Speaker 1: With Laurent's segal And from London and Gerard Reed from Berlin.
Speaker 2: This is redefining energy Today. On redefining Energy, we're going
Speaker 2: to talk about investing in clean energy and that wider
Speaker 2: green technology space.
Speaker 1: Yeah, especially we're going to talk about public markets. And
Speaker 1: as you may have noticed, I did a prediction last
Speaker 1: year that green equities would go up and they did.
Speaker 2: Know you owe me about the Champagne because I lost
Speaker 2: four because of your investment advice. Never listen again, forget
Speaker 2: about it. So I'm so glad. I just decided that
Speaker 2: I need to see, we need to get someone on
Speaker 2: that knows what they're talking about. What we did is
Speaker 2: we contacted Liizard Asset Management and we got Shallow Matthew
Speaker 2: to come on and talk about it and I learned
Speaker 2: a lot. It was really great.
Speaker 1: Yeah, because Shan you compared to me, he's a real expert.
Speaker 2: Shadow, I myself agree that if you say buy it,
Speaker 2: we said it, like you say sell that, we buy it.
Speaker 1: Yeah, when it comes to a compass that indicates the
Speaker 1: souths Unfortunately, let's bring on Shannu mate on the show. Shanno,
Speaker 1: Happy New Year and welcome to the show.
Speaker 3: Eylron Hey, Gerard, thanks for having me on Shanna.
Speaker 2: Can we just take a look back at last year,
Speaker 2: which looks from the outside looked like a difficult year
Speaker 2: in terms of clean tech?
Speaker 3: How did you see it? Absolutely, your framing is a
Speaker 3: correct one, but just just just a step back a
Speaker 3: little bit and highlight the landscape. I'll start at a
Speaker 3: high level and kind of we can go down into
Speaker 3: individual sectors. But the way that I look at clean
Speaker 3: tech is I define it in two big buckets. And
Speaker 3: so there's traditional clean tech, which is what you traditionally
Speaker 3: think of solar, wind batteries, evs, and then you have
Speaker 3: clean tech adjacent, which I consider different pockets of multi
Speaker 3: industrial companies that benefit from sustainability and climate related tailwinds
Speaker 3: like ellectrical equipment and HVAC low growth, but may not
Speaker 3: be traditionally considered, you know, your traditional clean tech. So
Speaker 3: if we look at how clean tech did, the way
Speaker 3: that I'll use to describe performance of broader indices and
Speaker 3: so for the listeners that aren't as close to financial markets,
Speaker 3: indexes are a makeup of a variety of stocks or
Speaker 3: companies from different sectors into a broad index. So, for
Speaker 3: like the broad US stock market, we use the S
Speaker 3: and P five hundred to gauge the overall performance of
Speaker 3: the stock market, whereas like an index might be a
Speaker 3: select composition of different clean tech companies. And so for
Speaker 3: trailing three year period, if you look at what the
Speaker 3: broader SMP has done, so the broad star market, it
Speaker 3: returned forty percent. And then that same period, if you
Speaker 3: look at kind of the global clean energy index or
Speaker 3: a global solar index, they were down forty to fifty percent.
Speaker 3: So in terms of relative underperformance, you know, that's materially
Speaker 3: very very poor, and a lot of that happened in
Speaker 3: the last year. Act to your point, in the last year,
Speaker 3: the broader market was up thirty percent, whereas the various
Speaker 3: clean tech industries were down anywhere from twenty to three
Speaker 3: thirty percent. So again relative under performance of anywhere from
Speaker 3: fifty to sixty percent. And so that's a really challenging
Speaker 3: predicament in terms of what happened. And there's a variety
Speaker 3: of factors, and I'm sure we can kind of get
Speaker 3: into some of the secret specific things, but broadly, the
Speaker 3: big takeaways were interest rates, the normalization of power prices,
Speaker 3: which deteriorate some of the payback or advantages that some
Speaker 3: of these new cleaner technologies have reduced focus from governments
Speaker 3: and corporates as well as broader just weak end market condition.
Speaker 3: We look at things like slowing edy adoption and incremental
Speaker 3: growth countries. You look at kind of the slowing adoption
Speaker 3: or saturation of certain things like solar adoption in various
Speaker 3: markets that are supportive in terms of policy, and so
Speaker 3: you have a variety of confluence of factors that are
Speaker 3: really challenging overall end market performance as well as you know,
Speaker 3: valuations in terms of clean tech adjacent which I think
Speaker 3: often gets missing this conversation or a nuance. You actually
Speaker 3: have some companies that have done tremendously well. So if
Speaker 3: you look at lacross broader industrial companies, two of the
Speaker 3: strongest performing, if not the strongest performing subsectors of have
Speaker 3: been electrical equipment and HVAC, and both those are very
Speaker 3: much driven by energy efficiency, the move to more sustainable
Speaker 3: options as well as kind of addressing the electrification of
Speaker 3: everything trends that we often talk about when we talk
Speaker 3: about climate, but don't really I forget to discuss when
Speaker 3: we're thinking about the stock equity performance.
Speaker 1: Shann thank you for this big picture that's pretty ugly
Speaker 1: when it comes to kin tech, and much better when
Speaker 1: it's adjacent. As you say, can you explain what type
Speaker 1: of shares or main shares you have in that ten
Speaker 1: tech segment and what type of shares you have in
Speaker 1: the teen adjacent segment.
Speaker 3: So in terms of clean tech, you have traditional sectors
Speaker 3: like residential solar WHI show this will be like your
Speaker 3: stolar installer companies, your solar inverter companies, solar module companies,
Speaker 3: utility scale solar side, you have electric balance system, you
Speaker 3: have solar modules, things like for solar and those types
Speaker 3: of companies. In terms of like other subsectors, lithium, you
Speaker 3: have litium producers like Albemarle or live ND, and then
Speaker 3: kind of moving up the stream the evs, you have
Speaker 3: people up and down the supply chain, whether it's the
Speaker 3: actual auto OEMs things like Tesla or Rivian or various
Speaker 3: components or suppliers into those subsectors as well. When we
Speaker 3: think about clean tech adjacent this is more companies that
Speaker 3: sell various equipment that may benefit from these broader trends
Speaker 3: but may not be traditionally things that you think of
Speaker 3: like solar modules or wind turbines, but you know electrical equipment.
Speaker 3: These are things like bus bars, transformers, switch gear, circuit breakers.
Speaker 3: HVAC is actually you know the chillers or the HVAC
Speaker 3: systems of heating, ventilation and air conditioning systems that go
Speaker 3: into big commercial buildings. And these shares or companies have
Speaker 3: done tremendously well in terms of the overall pricing power
Speaker 3: they have, the volumes and orders are seeing, and that
Speaker 3: comes from a variety of factors, including a focus on
Speaker 3: energy efficiency, load growth, as well as trying to save
Speaker 3: on energy costs in various equipment, and as well as
Speaker 3: the electrication of everything. As we've discussed, increase content for
Speaker 3: a lot of these companies in terms of selling into
Speaker 3: data centers or new commercial buildings, and we can kind
Speaker 3: of get into the non residential construction trends and manufacturing
Speaker 3: and what's the story that's going on in the US.
Speaker 3: But a lot of those companies have been beneficiar areas
Speaker 3: of that spend.
Speaker 2: Yahan new It's very interesting what you're saying, which is
Speaker 2: your differentiating the clean tech guys and the adjacent area
Speaker 2: clean tech adjacent? Can I dig into the differences between
Speaker 2: the two, is the differences between the two, the fact
Speaker 2: that the clean tech adjacent guys really have competitive advantages
Speaker 2: and it's much more difficult to enter those areas and compete. Well,
Speaker 2: let's be clear, if you're a battery manufacturer, very different
Speaker 2: compete with the Chinese. If your soda guy is the
Speaker 2: same thing, that's not why we have the relative performance
Speaker 2: or as there something else.
Speaker 3: I think it's a really fair characterization, to be honest.
Speaker 3: One of the things that really stood out for me
Speaker 3: when I was observing performance over the last years and
Speaker 3: in the last few years, if you look at some
Speaker 3: of the clean tech companies, right the big story that
Speaker 3: everyone got excited about, especially in late twenty one, was
Speaker 3: that you had this massive energy transition that needs to happen.
Speaker 3: It's a completely one directional tailwind. It's going to only
Speaker 3: increase in velocity. So in otherwise commodity type or cyclical
Speaker 3: industries right equipment selling into power markets like you would
Speaker 3: thought that there's gonna be this tailwind that would help
Speaker 3: subside the traditional cycles. And what we just saw in
Speaker 3: this cycle was that that didn't happen. A lot of
Speaker 3: these companies really out of themselves is having minimal visibility
Speaker 3: overstuffed inventories, minimal pricing power, especially when competing against the Chinese,
Speaker 3: and then that leads to just weak margins and weak
Speaker 3: cash flow generation. And so when you compare it to
Speaker 3: some of these other incumbent industries like you mentioned, you
Speaker 3: have more of a moat. They're more all gopaalistic industries,
Speaker 3: so you have much better volume and pricing trends. You
Speaker 3: have an established brand that's been built over fifty to
Speaker 3: one hundred years versus a more nascent company, and those
Speaker 3: things allow you to perform better in cycles. So I
Speaker 3: would categorize it broad as one is like the macro
Speaker 3: for the subsector, it's been weak for clean tech, what's
Speaker 3: been strong for clean tech adjacent? Just give it on
Speaker 3: the construction spend, and then you kind of think about
Speaker 3: the overall economics and industry composition. And as an investor, right,
Speaker 3: you're always looking for that sustainable competitive edge remote what
Speaker 3: we call and I think to your point you're answering
Speaker 3: is that clean tech companies haven't necessarily defined their remote
Speaker 3: yet or a little bit fewer and far between today.
Speaker 1: What's extraordinary in two twenty four is that Siemens and
Speaker 1: LG grew almost as Puss, Nvidia, which is phenomenon, and
Speaker 1: even g Velanova. The branch of gu was split, and
Speaker 1: those the gas still buying I mean the guest still
Speaker 1: buying market is on fire like they haven't seen in
Speaker 1: a decade. Those type of shares, that's what you would
Speaker 1: characterize as.
Speaker 3: The adjacent fought on LARN. If you look at the
Speaker 3: contributors or hot performers in the index last year, you'll
Speaker 3: see names like ge Vernova or Vistra, or Constellation or
Speaker 3: Energy Energy. These are companies that are taking advantage or
Speaker 3: should benefit from all the anticipated load growth and data centers.
Speaker 3: And as you alluded to, g Bbnova is a little
Speaker 3: bit of an interesting one because it has three different
Speaker 3: subsegments that relate to the transition, whether it's the gas
Speaker 3: drimine business, the wind business, or electrification business. But some
Speaker 3: of those other companies may have traditional natural gas plants
Speaker 3: or nuclear plants, and there's been a reserveence of thermal
Speaker 3: generation just as we have to address all this load.
Speaker 3: And so some of those shares have done tremendos well
Speaker 3: to your point, and in some ways it's interesting because
Speaker 3: depending on how you define it, some people wouldn't consider
Speaker 3: that clean tact, but I very much do in terms
Speaker 3: of it's a global energy transition. It's not just only
Speaker 3: certain types of energy. So the companies that do well
Speaker 3: depend on the subsector that you're exposed to. And right
Speaker 3: now it feels that those that can deliver on load growth,
Speaker 3: if it actually materializes, are the ones that are going
Speaker 3: to stand up benefit. And so those shares have done
Speaker 3: tremendously well.
Speaker 1: Yeah, I like that. So Weirdly, the incubans started, although
Speaker 1: bit lately, riding the wave, whereas all those specs who
Speaker 1: came out of nowhere were just like big four points
Speaker 1: with three years ago. I mean, they've all gone down
Speaker 1: ninety five percent. It's an unmitigated disaster. Yeah.
Speaker 3: Absolutely, I'm solid definitely in the spac mania in terms
Speaker 3: of companies that probably went public far too early and
Speaker 3: didn't really have provable or defensable business models or scale.
Speaker 3: But even I would point out some of the companies
Speaker 3: that were quote unquote clean tech darlings would point to
Speaker 3: the residential solar inverter space, for example, the companies that
Speaker 3: were up on a three basis through twenty one twenty
Speaker 3: two a three hundred five hundred percent, they're down eighty
Speaker 3: to ninety percent off all time highs. Even companies that
Speaker 3: we once thought were going to be trendous, high flying
Speaker 3: cleantech companies have come down considerably, and it just goes
Speaker 3: again to that point of ultimately comes down to economics.
Speaker 3: And I always kind of make this point that despite
Speaker 3: increasing amounts of dollars going into the transition at a
Speaker 3: macro level or an economic level depending on the country,
Speaker 3: it doesn't necessarily mean that the value capture a cruise
Speaker 3: to the companies themselves, right, It can be dispersed across
Speaker 3: the subsector, and that's where it gets back down to
Speaker 3: pricing power and your ability to generate profitable growth.
Speaker 2: The way I'd be looking at it is that the
Speaker 2: big change is the fact that for the first time
Speaker 2: in a decade, we have expectations that electricity demand is
Speaker 2: going to grow, and it's cirly grows significantly for the
Speaker 2: next years, and the main reason is data centers and
Speaker 2: the move to AI. I'd love to hear your thoughts
Speaker 2: on how you see that sector, because obviously, if you'd
Speaker 2: invested in that last year, you would have done incredibly
Speaker 2: well right.
Speaker 3: On Gerard in terms of the number one theme. If
Speaker 3: I had to identify and just the broader market. It
Speaker 3: is this whole AI and load growth related theme. We
Speaker 3: talked about some of the top contributors of the index
Speaker 3: last year, and it's very much related to the theme.
Speaker 3: And so just a step back again for listeners, the
Speaker 3: last two decades pretty much in the US, we've had
Speaker 3: flatish load growth. A lot of people have heard that.
Speaker 3: And then in terms of the near term acceleration of
Speaker 3: load growth that's going to come from these AI different
Speaker 3: credit data centers, the electrication of transport, electrication of heating,
Speaker 3: and spacing, and we're going to enter an era right
Speaker 3: where different estimates have it as up to two to
Speaker 3: three percent, which nominally doesn't sound that large, but actually
Speaker 3: from an infrastructure challenge is extremely large. And so I'll
Speaker 3: just focus on data centers to your point, with the
Speaker 3: general thinking being that we're in this era of a
Speaker 3: new technology that's one of the fastest adopting technologies in
Speaker 3: terms of consumer and corporate interest. And the way that
Speaker 3: this has developed is hyperscalers building these data centers filled
Speaker 3: with these GPUs that are incredibly energy intensive, and the
Speaker 3: conventional thinking right now is that to scale it, you
Speaker 3: need to build large GPUs with higher thermal rating and
Speaker 3: ability to process more compute, and that means more energy growth.
Speaker 3: And so there's all numbers storing out there, And just
Speaker 3: to give a little bit of sense, like the current
Speaker 3: gigawats in the US is roughly I think like around
Speaker 3: twenty to twenty five gigawatts, and in terms of the
Speaker 3: next six years, so twenty thirty, the amount expected is
Speaker 3: anywhere from another twenty five all the way up to
Speaker 3: I saw an estimate of one hundred and thirty yo
Speaker 3: wats the other day, And just to put some dollars
Speaker 3: on it, in terms of the build an AI data center,
Speaker 3: it can be anywhere from like ten million dollars in
Speaker 3: megawatt to twenty five depending on if your quitting chips
Speaker 3: or not. And so that's anywhere from like a low
Speaker 3: end five hundred million dollar opportunity, it's like a two
Speaker 3: point five trillion dollar opportunity. So who benefits from that,
Speaker 3: to your point, it's the chip providers, the server's racks,
Speaker 3: the thermal cooling, the electrical equipment that goes into these things,
Speaker 3: the actual labor that goes and installs and builds the
Speaker 3: electrical infrastructure, or the mechanical systems that go into these things,
Speaker 3: and all shares of the companies up and down the
Speaker 3: supply chain have really been poured over to see what
Speaker 3: your exposure is the data center and that's probably the
Speaker 3: most excited in that everyone is really fixated on and
Speaker 3: focusing on. And that's why some of the subjectors I
Speaker 3: mentioned earlier, whether it's electrical, mechanical or labor engineering, pyramid
Speaker 3: and construction firms have done tremendously well because everyone expects
Speaker 3: a lot of this build to come in and so
Speaker 3: I think the question really becomes now as we get
Speaker 3: from last year, in this year and next year, is
Speaker 3: does the load growth actually start to come. You know
Speaker 3: a lot of these buildings won't go into service here
Speaker 3: until twenty twenty six, twenty seven, and so we don't
Speaker 3: really have the first evidence of such. But right now
Speaker 3: we're seeing a lot of the speculative load requests as
Speaker 3: well as the construction start and so it's a matter
Speaker 3: to see like will that load growth come and will
Speaker 3: it come with the velocity that people are expecting.
Speaker 1: Okay, so I've got one stud and one quote. The
Speaker 1: first thirty is ten years ago NVDA cheap sales to
Speaker 1: data center was three hundred million DOLLA, so three hundred
Speaker 1: million DOLLA in twil twenty four. This one hundred billion dolla.
Speaker 1: It's insane.
Speaker 3: It's staggering.
Speaker 1: And the second quote, which I like a lot, is
Speaker 1: the stock market has correctly predicted eighty out of the
Speaker 1: last three technology booms. I think that AI think, you know,
Speaker 1: smell a bit like the same guys that were doing
Speaker 1: ESG three four years ago. You know, everything was ESG
Speaker 1: and now everything's AI. Yes. Of course, over the long term,
Speaker 1: HEI is going to be there, and I think a
Speaker 1: lot of people are overly optimistic. But that's that's my
Speaker 1: two cents.
Speaker 3: I think it's a really fair point. And to be honest,
Speaker 3: just like the market rewards a certain theme or narrative
Speaker 3: in one year, doesn't necessarily mean that the trend is
Speaker 3: true or that even it will materialize to the extent
Speaker 3: that people are expecting. And that's why I think this
Speaker 3: is such an interesting point in time where a lot
Speaker 3: of the share prices of certain companies that benefits from
Speaker 3: this trend have gone up fifty one hundred, couple hundred
Speaker 3: percent in a single year, and so that means expectations
Speaker 3: are moving up and so these companies will need to
Speaker 3: deliver high single digit, double digit type top line growth.
Speaker 3: They'll need to deliver significant in earnings growth to actually
Speaker 3: grow into these valuations. And if they don't, these shares
Speaker 3: that benefited a lot might be the ones that actually
Speaker 3: get penalized the most in coming years. And I think
Speaker 3: that's the trade that investors really need to pay attention to.
Speaker 3: One of the things you brought up earlier was gas turbans, right,
Speaker 3: whether it's like the Semens or gie Vnova's of the world.
Speaker 3: I've seen a lot of enthusiasm about that space, both
Speaker 3: in the share price movement as well as the overall
Speaker 3: just interest in the calls and the meetings that people schedule.
Speaker 3: For example, just for a little bit of background for people,
Speaker 3: gas turbine market in the early two thousands was considered
Speaker 3: like a resurgence because the US market just became deregulated
Speaker 3: and you were selling a lot of turbines, and at
Speaker 3: one point you sell up to one hundred gigawatts of
Speaker 3: turbines I think it was like twenty one, and so
Speaker 3: that market up until like two years ago was considered
Speaker 3: a little bit of a melting ice cube in the
Speaker 3: sense of like everyone knew that gas was going to
Speaker 3: play a transition role in the overall energy transition, but
Speaker 3: pacing new equipment installations wasn't necessarily a given. So we
Speaker 3: our market now is roughly like forty gigawatts. Now you
Speaker 3: have estimates that some people have it going up to
Speaker 3: sixty seventies, some people have it going backup to one
Speaker 3: hundred gigawats per year by twenty twenty seven, all the
Speaker 3: way through like you know, in the mid twenty thirties.
Speaker 3: And so again that's massive moves, and that explained some
Speaker 3: of the share price movements and of those gas urban companies.
Speaker 3: But to your point, the velocity of expectations has gone
Speaker 3: very very high paced, and so it will be to
Speaker 3: be proven for these companies. But it's interesting to even
Speaker 3: see the management teams get a little cough guard, where
Speaker 3: two years ago they might have been managing down capacity
Speaker 3: and now they're talking about capacity increases, and that's a
Speaker 3: pretty big swing.
Speaker 1: As you're opinion, if I had access to gas and BTU,
Speaker 1: I would put the gas sturbine in my backyard everywhere,
Speaker 1: cheaper on coals, cheaper than new gear. A two METU
Speaker 1: is so cheap, I mean there are very very few
Speaker 1: countries on this planet who can benefit from gast. Okay,
Speaker 1: you've got the Gulf States, Russia, whatever that is, but
Speaker 1: that's pretty much it. When you start importing the liquefying
Speaker 1: and moving and importing, you end up with guests with
Speaker 1: five times more expensive So outside the US, gas is
Speaker 1: an expensive, important form of energy. And I hear the
Speaker 1: energy guys, but they don't realize that they are importers
Speaker 1: on the other side who really wish they would not
Speaker 1: have to import, which means the push for clean energy
Speaker 1: is not for the environment. Okay, it's for the environment,
Speaker 1: but it's also a security of supply play that you
Speaker 1: don't have to do in the US because you are
Speaker 1: blessed by God and swimming in a cornucopia of energy
Speaker 1: coming from all over the place means that whatever success
Speaker 1: of vision you have in the US is very difficult
Speaker 1: to replicate elsewhere.
Speaker 3: I think that is such a good point and one
Speaker 3: that's tremendously under appreciated. Is like the US, as you mentioned,
Speaker 3: that blests with this plentiful amount of natural gas. It's
Speaker 3: extremely cheap, and we have the infrastructure and the ability
Speaker 3: to produce it at a very low rate, which isn't
Speaker 3: the same across countries. To actually have a question for you,
Speaker 3: because this is something that's been really I've been percolating
Speaker 3: in my mind. Where again, as you mentioned, is due
Speaker 3: to the kind of the economic considerations, natural gas will
Speaker 3: probably serve a disproportionate amount of the incremental load growth
Speaker 3: in the United States given our abundant natural resources and infrastructure,
Speaker 3: but that's not the same in different countries. But one
Speaker 3: of the points that have been made to me is,
Speaker 3: for the first time in a really long time, utilities
Speaker 3: have buyers that are willing to pay premiums or access
Speaker 3: rents in the system that they're willing to actually pay
Speaker 3: up for, and so utilities can be a little bit
Speaker 3: more experimental in terms of how they serve this load
Speaker 3: growth versus traditionally. You know, you're trying to operate, execute
Speaker 3: on the cheapest possible route to execute against your regulated
Speaker 3: way to return. And so have you seen utilities in
Speaker 3: Europe or elsewhere be a little bit more experimental about
Speaker 3: how they serve their commensurate load growth because it's happening globally, right,
Speaker 3: it's not just a US story. Be curious as that
Speaker 3: if you're seeing a little bit more of that, because
Speaker 3: in the US you might default a little bit more
Speaker 3: in natural gas, but elsewhere it might be fuel cells
Speaker 3: or batteries or things like that. So what do you
Speaker 3: two think about that topic.
Speaker 2: The European situation is very, very difficult, and it's also
Speaker 2: very different than the US. So what we've got is
Speaker 2: we don't have the same level of demand growth for
Speaker 2: a start, and we have significant demand of renewables that
Speaker 2: have command to the markers and are continue to come
Speaker 2: on to market and they are disrupting the markets. So
Speaker 2: we have large amounts days where you've got zero prices.
Speaker 2: We've got huge curtailment of wind, etcetera, etcetera. And we have,
Speaker 2: despite all those surpluces, we've really high power prices. Our
Speaker 2: power prices on average are twice what they are in
Speaker 2: North America. And the reason is because we're important energ
Speaker 2: and so the LNG is determining the wholesale price for everyone,
Speaker 2: not all the time, but maybe for fifty percent of
Speaker 2: the time across most of Europe.
Speaker 3: And that's an issue.
Speaker 2: Lauren said it earlier on he talked about some energy
Speaker 2: security point of view, it's also an economic issue as well.
Speaker 2: You know, how is German industry going to compete with
Speaker 2: American industry when they're paying twice the price for electricity
Speaker 2: and gas prices three times higher. It's tough, tough, tough, tough.
Speaker 3: You're spot on. I think towards the end of last
Speaker 3: year you saw Reuter's posting stories about how German industry
Speaker 3: has been throttling capacity because of really expensive gas prices.
Speaker 3: And so to your point right there, right, you're almost
Speaker 3: like handicapping an industry on their ability to compete because
Speaker 3: their input costs are so high. And so that's where
Speaker 3: like a lot of this build very strongly about the
Speaker 3: energy transition. A lot of what we're trying to solve for,
Speaker 3: especially with this unprecedented acceleration of growth, is how do
Speaker 3: we do this in the most smooth and economically consider
Speaker 3: it possible way, Because at the end of the day,
Speaker 3: load growth is positive, right, I mean, if we build more,
Speaker 3: infrastructure will be better suited to handle the future needs
Speaker 3: of electrification, of heating, and transport, which will be multiple
Speaker 3: as in the theory of what data centers will do.
Speaker 3: And so if we build the more, if we set
Speaker 3: up the right infrastructure, if we allow utilities to kind
Speaker 3: of figure out these new tariff systems or ability to
Speaker 3: charge you know, premium rates for folks that need access
Speaker 3: to power quicker. That will help us down the road,
Speaker 3: versus kind of kicking the can down in terms of
Speaker 3: how do we solve these infrastructure problems. It's going to
Speaker 3: happen sooner or later, and I say, it's kind of
Speaker 3: a better thing in my eyes that we solve these
Speaker 3: issues sooner or at least, you know, apply innovative approaches.
Speaker 1: The way we see the US from outside, it's like
Speaker 1: we are in the streep of Las Vegas, you know,
Speaker 1: on the street, and we look at the hotel and
Speaker 1: there's a guy dressed like Elvis, and he has three
Speaker 1: buffet as much as you can hit, and we're the
Speaker 1: poor guys on the outside. And sometimes, you know, you
Speaker 1: throw us a half eaten cold hamburger. That's how we
Speaker 1: see and then you complain like we our idiots. Sorry.
Speaker 1: I've heard a lot of guys say, he opens our idiot. Sorry.
Speaker 1: We are energy poor and every year at the beginning,
Speaker 1: we need to literally throw away four percent of our
Speaker 1: GDP just to buy energy, which is a luxury. Well,
Speaker 1: at least where allies we get the stuff, but we
Speaker 1: need to pay for it. You know, imagine China, who
Speaker 1: has to import eighty percent or more of their oil.
Speaker 1: Every tanker going to China goes in front of the
Speaker 1: fifth fleet in Qatar and then the seventh fleet in Singapore,
Speaker 1: which means that the day somebody coughs and says, well,
Speaker 1: you know, I think those those tankers cannot pass anymore.
Speaker 1: That's the main reason for me. They develop evs and
Speaker 1: you know, trying to get rid of oid. It's never
Speaker 1: about the climate, it's about energy security. You are the
Speaker 1: US in this phase of energy dominance, and good for you,
Speaker 1: because look if you what the permin basin in Bavaria
Speaker 1: will do exactly the same. But the guys outside the
Speaker 1: buffet in Las Vegas, they think differently from the guy inside.
Speaker 1: And I think it's a really good point, right.
Speaker 3: China is doing all the above energy policy as a
Speaker 3: result of a lot of what you just said, the considerations,
Speaker 3: it could be certain views of the transition, but more importantly,
Speaker 3: it allows for their independence and the ability to grow
Speaker 3: a lot faster versus kind of being dependent on other
Speaker 3: nations for their energy needs.
Speaker 2: Seana, maybe we can just return to the future a
Speaker 2: little bit what gets excited about twenty twenty five.
Speaker 3: As I sit here and think about the year ahead,
Speaker 3: things I'm trying to think about is the rate of
Speaker 3: change or you know, what are things that are rather
Speaker 3: confirm or break the seas And so I think a
Speaker 3: lot of it still, especially with our recent election in
Speaker 3: the US right here, is focused on the level of
Speaker 3: investment and infrastructure build in the United States. And you know,
Speaker 3: there's various views as to whether the new administration and
Speaker 3: supportive or not. But at the end of the day,
Speaker 3: spending on manufacturing, spending on data centers annualized now, you know,
Speaker 3: as approaching I think like thirty five percent of all
Speaker 3: total non residential private construction spend and those are factories,
Speaker 3: those are infrastructure setups, those or new power generation facilities.
Speaker 3: And I'm really still excited by this theme and kind
Speaker 3: of looking at the people that help provide that or
Speaker 3: address constraints. So whether that's equipment providers, labor and engineering,
Speaker 3: equitment and construction, those companies continue to grow their tams
Speaker 3: as well as their ability to execute against backlog. I
Speaker 3: think these various pockets of equipment, whether it's electrical or HVAC,
Speaker 3: you have really strong order growth into both data centers
Speaker 3: but also into the utility markets and CNI or industrial
Speaker 3: type customers as well. One thing I'm paying attention to
Speaker 3: as well, as you know, we spent a little bit
Speaker 3: of time talking about kind of underperformance of clean tech.
Speaker 3: But at some point the sponsorship will return to the sector.
Speaker 3: You're on two to four years now of really poor
Speaker 3: performance and no one wantingone to own these things. But now,
Speaker 3: at least once you have some direction or clarity on
Speaker 3: where the administration is going to go in terms of
Speaker 3: the tax credits you have, well you'll have people step
Speaker 3: back into these names. You know, valuations at one point
Speaker 3: where two act index at the end of twenty twenty one,
Speaker 3: which was crazy maini a time, but now and depending
Speaker 3: on which metric you're using, are half the index, and
Speaker 3: so some of these companies will see growth, Some of
Speaker 3: these companies are taking share, some of these companies will
Speaker 3: benefit from domestic content or protectionist type policies that the
Speaker 3: administrative being put in place. And so at some point
Speaker 3: too the clean tech world have a resurgence and such
Speaker 3: as a matter of when, and so those are some
Speaker 3: of the things that I'm paying attention to well.
Speaker 1: It's a great way to conclude. Channel. It was a
Speaker 1: real pleasure to have you on the show.
Speaker 3: Thank you so much for having me on, and look
Speaker 3: forward the following future episodes.
Speaker 2: And I wish you Grade twenty twenty five.
Speaker 3: Yeah, same you too as well.
Speaker 1: But Job, I've got three things to say. First of all, well,
Speaker 1: I'm glad we brought Channu because it's obviously much more
Speaker 1: knowledgeable than the two of us combined. Agreed, very articulate.
Speaker 2: Agreed, agreed, agreed.
Speaker 1: The second thing is, as we are early two twenty five,
Speaker 1: greniquities are now supper cheap, so I might be right
Speaker 1: even if the time in was wrong. And the third
Speaker 1: point is it was, in hindsight a great idea to
Speaker 1: split the conglomerates of G and Siemens because the performance
Speaker 1: of their energy branch now they are independent, has been
Speaker 1: stellar Fanova one hundred and eighty percent last year and
Speaker 1: Siemens energy times four.
Speaker 3: Role.
Speaker 2: You've said a lot there, but let's start with the end,
Speaker 2: which is you talked about Siemens and GE. I could
Speaker 2: also add to that Hitachi and a whole pile of prismium.
Speaker 2: You do steal cables everyone around the periphery of this
Speaker 2: energy transition. If you make transformers, they're the guys that
Speaker 2: have done well because in all those areas is a
Speaker 2: little bit of barriers to entry number one and number two,
Speaker 2: there's a huge growth opportunity in front of them. And
Speaker 2: let's be clear, if you're in most of the rest
Speaker 2: of the whole renewable space, well in the hardware, so
Speaker 2: it's all about China. Really want to compete with China,
Speaker 2: very tough. And then the second thing, as you know,
Speaker 2: is that in the whole we're anew about asset space.
Speaker 1: That's awesome.
Speaker 2: There's been a lot of stress there as well, just
Speaker 2: because of I suppose interest rates fluctuations for a start,
Speaker 2: And I think secondly then just the whole thing in
Speaker 2: and around power price volatility, which is causing people to
Speaker 2: get a little bit nervous. And there's also negativity in
Speaker 2: the public eye in and around that.
Speaker 1: So yeah, I like that piece.
Speaker 2: Is now what you said another interesting thing which has
Speaker 2: maybe now is the time to be buying some of
Speaker 2: these particular I'm thinking of some of these American solar
Speaker 2: business as the first soldos of this world and stuff
Speaker 2: like that. And if I be honest, I did buy
Speaker 2: first soldo, So let's talk in a year's time and
Speaker 2: see how I did. And I did it my own
Speaker 2: bat so it's my own responsible if I mess up.
Speaker 1: That there's something quite clear in my eye. And of
Speaker 1: course what I'm going to say is very controversial. Is
Speaker 1: there is a crazy hype around nuke company like a
Speaker 1: Vistrand constellation. And I know that they signed a lot
Speaker 1: of PPAs with Big Take and so on. But it's
Speaker 1: all well and good to talk about nuke for data centers.
Speaker 1: But what we've seen at the end of last year
Speaker 1: is Meta announcing a Mega two gigawa data center for
Speaker 1: ten billion dollar in Louisiana called Richland Parish, and it's
Speaker 1: fueled by three ccgts built by Entergy. It's all well
Speaker 1: and good to talk about nuke. It's all well and
Speaker 1: good to talk about net zero. And I know Meta
Speaker 1: is in kahoot with Amazon, and you know they're cooking
Speaker 1: their emission books. I mean this, everybody knows.
Speaker 4: That I won't go to that outfield, but I will
Speaker 4: talk about the AI reck and actually it's all good
Speaker 4: and taking an all nuclear plant and putting it back online.
Speaker 4: That makes sense, Okay, By the time you build a
Speaker 4: new SMO or any form of traditional nuclear reactor, good
Speaker 4: locks twenty thirty five.
Speaker 1: BI race is over. You've lost. Oh, it's not. It's
Speaker 1: not the power.
Speaker 2: The solution, It really isn't. The solution is you.
Speaker 1: Need to build fast.
Speaker 2: And that means you're gonna do You're gonna do solar,
Speaker 2: You're gonna do batteries, You're gonna do that, Gas engines,
Speaker 2: you might do gas turbines, you might do win that's
Speaker 2: it quick, right, Otherwise you're not gonna win the AI race.
Speaker 1: Yeah. And in conclusion, there's a generic point that I'm
Speaker 1: flabbergasted because people don't understand the basics of energy. And
Speaker 1: I'm gonna remind you. Gas in the US is a
Speaker 1: three dollar m mbtu. Now, the energy content of MTU
Speaker 1: is seventeen percent of bile of oil. So in fact,
Speaker 1: you multiply by six, so three US dollar and mbtu,
Speaker 1: that's a bil of oil at eighteen dollar barry, Okay,
Speaker 1: right now? Is that seventy good? Now in Europe we
Speaker 1: get it at thirteen dollars, which is equiped to a
Speaker 1: barrel of oil at seventy five dollars, which is kind
Speaker 1: of where it should be I'm done.
Speaker 2: So your first round to the year. I love it.
Speaker 1: It's not run, it's a calculation, it's basic.
Speaker 2: I know, I know, absolutely absolutely.
Speaker 1: But that's also mean that gas in the US is
Speaker 1: incredibly cheap. So of course, of course, of course they're
Speaker 1: gonna right now they export what fifteen percent in the
Speaker 1: energy they want to go to thirty percent okay, and
Speaker 1: they want to power everything with gas. But will there
Speaker 1: be enough gas? Because everybody is looking after that magic
Speaker 1: barrel at eighteen dollars. It's magic, yess magic okay, but
Speaker 1: market's out of magic.
Speaker 3: Job.
Speaker 1: We will do a bit less episode this year because
Speaker 1: we did like once a week last year and that's
Speaker 1: a bit exhausting and sometimes the curity is not there.
Speaker 2: We want to improve the quality this year. We want
Speaker 2: to get that's the key thing we want to do
Speaker 2: with the podcast. So we're gonna got it three times
Speaker 2: a month rather than four. Promise you good shows every time, okay,
Speaker 2: except when Lauran has given stop pretiction.
Speaker 1: Job, have a good weekend. We're talk in two weeks time.
Speaker 1: You're my rod.
Speaker 2: Thank you for listening to Redefining Energy. Don't forget to
Speaker 2: read the show and subscribe on Apple Podcast, Spotify, or
Speaker 2: the platform of your choice.