Speaker 1: Okay, so the Dull Men's Club. I first stumbled on
Speaker 1: it on YouTube or something years ago. But it's a
Speaker 1: club that quote celebrates the ordinary, like I recall seeing
Speaker 1: something about a post box appreciation society, or one guy
Speaker 1: who collected soda bottles, or another member who was really
Speaker 1: interested in those brown tourist site signs you see along
Speaker 1: the highway. Calendar items featured on the website include National
Speaker 1: Punctuation Day or the annual Dullis Airport plane pole asking
Speaker 1: were you there? Or the World Stone Skimming Championship. Okay,
Speaker 1: those last two sound pretty cool. Today we'll be talking
Speaker 1: with Nat Bullard about a piece he wrote with Liam
Speaker 1: Denning for Bloomberg Opinion called energy stocks are now duller
Speaker 1: than utilities. It opens with quote, utilities are, by design
Speaker 1: a bit of a snooze. We feel no excitement of
Speaker 1: the miracle of instantaneous light, television and coffee grinding, expecting
Speaker 1: those things simply to happen when we want them to,
Speaker 1: which virtually all the time they do. Reading this, I
Speaker 1: thought for sure there would be a Dull Men's Club,
Speaker 1: appreciation society, or electrical things that worked as expected. I checked,
Speaker 1: there's not listening back to this interview. I kept pressing that,
Speaker 1: trying to get him to say energy or oil stocks
Speaker 1: are duller than utilities because utilities are doing all kinds
Speaker 1: of cool, new exciting things leading to really exciting growth stories.
Speaker 1: But no, he held his ground, wouldn't go there. Turns
Speaker 1: out it seems utilities are just the less dull of
Speaker 1: the two. So maybe we have a candidate for the
Speaker 1: Dolmen's Club. I don't know. The interview itself is actually
Speaker 1: quite interesting, so stay with us. We'll also discuss a
Speaker 1: piece called big Energy Companies see Cole's Last Stand that
Speaker 1: he wrote with David Fickling, also for Bloomberg Opinion. We'll
Speaker 1: talk about the future of coal and where and why
Speaker 1: it still make makes sense or not and we mentioned
Speaker 1: it last time. But Not is global head of executive
Speaker 1: Insights for BANF. He wears many hats for beanof one
Speaker 1: of which is writing a weekly op ed called spark Lines,
Speaker 1: published do Bloomberg Opinion. You can find them on terminal
Speaker 1: under Ni Bullard or on Bloomberg dot Com under spark Lines.
Speaker 1: In either location you can sign up for a weekly distribution.
Speaker 1: And as always, BENIF does not provide investment or strategy
Speaker 1: advice and you can hear the full disclaimer at the
Speaker 1: end of the show. Him Mark Taylor here with Dana Perkins,
Speaker 1: and you're listening to switch On the benf podcast. NAT.
Speaker 1: Welcome back to Switched On. Thanks for having me, folks,
Speaker 1: it's going to be back. So this first one we're
Speaker 1: going to talk about today actually has the word dull
Speaker 1: in the title that it actually was one of your
Speaker 1: best read pieces and I actually really got quite interested
Speaker 1: in it. Tell me why it was one of your
Speaker 1: best red pieces. What happened there? So what I wrote about,
Speaker 1: and I'll give you the exact title is energy stocks
Speaker 1: are now dumber than utilities. Wah wah wah. I know
Speaker 1: that from many of you out there in radio man,
Speaker 1: that doesn't sound that interesting. However, within the financial community,
Speaker 1: and when you consider the scale of these two industries
Speaker 1: that we're talking about, like two of the biggest on
Speaker 1: earth in terms of stock market capitalization, in terms of
Speaker 1: fixed and long term assets, in terms of cash flow, everything,
Speaker 1: there's quite a bit of implication in the financial market
Speaker 1: for what is, to be honest, that's sort of dry
Speaker 1: sounding thing, which is there is a dividend yield paid
Speaker 1: out by oil and gas companies, there's a dividend yield
Speaker 1: paid out by utilities. Historically, utilities have had a relatively
Speaker 1: high it end and relatively lower growth compared to oil
Speaker 1: and gas. Oil and gas companies have had a relatively
Speaker 1: no dividend and relatively high growth in equity prices and valuations.
Speaker 1: And what we've seen in the last four months is
Speaker 1: that that has switched and now utilities are actually paying
Speaker 1: out less in dividend than oil and gas companies are paying.
Speaker 1: And what that means for those of you out there
Speaker 1: in radio land is that you can think about this.
Speaker 1: A company can reward its shareholders in two ways. It
Speaker 1: can either reward them with a stock price that is
Speaker 1: going up all the time, so you're benefiting from growth.
Speaker 1: Or you can reward shareholders for holding your stock by
Speaker 1: paying them a fixed amount of cash based on the
Speaker 1: share price. That would be a dividend. And historically utilities
Speaker 1: are said, well, you know, we're very very stable, we
Speaker 1: have a very predictable market. We're going to give you
Speaker 1: a lot of cash, one in the form of dividends
Speaker 1: as a way of saying thank you for owning our stock.
Speaker 1: And oil and gas companies have saying, goin, we need
Speaker 1: money to invest, so we're not going to pay you
Speaker 1: a lot of cash. We're going to then return an
Speaker 1: advantage to you in terms of an increasing stock price.
Speaker 1: And that's the way that you're going to benefit from
Speaker 1: owning a share in x y Z company. Now, when
Speaker 1: those things shift, it's a really really big deal. When
Speaker 1: a company makes a decision that it needs to start
Speaker 1: paying out more in a dividend, it implies all kinds
Speaker 1: of things. One is you need to reward shareholders for
Speaker 1: holding onto you more, so they in order to do that,
Speaker 1: you pay them more money. But within that, there's also
Speaker 1: a question about the nature of your future growth prospects.
Speaker 1: It's saying, maybe there's less of an option to have
Speaker 1: a high amount of growth in the share price, and
Speaker 1: if people want to hold onto this equity, we need
Speaker 1: to give them a reason, and the reason is give
Speaker 1: them more money in cash. And you're seeing this industry
Speaker 1: wide for the energy stocks, that's right. So what I
Speaker 1: did is I took the S and P five hundred,
Speaker 1: which has within its sub indicase one for utilities, one
Speaker 1: for what they confusingly call energy that's actually oil and gas.
Speaker 1: Yet sorry, everybody, out there, SMB energy is actually oil
Speaker 1: and gas, it's not energy, and you can just very
Speaker 1: easily pull the dividend yield on those for it's going
Speaker 1: as far back as you want. In this case, I
Speaker 1: went all of that to and you can see this
Speaker 1: this nice trend, this compression over time or rather convergence
Speaker 1: I would say, over time between the yields and these
Speaker 1: two sectors. And then this crossover point which happens sort
Speaker 1: of midsummer, ends up being quite a big deal. Can
Speaker 1: you go back and describe why this change started to happen? Well,
Speaker 1: the change started to happen because what my co author
Speaker 1: and the indenting said is roughly that the oil price
Speaker 1: option in equities is pretty much gone, so companies are
Speaker 1: really no longer pricing their their future vision with a
Speaker 1: huge amount of upside in the oil price. That's not
Speaker 1: to say that it might not happen, right, you might
Speaker 1: get spikes in oil that go to who knows what
Speaker 1: a hundred and fifty three hundred dollars a barrel or
Speaker 1: something like that, but it's not viewed as structural. The
Speaker 1: way that the oil market activity of the early two
Speaker 1: thousands was wherein you had primary energy demand and fuels
Speaker 1: demand in excessive economic growth. So you gave people a
Speaker 1: reason to invest in a growth story. And if that
Speaker 1: is sort of coming off the boil and you were
Speaker 1: expecting nowhere growth, then you're now competing with the whole
Speaker 1: host of other low growth industries like let's say real
Speaker 1: estate or utilities and things that traditionally return a lot
Speaker 1: of benefit to investors in the form of cash. And
Speaker 1: so now you're having to compete with that message to
Speaker 1: the market in a very straightforward way with money by
Speaker 1: just paying people in the form of the dividend. I
Speaker 1: thought it was really interesting that you called the utilities
Speaker 1: of the past, or our interaction as consumers with the
Speaker 1: utilities and mindless transaction. What has changed with the utilities
Speaker 1: now are going forward to make them a bit more exciting. Well,
Speaker 1: I'm not certain that they're necessarily that much more exciting,
Speaker 1: although in a relative sense, they're more exciting. Right. This
Speaker 1: is like from a financial markets perspective, they're being priced
Speaker 1: more excited. And I should clarify, a mindless transaction is
Speaker 1: that you don't really think about your monthly electricity bill.
Speaker 1: We did it. We did an episode a little while
Speaker 1: back about the changing business models and utilities, but for
Speaker 1: the most part, we don't tend to think about our
Speaker 1: monthly electricity bill. And that's why we said mindless transaction.
Speaker 1: That's right. Well, listen, we are all sitting here in
Speaker 1: this lovely climate controlled studio, the beneficiaries of trillions of
Speaker 1: dollars and more than a century worth of investment in property,
Speaker 1: plant equipment, uh, synchronization, optimization, all of that sort of
Speaker 1: stuff to make sure that these things work without us
Speaker 1: really knowing about it. We're not hand cranking a dynamo
Speaker 1: to have flickering lights and recording under wax disks here
Speaker 1: in the studio. You know, We're actually, we're actually the
Speaker 1: beneficiary of something that has embedded itself into every other
Speaker 1: sort of process and subprocess that we have in modern day,
Speaker 1: which I would say was very apparent um just earlier
Speaker 1: this month when my family out in California had their
Speaker 1: electricity shut off, and we could say that that's exciting
Speaker 1: in a way and not dull, but all jokes aside.
Speaker 1: It's a It's a sign of a couple of things.
Speaker 1: One inherent physical brittleness in the power infrastructure and architecture
Speaker 1: of northern California. In particular the WUI, the wild land
Speaker 1: urban interface where so many of these homes are being
Speaker 1: shut off for wildfire risk, but also the sense that
Speaker 1: there is a great deal of things that need to
Speaker 1: change and can change within the utility, the utility business
Speaker 1: and its physical stuff. If you want to invest to
Speaker 1: harden PGENS infrastructure in order to not have these fire
Speaker 1: shut offs, it's on the order of I don't even
Speaker 1: know the exact numbers, but at the minimum, tens of
Speaker 1: billions of dollars, if not hundreds of billions of dollars
Speaker 1: worth of investment, which is all capital that needs to
Speaker 1: be deployed, which is probably capital that you cannot be
Speaker 1: paying out to shareholders as you used to know. Is
Speaker 1: that the reason for the growth story, you know, to
Speaker 1: to maintain status quo or get back up to the
Speaker 1: status quote or is it a you know, exciting, bold
Speaker 1: new frontier. It's a transformation narrative for sure. And and actually,
Speaker 1: as you can see from whale and gas interest and utilities,
Speaker 1: there's a sense of competition with you know, at the
Speaker 1: margins within these two very established businesses. Let's think about
Speaker 1: it as as you change the way that you energize
Speaker 1: the vehicle fleet, So you're no longer pumping distalates, you know,
Speaker 1: through a network of physical pipes, and your essentially substitutingal
Speaker 1: nectron sent through wires. It's unclear who exactly is going
Speaker 1: to own that end point, but one of the other
Speaker 1: company can't. We see plenty of oil and gas companies
Speaker 1: buying charging networks, for instance. Um, you could also argue
Speaker 1: that they're buying charging networks and tagging into the end
Speaker 1: of trillions of dollars worth of power infrastructure already owned
Speaker 1: by big companies who could probably do it on their own. So, uh,
Speaker 1: there's there's more. There's more excitement in this part of
Speaker 1: the margins than there would have been ten years ago.
Speaker 1: What should we be watching for in this particular dynamic,
Speaker 1: Just well, watch watch my my simple squiggling line chart
Speaker 1: and see see how this goes over time. Watch as well,
Speaker 1: the waiting in the s the SMP five hundred that
Speaker 1: energy companies get in the early nineties. This is going
Speaker 1: way back now, but in the early nineties the energy
Speaker 1: sector had a higher weighting in the SMP than technology stocks.
Speaker 1: It now has barely any more than utilities. I think
Speaker 1: it has less than pharmaceuticals. And healthcare, which is really
Speaker 1: an extraordinary, extraordinary tangle about the transformation of the U.
Speaker 1: S economy. But it's also just a sign that these
Speaker 1: these are not, you know, the double digit percentages of
Speaker 1: the proxy for the global or the United States economy
Speaker 1: and the market that they used to be so pivoting
Speaker 1: a bit the energy story that we're talking about, his
Speaker 1: energy story that those of us who listen to a
Speaker 1: podcast right now probably experience. There's another article that you
Speaker 1: also wrote for Bloomberg Opinion that's called big Energy Companies
Speaker 1: see Cole's Last Stand. And one of the things you
Speaker 1: really point out in this particular piece is that they're
Speaker 1: that Cole's story is one actually of countries that are
Speaker 1: developing energy infrastructure in places where maybe there wasn't as
Speaker 1: much or there wasn't these predictable all the lights are on,
Speaker 1: all the electricities available. Can you delve into that a
Speaker 1: little bit? Sure? So that if you watch the long
Speaker 1: term narratives that go through that go through sectors, it's
Speaker 1: always interesting to watch how they change. Right So, from
Speaker 1: the early days of the analyzes that Mark and I
Speaker 1: were doing, you can look at the coal sector and
Speaker 1: its argument is what we're the cheapest right, like like
Speaker 1: you don't, We don't need to have any debate about
Speaker 1: any other merit. We are the least cost provider of
Speaker 1: the synchronized electron on the grid. There you go, As
Speaker 1: you have competition from other resources, you see another sort
Speaker 1: of layer that adds on that narrative. You can probably
Speaker 1: still make that argument and many plates. But then the
Speaker 1: next one is, well, we're reliable. Right, Um, we may
Speaker 1: be domestic in some cases. Right, this is the molecules
Speaker 1: of freedom argument. More on us in the United States.
Speaker 1: We we we are, we are reliable, we're domestic, we're
Speaker 1: predictable in terms of supply, we're not intermittent. And look
Speaker 1: as technology to uh synchronize to the grid every they're
Speaker 1: kind of renewable and intermittent energy you might have becomes
Speaker 1: better and better, and those are simply so cheap that
Speaker 1: even the integration costs are not really a problem. Then
Speaker 1: the argument has to continue to shift in some way,
Speaker 1: and the argument has shifted out of a domestic argument
Speaker 1: in the higher cost markets in Europe and in the
Speaker 1: United States too. Well, you know, China still builds a
Speaker 1: coal plant every week. This is not only not true,
Speaker 1: it hasn't been true for quite some time. Then the
Speaker 1: argument becomes, well, you know in India, f India is
Speaker 1: going to will actrify in the same way that China did,
Speaker 1: then it's going to turn out that same way. Fair Enough,
Speaker 1: China has like China, it's like four times the amount
Speaker 1: of energy capacity that that that India does per capita.
Speaker 1: Is it going to grow to the point and you're
Speaker 1: going to grow to the point where it becomes just
Speaker 1: as much an energy economy in terms of power generation
Speaker 1: capacity per capita as what you would have in China.
Speaker 1: Potentially potentially not. But at the same time it's also
Speaker 1: the beneficiary India is in this case of into acting
Speaker 1: with all of these technologies as they're really really mature,
Speaker 1: right so finding wind and somewhere as the cheapest cost
Speaker 1: of new build electricity and markets like this. So the
Speaker 1: shifting rationalizations and justifications are a sign of a market
Speaker 1: that is very, very mature and that is being intersected
Speaker 1: in multiple ways and in multiple places by new technologies.
Speaker 1: One of the things you also bring up are the
Speaker 1: different scope one two in this case three emissions of
Speaker 1: the steel industry and various industries. And I think I
Speaker 1: have a sub question here, which is not just about
Speaker 1: the utility industry, but just generally how deeply anybody's going
Speaker 1: to look at Scope three because it's so difficult for
Speaker 1: companies to actually calculate out should we do it, should
Speaker 1: we do a family roundtable? And what Scope three emissions
Speaker 1: actually are? Absolutely, go for it, Mark, I'm not I'm
Speaker 1: not your guy. Scope three emissions. Scope three missions for
Speaker 1: for those of you out there in radio land, are
Speaker 1: emissions from the value chain of your customers. If you're
Speaker 1: a company, right, So there are the emissions in the
Speaker 1: case of take, for instance, BHP the mining group, the
Speaker 1: emissions that people make from using your product, so that
Speaker 1: it's it's possible to have very very low Scope one
Speaker 1: emissions and two emissions which are related to your own
Speaker 1: use basically, but have extremely high Scope three emissions because
Speaker 1: you're selling coal into a market that uses it to
Speaker 1: make steel or to make power. And in the case
Speaker 1: in particular of coal's use and steel, uh, the reason
Speaker 1: that it's used as is that it's hard to substitute for,
Speaker 1: it's cheap, it's reliable, and there are, as Mark can
Speaker 1: tell you, like physical chemical reasons why you need to
Speaker 1: use it in a lot of processes. What's interesting to
Speaker 1: see is we begin to see some of these big,
Speaker 1: publicly englisted, internationally diversified mining metals and mining companies starting
Speaker 1: to address this issue, mostly from a research and development perspective,
Speaker 1: but as a way to I think, start working around
Speaker 1: own the inherent issues that might come from their very
Speaker 1: very large scope three emissions. And if you think about
Speaker 1: it in the case of steel, there's there's really two
Speaker 1: ways to do that. One is substitution at the combustion level,
Speaker 1: right like that the process level to make steal the
Speaker 1: way you traditionally do, and that is a hydrogen argument
Speaker 1: for the large part. But then there's another argument that
Speaker 1: might call ether for this piece David Fickling looked at
Speaker 1: pretty closely, which is the same thing that really gutted
Speaker 1: the primary steel industry in the United States, which was
Speaker 1: electric arc furnace recycling is probably going to take hold
Speaker 1: in China, in particular, given the fact that China has
Speaker 1: been deploying half the world steel for about ten years now.
Speaker 1: So you you have substitution and you have essentially non
Speaker 1: consumption as you're as you're competing. Thing that might start
Speaker 1: changing that scope three emissions landscapes in theory and theory,
Speaker 1: one could make steel that has zero emissions for most
Speaker 1: of the process if you use an entirely renewable electric
Speaker 1: arc furnace in the process of making recycls deal scope
Speaker 1: three emissions, as I previously stated, are difficult to calculate,
Speaker 1: and I think that companies in the energy industry, if
Speaker 1: they started to integrate this in this may have an
Speaker 1: impact on their attractiveness from an E s G standpoint.
Speaker 1: Tying it back to the first article that we were
Speaker 1: actually talking about earlier, how do you see this potentially
Speaker 1: having an interplay with these balance and dividends and stock
Speaker 1: price and just attractiveness of these companies overall. So as
Speaker 1: as a as a proper commentator, I don't get to
Speaker 1: talk at all about whether or not this makes companies
Speaker 1: better investments or not. But what it can definitely do
Speaker 1: is that a labor of distinction, right, So I think
Speaker 1: you could you the institutional investor will ask yourself in
Speaker 1: the process of doing analysis whether this whether and focus
Speaker 1: on E s G. Environmental, social, and governance is a
Speaker 1: matter of alpha. So it's a way of making an
Speaker 1: outsized return compared to peer groups. If it's a matter
Speaker 1: of beta, if it's a matter of producing risk and
Speaker 1: sort of uncorrelating your risks from your peer group, or
Speaker 1: whether it's just something that is essentially preparing you better
Speaker 1: for the future. Let's put it in another way. If
Speaker 1: you had I don't know, a thirty five percent growth
Speaker 1: rate as an industry, and you had increasing gross margins
Speaker 1: and you had decreasing unit costs, you can probably get
Speaker 1: away with saying we are just the growth story. You
Speaker 1: don't really need to think about e s g. As
Speaker 1: a major lens on the performance or the future prospects
Speaker 1: of the company. If, however, you have less of a
Speaker 1: growth story, and you're in a mature industry with well
Speaker 1: analyzed peer groups, so without a lot of sort of
Speaker 1: disruptive innovation frontier around you, then it's probably sensible to
Speaker 1: start start applying lens is like this to that sector,
Speaker 1: because there they are ways of making distinctions, right they
Speaker 1: could they could lead to better returns, that's a matter
Speaker 1: of deep financial analysis. They could be reducing risk or
Speaker 1: un correlating it from the rest of the sector. So
Speaker 1: I think I think we'll start to see that more
Speaker 1: and more applied the very mature industries, not just because
Speaker 1: they might have the very technical exposures around emissions and
Speaker 1: things like that, but simply because it's another way of
Speaker 1: analyzing things that are otherwise quite well analyzed. Okay, so
Speaker 1: let's go back to the emerging markets team for a minute. So,
Speaker 1: if you'll indulge me, I heard this thing yesterday that
Speaker 1: Southeast Asia, who has historically built been the ones promoting
Speaker 1: coal these days. Right, they've stopped and they've completely shifted
Speaker 1: their focus to hydro Right, which carries its own set
Speaker 1: of problems. But at least it's not they're saying, at
Speaker 1: least it's not coal. Right, So it was the kind
Speaker 1: of last stronghold of coal new build um, but it's
Speaker 1: gone for the most part. Well, there's there's a there's
Speaker 1: an element in all of these things that doesn't really
Speaker 1: make its way into a lot of macro modeling, which
Speaker 1: is what do people want? So people, people, people. If
Speaker 1: we think about energy from a very classical perspective is
Speaker 1: energy is just the ability to do work. So I
Speaker 1: don't go out and buy a quantum of fuel or
Speaker 1: a you know a certain number of electrons. I actually
Speaker 1: I actually hire them to do a job, which is
Speaker 1: run the lights. Uh, you know, energized rotating machinery, help
Speaker 1: me move, help me heat, whatever it might be. And
Speaker 1: again you can make the argument when the spread in
Speaker 1: economics between something renewable or zero carbon and something high
Speaker 1: carbon but very very reliable. When that spread is very
Speaker 1: very wide, you can make the argument that mitigates in
Speaker 1: favor of let's just do more cold because it's cheap, reliable,
Speaker 1: domestic whatever. When the economics of those can press forward
Speaker 1: quite a bit such that there's either very little or
Speaker 1: no difference in the levelized cost of energy from one
Speaker 1: versus the There, I think you sort of start to
Speaker 1: look into sort of secondary characteristics that are imputed to
Speaker 1: each of these different sources. So people say I want
Speaker 1: something clean because now I know that there's no difference
Speaker 1: economically between them. Uh. But in another way, people have preferences,
Speaker 1: and as incomes rise, as people are past the point
Speaker 1: of sort of abject poverty and more into the sort
Speaker 1: of approaching middle income country status, people don't want air pollution.
Speaker 1: People have a sensitivity around baking in thirty years worth
Speaker 1: of worth of emissions, and it actually is much more
Speaker 1: localized than it is than it is sort of generalized
Speaker 1: and climactic you can think of it is it's more
Speaker 1: of a local environmental issue than a global climate issue
Speaker 1: that you see people manifesting all of this objection around,
Speaker 1: so people saying, look, okay, they may not actually care
Speaker 1: in the least about the global war, the carbon emissions
Speaker 1: aspect of having a coal plant in one's back yard.
Speaker 1: What people do care about is local air quality. Look,
Speaker 1: you can walk on the street here in London and
Speaker 1: see that we're soon to be and what is it,
Speaker 1: the no emission zone. We already are. We are in
Speaker 1: the ultra low emission zone we're recording today and where
Speaker 1: Mark and I live separately outside of a little bit
Speaker 1: further out, we will be an ultra low emission zone
Speaker 1: in and it does ultimately come down to air quality
Speaker 1: and human health. That's right, now, let's be is that
Speaker 1: the bow you can tie around all this Sorry, well
Speaker 1: it's it's it's part of the bow because it's the
Speaker 1: next thing to look for, right, It's the thing to
Speaker 1: watch for the intersection of behavior that's not institutional investor
Speaker 1: behavior but is personal aggregated personal preference behavior. Right, So,
Speaker 1: from a climate perspective, your ultra go emission zone in
Speaker 1: London does basically nothing. It's not that big of a
Speaker 1: deal from an air quality, from a children's health quality perspective,
Speaker 1: it does quite a bit. Now, London had the Great fogs,
Speaker 1: you know, as recently as I believe the nineteen fifties, right,
Speaker 1: so just the big smoke, the big smoke, appawning air
Speaker 1: quality issues at a time when there was no alternative
Speaker 1: to energize and heat, so you use coal for everything.
Speaker 1: Coal plants were local, you know, the ones that have
Speaker 1: become both swanky apartments and a museum here in London.
Speaker 1: We're both operating. But London, relatively speaking, got rich, and
Speaker 1: so it's stopped really wanting that you had alternatives somewhere else.
Speaker 1: In an extent, you just sort of globalize the pollution
Speaker 1: issue by sending it somewhere else. You build the nuclearor fleet,
Speaker 1: you built gas whatever. But we're going to see more
Speaker 1: and more I think awareness of issues at a local
Speaker 1: level that when you aggregate them start to be significant
Speaker 1: for change. And what's very interesting about them is that, um,
Speaker 1: you can't really litigate them away, like I don't know,
Speaker 1: I don't know that there are they're probably forces trying
Speaker 1: to intervene and prevent the ultra and the emission zone
Speaker 1: from expanding. Good knock right, good luck to them. There
Speaker 1: is the element though, where change does take a long time,
Speaker 1: and I think you pointed this out specifically in reference
Speaker 1: to India, where the average age of a coal fired
Speaker 1: power station in India's ten years. So because these are
Speaker 1: such big infrastructure projects, you know, we may end up
Speaker 1: seeing a coal industry that actually has a reasonably flat,
Speaker 1: maybe not growth, reasonably flat future for some time to come,
Speaker 1: and tell the lagging installations of new builds actually catches potentially.
Speaker 1: I would also I would also raise the possibility for
Speaker 1: analytical thinkers that, um, the frameworks we've used in in
Speaker 1: our economies wherein we operate stuff for forty years past
Speaker 1: its economic life, may not necessarily be the paradigm in
Speaker 1: a lot of different markets. If if there are enough
Speaker 1: environmental changes out there that, say, I don't know, impair
Speaker 1: the watershed that you need to cool your coal plant, well,
Speaker 1: then it doesn't matter if it's eight years old or
Speaker 1: eighty years old. You may not be able to operate it. Um,
Speaker 1: if there's enough local objection to it, then people may
Speaker 1: want things to go away. So we've already been through
Speaker 1: this phase of shifting things quite a ways out. And
Speaker 1: you know, this is economic modeling that says that the
Speaker 1: coal point has a forty year life. There are plenty
Speaker 1: of things that are lemons or elephants shortly after they're
Speaker 1: completed and they and they really may not be may
Speaker 1: not be doing that. So I I think it's prudent
Speaker 1: to still model things based on you know, inexpected economic lifetime.
Speaker 1: I think it's also worthwhile to consider a counter argument
Speaker 1: about whether or not things are actually going to be
Speaker 1: operating for forty years just because they've been built. Um,
Speaker 1: there are plenty of examples of oil fired power plants
Speaker 1: that were built. Uh, they were built at certain periods
Speaker 1: of time that are now essentially absolute immediately in many
Speaker 1: cases because they were substituted for coal. Uh. You know,
Speaker 1: there are there are plenty of times and places when
Speaker 1: substitution can happen, when there are alternatives, and where people
Speaker 1: make their own economic decision, which is I'm just not
Speaker 1: going to do this anymore. We had this happened throughout
Speaker 1: throughout the United States fleet, right, We've even got a
Speaker 1: time right now, it's almost like a great test case
Speaker 1: in which we've been sort of stripping regulations around around
Speaker 1: particular emissions and things like that. That in theory should
Speaker 1: be great for a coal plant, But investors making a
Speaker 1: rational decision look forward and say, well, not only am
Speaker 1: I not going to build anything new, I'm also going
Speaker 1: to shut down something old because I have I have
Speaker 1: an alternative. I have an alternative to that service that's
Speaker 1: being provided. And that's kind of what's well in a way,
Speaker 1: driving the growth story for the utilities in a way, yes,
Speaker 1: because actually more investment is good. And you know, utilities,
Speaker 1: as you add wires, you're you're adding a recurring and
Speaker 1: for restable cashflow to investors in needs in the United
Speaker 1: States paradigm of investor on utility. But as things get cheaper,
Speaker 1: as you get more options, you you have other areas
Speaker 1: you can expand that's right, right, I mean, in theory,
Speaker 1: if I'm a utility, I should be the beneficiary of
Speaker 1: every new wire that gets built. Exam. I may not
Speaker 1: be capturing the value of every new electron that's generated,
Speaker 1: but I should be getting value out of every electron
Speaker 1: that's being delivered. Right now, I could be competed away
Speaker 1: at the margin or maybe even at the heart by
Speaker 1: highly distributed energy, or I could have a plane that myself.
Speaker 1: I could be providing the electrons and the infrastructure to
Speaker 1: energize an electric vehicle fleet, or I could be competed
Speaker 1: away by by an oil and gas company doing that,
Speaker 1: or by a technology company doing it, or any number
Speaker 1: of other people that decide to tap into the existing
Speaker 1: electricity network, build in points onto it, and come up
Speaker 1: with a different business model than what you might already
Speaker 1: have right now, Nat, thanks for joining us. Always a pleasure, guys,
Speaker 1: See you next time. I'm on another Bloomberg Anya is
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