>is energy, and that leads to more frequent and severe storms.

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<v Speaker 3>So what's the growth story for Neptune? Is it more markets?

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<v Speaker 3>Is it more policies? Is you driving rates higher? How

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<v Speaker 3>are you guys pulling those lovers growth?

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<v Speaker 6>The growth story for Neptune is helping educate the American

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<v Speaker 6>consumer that their homeowner's policy does not cover the risk

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<v Speaker 6>of flooding and that they need to buy a separate

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<v Speaker 6>policy to protect.

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<v Speaker 7>Their most valuable asset.

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<v Speaker 6>If we can just help educate people on that fact,

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<v Speaker 6>Neptune's going to do a great job at growing.

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<v Speaker 5>We should mention that Neptune is going public after a

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<v Speaker 5>bunch of specialty insurance companies have gone public this year,

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<v Speaker 5>Accelerant Holdings, Aspen Insurance, American integrity insurance, slide insurance. What

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<v Speaker 5>do you think it is about the current environment that

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<v Speaker 5>makes it so welcoming for insurance companies to tap the

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<v Speaker 5>public market.

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<v Speaker 6>It's nice to have the market open, and it's nice

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<v Speaker 6>that pricing and insurance makes sense. We want to make

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<v Speaker 6>sure that that consumer is finding value, that the agent

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<v Speaker 6>is doing well, that Neptune's making money, and it's sustainable

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<v Speaker 6>for the global.

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<v Speaker 7>Insurance and reinsurance community.

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<v Speaker 6>I think we have some good equilibrium in the industry

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<v Speaker 6>right now, and that's why you're seeing so many companies

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<v Speaker 6>come to market.

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<v Speaker 2>Stay with us. More from Bloomberg Intelligence coming up after this.

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<v Speaker 3>Again, we've been talking a lot about AISO is everybody

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<v Speaker 3>in the marketplace really for the last two or three years,

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<v Speaker 3>and now you've been looking for derivative plays, and a

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<v Speaker 3>lot of the deliverative plays have focused on who's going

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<v Speaker 3>to power all these data centers, and that focuses on

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<v Speaker 3>energy fossil fuel, energy, new energy, and even including nuclear energy.

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<v Speaker 3>So everything seems to be on the table as these

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<v Speaker 3>data center providers think about how they're actually going to

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<v Speaker 3>power this stuff going forward.

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<v Speaker 2>Scott Levine joined us.

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<v Speaker 3>He looks at the energy business for Bloomberg Intelligence. He

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<v Speaker 3>put together a global team and put out a huge

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<v Speaker 3>report here, and a really good report on nuclear power

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<v Speaker 3>twenty twenty six outlook. He's saying, AI driven power demand

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<v Speaker 3>set to spark three hundred and fifty billion dollar build cycle.

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<v Speaker 2>Scott to thanks so much for joining us here. I

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<v Speaker 2>love the big round numbers here.

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<v Speaker 3>Talk to us about from an energy perspective, what the

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<v Speaker 3>industry's doing to kind of prepare for what seems to

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<v Speaker 3>be this insatiable demand for power.

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<v Speaker 8>Yeah, so nuclear has two very big positives going for it.

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<v Speaker 8>Number One, it's a emissions free power source, and the

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<v Speaker 8>hyperscillers that are really behind the investments care about that deeply, right,

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<v Speaker 8>and so they've favored you know, more renewable sources here too.

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<v Speaker 8>Four like wind and solar. But what those lack are

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<v Speaker 8>you know, twenty four by seven base load characteristics and

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<v Speaker 8>for a data center to be up twenty four to

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<v Speaker 8>seven that's not going to do it right. So nuclear

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<v Speaker 8>checks both of those boxes, and those are two very

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<v Speaker 8>big positives and the reasons that you're seeing folks like

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<v Speaker 8>Microsoft and Meta come out in favor of nuclear power.

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<v Speaker 2>And yeah, so what's.

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<v Speaker 3>The how much does nuclear provide today in the US

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<v Speaker 3>versus where you think it might be in twenty five years.

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<v Speaker 8>Yeah, so today it's a little bit below twenty percent

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<v Speaker 8>of the grid, OK, which we're saying we'll return to

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<v Speaker 8>about in our you know, base case scenario twenty percent

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<v Speaker 8>of the grid by twenty fifty. That may not seem

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<v Speaker 8>like much two percentage points, right, but it you know,

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<v Speaker 8>will equate to or amount to a three hundred and

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<v Speaker 8>fifty billion dollar investment to get there.

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<v Speaker 7>So those are big numbers.

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<v Speaker 8>And in addition that we're talking about adding sixty some

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<v Speaker 8>odd gigawatts to the grid, and you can think about

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<v Speaker 8>each full sized nuke being one gigawatts. That's basically building

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<v Speaker 8>sixty generating units as our base case.

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<v Speaker 2>So those are big numbers to get.

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<v Speaker 8>You from eighteen to twenty percent over a twenty five

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<v Speaker 8>period of time.

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<v Speaker 3>I tell you, I went in this report that you

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<v Speaker 3>and your team put together. Section five, small modular reactors.

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<v Speaker 3>That's where I wanted to go to because I had

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<v Speaker 3>think we've had some people come into the studio over

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<v Speaker 3>the last few years and just talk to us about

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<v Speaker 3>the science and engineering and the possibilities of these small

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<v Speaker 3>modular reactors.

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<v Speaker 2>Tell us what they are and what role they could

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<v Speaker 2>play going forward.

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<v Speaker 8>Yeah, so really these are and none of these have

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<v Speaker 8>been built in the US yet, right, So this is

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<v Speaker 8>very much an emerging technology play. But basically you're talking

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<v Speaker 8>about is taking a full sized nuke. You're driving on

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<v Speaker 8>the highway, you see a big coolin tower, a bunch

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<v Speaker 8>of smoke coming out the top of it. These are

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<v Speaker 8>much much smaller, right, and so the idea here would

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<v Speaker 8>be that these are much more flexible, and so if

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<v Speaker 8>you have more disparate data centers located throughout the country,

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<v Speaker 8>you can power these ostensibly with these smaller units.

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<v Speaker 7>Right.

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<v Speaker 8>And we're talking about you know, some of these are

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<v Speaker 8>smaller versions of what's already in operation today, which is

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<v Speaker 8>a light water reactor. And then some of these types

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<v Speaker 8>of units are different types of technologies. You have gas

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<v Speaker 8>cooled reactors as opposed to water.

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<v Speaker 7>You have molten.

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<v Speaker 8>Salt cooled reactors as opposed to water, and these use

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<v Speaker 8>different types of technologies, different types of fuels still remain

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<v Speaker 8>to be licensed improven, So a lot of it's are

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<v Speaker 8>very much on the com But the technology in each

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<v Speaker 8>of those areas holds promise, so we'll see and each

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<v Speaker 8>of them has pros and cons right, and so we'll

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<v Speaker 8>see over the next five years the technology shakeout and

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<v Speaker 8>see which ones end up being at the top of

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<v Speaker 8>the stack for the US. But each of them have

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<v Speaker 8>a lot of money behind them and a lot of

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<v Speaker 8>support from a lot of depocketed players.

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<v Speaker 3>Talk to us about this Trump administration, what is its

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<v Speaker 3>view on nuclear fuel as an option?

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<v Speaker 8>Okay, so firstly, very positive. They came out with a

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<v Speaker 8>bunch of executive orders in May where they have clear support.

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<v Speaker 8>They're trying to streamline the licensing process, so these things.

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<v Speaker 8>They basically want to see ten reactors in construction by.

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<v Speaker 2>Twenty thirty Okay, so.

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<v Speaker 8>Yeah, and that's five years from now. It seems like

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<v Speaker 8>a long time, but in nuclear world where it takes

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<v Speaker 8>ten even fifteen years to build a reactor, which is

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<v Speaker 8>what it took to build the only reactor that's been

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<v Speaker 8>built in the US in the last thirty years took

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<v Speaker 8>fifteen years to build. That is not that long a

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<v Speaker 8>period of time.

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