Speaker 1: With Laurent's Segal end from London and Gerard read from Berlin.
Speaker 1: This is redefining energy today.
Speaker 2: On redefining energy, we're going to look at hyperscalers and
Speaker 2: US utilities. But we did something sort of similar a
Speaker 2: few months back, and actually what we did is we
Speaker 2: looked at from the hyper scaler's point of view. This
Speaker 2: time we're going to look at from the utilities, the
Speaker 2: US utilities, how they see barber World's going forward, how
Speaker 2: they can meet demand going forward, what new services are
Speaker 2: in it, and whether it's a hype cycle.
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Speaker 3: Back to the show, Yes Chad, in episode two nineteen,
Speaker 3: we really analyzed the need for power from hyper scalers,
Speaker 3: and in order to get the view of the US utilities,
Speaker 3: we have brought Rajif Bajarj is VP of Solutions Sales
Speaker 3: that Constellation and for our listeners, Constellation it's in terms
Speaker 3: of capacity, in terms of generation, it's the largest power
Speaker 3: producer in the US, and their fleet is extremely interesting
Speaker 3: because it's fifty percent nuclear and fifty percent gas after
Speaker 3: the acquisition of Calpine last year. So you're going to
Speaker 3: see how the growth of Hyperscalar is perceived from a
Speaker 3: US utility point of view.
Speaker 4: So why don't we bring them on a show. I'm
Speaker 4: looking forward to this.
Speaker 3: Rash Welcome to the show. Thank you very much. Lauren.
Speaker 4: Well, right, maybe i'd kick off. I used to be
Speaker 4: a utilities on list and if I look at utilities,
Speaker 4: they've always traded a very low multiples because basically los
Speaker 4: has been happened in the utility space for twenty years.
Speaker 4: And then I look at the share prices in the
Speaker 4: last few years of the utilities and evaluations they're at.
Speaker 4: Suddenly they're trading like growth stocks. So gives an a
Speaker 4: view of what's happened too for the sleepy utilities to
Speaker 4: suddenly have these great valuations and growth stories.
Speaker 5: You know, when I first joined the industry, it was
Speaker 5: a very sleepy, boring industry. Nothing ever changed, and there's
Speaker 5: been a tremendous transformation in the industry and with our company,
Speaker 5: because everything is now revolving around energy. And that's just
Speaker 5: not in the data center space, but in general. The
Speaker 5: supply demand has shifted very significantly, continues to change, and
Speaker 5: it's going to have a significant impact on the global
Speaker 5: economy and how things play out over the next few
Speaker 5: years for sure.
Speaker 4: And by the way, look at im enough see you
Speaker 4: work for Constellation. What for me is incredible is to
Speaker 4: see the share price has going up sixfold in five years.
Speaker 4: And again I've never seen anything like that in the
Speaker 4: utility space.
Speaker 2: Right.
Speaker 5: That's the amazing part is, in many ways, a lot
Speaker 5: of our company's stocks, so it's just not Constellation, with
Speaker 5: other companies as well, has tracked what has happened in
Speaker 5: the data center space. There's a fairly strong correlation in
Speaker 5: some cases that shows how much energy is being valued
Speaker 5: as being impactful to the world in this very important
Speaker 5: segment of the market.
Speaker 3: If you try to put some numbers to a Constellation,
Speaker 3: you're the biggest usut t term of capacity in generation,
Speaker 3: so you generate to a rotel one hour per year.
Speaker 3: I mean front of you. You've got those Hyperscalars, the Amazon,
Speaker 3: the Google, the Microsoft, and they consume thirty to how
Speaker 3: what hour? You're much bigger, But those guys, guys have
Speaker 3: big plans, big money, big demand. How do you accommodate
Speaker 3: those people? Which pace of development for outstreet even probably
Speaker 3: what you can deliver.
Speaker 5: What I can do here is provide a little bit
Speaker 5: of a background on Constellation as a company. Constellation is
Speaker 5: a three year old company. We call it it's a
Speaker 5: new old company because as a company it's been around
Speaker 5: for a long time. But it was at one point
Speaker 5: fired by utility Excellon three years ago, we spun off
Speaker 5: from Excellent in an ipo and we are listed on
Speaker 5: the Nasdaq Stock Exchange. Since then, the company has done
Speaker 5: extremely well. But a lot of times, when you think
Speaker 5: about companies doing well, a lot of it is hard work,
Speaker 5: but you also need some good luck at the same time,
Speaker 5: and the time of our spin off was very good
Speaker 5: because nuclear power at the time was really not in
Speaker 5: vogue at all. Actually, one of the reasons we're being
Speaker 5: spun off is because from an ex Alon standpoint, it
Speaker 5: was a strategic and the shareholders didn't really want it
Speaker 5: as part of the portfolio. During the time of the
Speaker 5: spin off, things changed and the nuclear fleet, many of
Speaker 5: which we had already taken out of commission, some others
Speaker 5: we were considering or had announced we're going to be
Speaker 5: taken out of commission, became more valuable and we got
Speaker 5: the benefit of it during the IPO process and as
Speaker 5: a new company. Because nuclear all of a sudden became
Speaker 5: the thing in vogue. It became important because of the
Speaker 5: reliability of a nuclear fleet and the fact that it
Speaker 5: runs twenty four by seven by three sixty five, which
Speaker 5: became a high priority for data centers as well as others.
Speaker 5: At the same time last year we also announced the
Speaker 5: acquisition of Calpine. That was very much related to where
Speaker 5: we saw the market going moving forward. Our president and CEO,
Speaker 5: Joe Dimingus is he's a visionary. I highly admire his
Speaker 5: knowledge and insight, and he saw that because reliability was
Speaker 5: becoming a bigger issue and we needed to provide every
Speaker 5: electron to the grid as possible, having a nuclear fleet
Speaker 5: was great being clean and reliable, but you can't build
Speaker 5: a nuclear fleet overnight right and add to it. So
Speaker 5: gas became an important part of our strategy. We closed
Speaker 5: the deal at the end of last year and now
Speaker 5: what I would call the new constellation post the Calpie
Speaker 5: and acquisition, we are the largest independent power producer in
Speaker 5: the world. In the US, we have the largest nuclear
Speaker 5: fleet and the largest gas fleet producing electricity. We also,
Speaker 5: through Calpine, have become the largest geothermal provider in the
Speaker 5: US as well. So it's a much more diverse mix
Speaker 5: with generation and a lot of different parts of the country.
Speaker 5: And so it gives us the ability to be more
Speaker 5: flexible in terms of putting together strategies for our customers
Speaker 5: that help them address the three key needs that we
Speaker 5: see moving forward, which are reliability, sustainability, and I will
Speaker 5: add affordability because as power prices are going up, that's
Speaker 5: becoming a bigger and bigger problem.
Speaker 3: Yeah, and affordability. It's the blessing of the US. You
Speaker 3: have gas at three dollar and n metu and if
Speaker 3: you look at what's happening in the girlf right now,
Speaker 3: everybody was getting this gas a twenty dollars. You can
Speaker 3: run a gas fleet at a three dollars and it's
Speaker 3: going to be I guess very profitable. But for the
Speaker 3: rest of the world, gas becomes not top water or
Speaker 3: more like Champagne. So we can't do this fuel strategy.
Speaker 3: You need to import gas even when it arrives. That's
Speaker 3: the blessing you have and good for you to maximize
Speaker 3: the value of it. You are talking to the amazons
Speaker 3: and the metal of this world. What type of conversation
Speaker 3: you're having with them?
Speaker 5: In general, the conversations continue to evolve. Two years ago,
Speaker 5: the discussions were very much focused on stage ability. Everyone
Speaker 5: was very zeroed in on you know, Scope two, scope
Speaker 5: on reductions. Folks that started talking about Scope three. But
Speaker 5: when it became very clear that the demand side of
Speaker 5: things was going to continue to ramp up, each projection
Speaker 5: was higher than the last one. There's been a pivot
Speaker 5: where the reliability has become a much bigger part of
Speaker 5: the conversation. Reliability in the US has become more of
Speaker 5: an issue because of some of the auctions that we've
Speaker 5: had in areas like PGM last year, where there's been
Speaker 5: some very dramatic increases in the capacity numbers, and there's
Speaker 5: a recognition that we should be thinking about not only
Speaker 5: just the electricity price, but other components of what's on
Speaker 5: a customer's bill, right, so capacity, transmission and some ancillaries
Speaker 5: are all being looked at more carefully because each of
Speaker 5: those areas together is the final bill, and you just
Speaker 5: can't look at one section of it, which is your
Speaker 5: energy bill, which interestingly enough, has not changed very dramatically
Speaker 5: over the past few years. It's more the CND side
Speaker 5: capacity prices, which are the largest components of that increase.
Speaker 4: Can I ask you just when you look at the
Speaker 4: end of the day, go back to my whole thing
Speaker 4: about your trading like a growth stock, can you talk
Speaker 4: a little bit about how you see that growth going
Speaker 4: forward and how you manage it and what you see
Speaker 4: is the risks in other words, more easier or does
Speaker 4: anything warrier.
Speaker 5: My job is to understand what the customer is doing,
Speaker 5: what are their pain points, and where do they want
Speaker 5: to go moving forward. Our strategy is very much dictated
Speaker 5: by coming up with new products and solutions that match
Speaker 5: up to their changing needs. And there's a lot going
Speaker 5: on with the pricing part that I talked about earlier,
Speaker 5: but along with that, there's many other exciting things that
Speaker 5: are happening on the technology side of things, as one
Speaker 5: of the largest companies in this space. It's really important
Speaker 5: for us not to just come up with a strategy
Speaker 5: that we're comfortable with and then as an assembly line
Speaker 5: go to every customer with that same solution and expect
Speaker 5: that it's going to work for everyone. That is exactly
Speaker 5: the opposite of what we're seeing. We have to be
Speaker 5: very nimble. We have to understand that the customer and
Speaker 5: their objectives are changing because of what's going on in
Speaker 5: the market. And there are some examples are the Big
Speaker 5: Beautiful Bill last year, some of the executive orders coming
Speaker 5: out of the President. But then what we're seeing in
Speaker 5: terms of impact on solar and wind. On the flip side,
Speaker 5: we have technologies like battery and storage, for example, that
Speaker 5: are becoming a bigger part of the conversation, along with
Speaker 5: exciting areas like SMRs and potentially even fusion if you
Speaker 5: look way into the future. So how do we take
Speaker 5: all of this information and insight and put it together
Speaker 5: in a manner that a company can understand and they
Speaker 5: can say, Okay, I have a ten, fifteen, twenty year
Speaker 5: horizon to get from where I am today to my
Speaker 5: ultimate goal. The planning given what's available today, the constraints
Speaker 5: that are in place, affordability, and then new technology. There
Speaker 5: are all pieces to the puzzle that have to come
Speaker 5: together to really feel like we're providing the value the
Speaker 5: customer is looking for.
Speaker 3: Rash. I'm glad you introduced batteries because I want to
Speaker 3: have a bit of a deeper conversation around batteries. And
Speaker 3: I guess that your Calpine part being very present in Texas,
Speaker 3: so you are interacting with batteries more and more. And
Speaker 3: it's also related to the famous paper of Duke University
Speaker 3: Tayler Norris, who now works at Google, saying the grid
Speaker 3: is okay except for a few hundreds of hours per year,
Speaker 3: which means that if we put flex in fact, we
Speaker 3: we don't need to build as much generation as we
Speaker 3: can imagine. But if I look at batteries in the US,
Speaker 3: it's really Texas, California and the rest you talk about PGM,
Speaker 3: nobody's building battery or maybe I'm wrong, are the huge
Speaker 3: battery plans or not.
Speaker 5: In PGM, things are evolving very rapidly on the battery
Speaker 5: side in the US, where folks are very interested and
Speaker 5: looking at in front of the battery as well as
Speaker 5: behind the meter. Battery Solutions and Texas California by far
Speaker 5: they're the leaders, and they're seeing some very positive impact
Speaker 5: from the battery that they have implemented over the last
Speaker 5: few years. Where California, for example, notifications are going out
Speaker 5: in the summer months as texts to regular citizens of
Speaker 5: California to take their electricity down, and even those types
Speaker 5: of things have had a very powerful impact. Where I'm
Speaker 5: starting to see a change in mindset is also behind
Speaker 5: the battery and here taking battery, looking at demand response
Speaker 5: laurent which you were just referring to, and then in
Speaker 5: some cases also looking at solar as another component. Behind
Speaker 5: the meter is giving people a bundle that they can
Speaker 5: really understand and implement. Now, the cost is still a factor.
Speaker 5: I'm not going to say that. You know, we're in
Speaker 5: a place where it's being embraced in a very significant manner,
Speaker 5: but what you're starting to see is many more people
Speaker 5: having that conversation. We are doing a lot of modeling
Speaker 5: for customers, trying to show them how a battery can
Speaker 5: pay out over a long period of time and how
Speaker 5: it's going to help mitigate the risk for them by
Speaker 5: itself or along with solar, but demand response is a
Speaker 5: very significant part of the conversation as well, and where
Speaker 5: demand response, what I'll say is, and you're talking about
Speaker 5: the Duke paper. We are very proud of the fact
Speaker 5: that being a market leader is great, but one of
Speaker 5: the responsibilities when you are a market leader is you
Speaker 5: should be taking the lead and show new and innovative
Speaker 5: ways to make change and drive change because you have
Speaker 5: an audience that where people will listen to you. And
Speaker 5: with demand response, traditionally it's been a one year program
Speaker 5: and kind of bid into the program because prices for
Speaker 5: capacity we're very low. A lot of companies that were
Speaker 5: in the program have not participated in it. What we
Speaker 5: have tried to do over the last year or so
Speaker 5: is rolled out a product that we called our Enhanced
Speaker 5: Demand Response Product, where we are going for a longer
Speaker 5: term up to ten years, but we're also providing certainty
Speaker 5: in terms of the payout for these companies. So that
Speaker 5: going back to your question on a battery, when people
Speaker 5: are trying to model battery and they're looking at demand
Speaker 5: response at the same time, if you have that certainty
Speaker 5: in terms of the revenue you're going to generate, it
Speaker 5: can even help offset the cost of the battery and
Speaker 5: make the financial models look much more attractive.
Speaker 4: Rash, Can I talk about another technology and listen, you're
Speaker 4: the king of geoturmo in the Western world. I'd love
Speaker 4: to hear your thoughts on the future of it. In
Speaker 4: other words, are we going to see growth in that?
Speaker 4: Is there new technologies there? How do you feel and
Speaker 4: see about that?
Speaker 5: Yeah, geothermal is a very interesting question. Recently we actually
Speaker 5: had a very good conversation about this, and I'll talk
Speaker 5: about that in a minute, But first, CEBAY is an
Speaker 5: organization that is the acronym stands for Clean Energy Buyers Association.
Speaker 5: They are about four hundred companies, all the hyperscalers, other
Speaker 5: organizations like Target and Walmart and Exonmobile and others are
Speaker 5: part of this group. So it's a very cross functional
Speaker 5: group of energy users very much focus on sustainability and
Speaker 5: our reliability. As part of a board meeting, we visited Washington,
Speaker 5: DC and the Capital and talked with members from the House,
Speaker 5: the Senate as well as the White House, and geothermal
Speaker 5: was something that actually came up for discussion and geothermal
Speaker 5: people put it all together as one term, but they're
Speaker 5: really two distinct pieces to geothermal. One is just through
Speaker 5: natural geysers in places like California, you get a lot
Speaker 5: of heat. From what I understand, the Calpine facility that
Speaker 5: we have in northern California fits into that particular category.
Speaker 5: But then you have a lot of other startups that
Speaker 5: have new and innovative technologies that could be impactful and
Speaker 5: could be used across wider part of the world if successful,
Speaker 5: and that's an area of focus and a topic of
Speaker 5: the conversation. From the discussions I was referring to, the
Speaker 5: problem is that the technologies are still very much in
Speaker 5: their infancy. The price is very high, and more workers
Speaker 5: going to have to be done to really embrace eobermal
Speaker 5: in a significant way. But one thing that was very
Speaker 5: clear to me is that at least from a federal
Speaker 5: government standpoint in the US, there's a lot of interest
Speaker 5: in geothermal and what I'm hoping is that they will
Speaker 5: provide a first of a kind risk or ways for
Speaker 5: these new technologies to come to market faster, because as
Speaker 5: more people embrace it, hopefully prices will come down, it
Speaker 5: will be competitive, and we'll see more of it.
Speaker 3: Yeah, on the pot we've been following Timular Timer at
Speaker 3: Fervo really supported by Google and Cindy at Sage, which
Speaker 3: for me are the two startups. I mean there are
Speaker 3: a bit more than startups because they have raised hundreds
Speaker 3: of millions. And it's true that it's a wonderful technology,
Speaker 3: but as you say, how much can you replicate when
Speaker 3: you go from site A to side B. Probably what's
Speaker 3: above the ground should be pretty much the same. But
Speaker 3: all trilling thing. And it's great. They invented new techniques
Speaker 3: and they just get better all the time. But the
Speaker 3: question remain. Everybody loves it, but everybody questioned the pace
Speaker 3: with which it can be scaled up, which is a
Speaker 3: question we don't have for solar and batteries. You know,
Speaker 3: you just put them on the parking lot or on
Speaker 3: the roof. And Bobby Uncle, there's a lot of technology
Speaker 3: you refer a bit earlier, and here I'm very curious.
Speaker 3: It's SMR And if there's something you know, it's really nuclear.
Speaker 3: So on one camp you have Westinghouse and the book
Speaker 3: Fields who say the big is better, but it has
Speaker 3: been a bit of a pain through av girl, and
Speaker 3: on the other hand get those a lot. I don't know.
Speaker 3: I'm many ten twenty with some declination of the same
Speaker 3: some with new tech, but they've been successfully in raising money.
Speaker 3: How do you see the landscaping.
Speaker 5: SMRs somrs are great technologies, And to the first part
Speaker 5: of your question, we don't think that there's going to
Speaker 5: be a focus only on big or a focus just
Speaker 5: on SMRs. It's going to be a mix moving forward,
Speaker 5: and that mix is going to how that percentages shakeout
Speaker 5: is to be determined, but it's going to be a combination.
Speaker 5: From a constellation standpoint, when we look at a lot
Speaker 5: of these new technologies for SMRs, at this point we
Speaker 5: are agnostic to it. We're talking with every company, We're
Speaker 5: understanding the technologies.
Speaker 4: We do have a lot.
Speaker 5: Of knowledge and insight, obviously on the nuclear side, so
Speaker 5: we are getting prepared to implement SMRs as a strategy
Speaker 5: at some time in the future. Having said that, in
Speaker 5: the US there have been a lot of announcements, but
Speaker 5: there are certain parts of the world that are a
Speaker 5: little ahead of the US when it comes to SMRs.
Speaker 5: We will see SMRs. SMRs are going to become important
Speaker 5: across the world, but in the US realistically, SMRs are
Speaker 5: not going to be at at any significant scale until
Speaker 5: at least twenty thirty five. That's because there's a lot
Speaker 5: of process work and approvals that are going to be
Speaker 5: needed before we get there. So technology is important, it's
Speaker 5: one part of it. But then how are you going
Speaker 5: to license and the permitting and where they go in
Speaker 5: and how they are brought on are all things that
Speaker 5: have to be decided is still work in progress. What
Speaker 5: I can say is a lot of companies that we
Speaker 5: talk to, and this is probably true across the world,
Speaker 5: people think about SMRs and they think that, oh, you know,
Speaker 5: I can just drop an SMR anywhere. Given our experience
Speaker 5: in nuclear, you just can't build nuclear anywhere. There's a
Speaker 5: lot of work that needs to be done on where
Speaker 5: the location is. There's a lot of work that has
Speaker 5: to be done in terms of talking with the local communities,
Speaker 5: giving them the insights and knowledge and giving them the
Speaker 5: opportunity to learn more about nuclear And so when we
Speaker 5: look at nuclear including somrs in the US, we feel
Speaker 5: the best places for SMRs to be located is where
Speaker 5: you already have a nuclear facility because generally there's a
Speaker 5: lot of land and you have a community that is
Speaker 5: very comfortable with nuclear. So in terms of timing interconnections community,
Speaker 5: those are probably the most ideal places for them to
Speaker 5: be located. So Rogie, the one thing that I also
Speaker 5: see in the space is that there's a huge change
Speaker 5: in the way the customers are actually using energy, and
Speaker 5: that means you also have to change the way you're
Speaker 5: servicing them and the products you will for them and
Speaker 5: stuff like that. Could you talk a little bit about
Speaker 5: that and expand the there's a bit of a month on
Speaker 5: the innovations you see in that area there. Jared, it's
Speaker 5: a very good question because conversations keep all evolving with
Speaker 5: our customers. A lot of that has to do with
Speaker 5: pretty much everything that we've been talking about so far.
Speaker 4: Some things that come to mind is.
Speaker 5: Behind the meter, and they're behind the meter strategy a
Speaker 5: lot more interests than probably what we had a year,
Speaker 5: definitely two years ago, so the reliability piece is becoming
Speaker 5: very critical for them. On the reliability side, we also
Speaker 5: have a lot of conversations about nuclear Three four years
Speaker 5: ago we launched an hourly product that started with data
Speaker 5: center companies where if you are pulling wind or solar
Speaker 5: and the sun isn't shining or the wind isn't blowing,
Speaker 5: how can you fill those gaps and still have clean energy.
Speaker 5: We're filling the gaps with our nuclear power in many cases,
Speaker 5: and that has expanded beyond data centers to a lot
Speaker 5: of other verticals as well, so that interest is growing.
Speaker 5: What we're also so starting to see tight reliability is
Speaker 5: that customers now are looking for a long term reliability,
Speaker 5: a way to lock in capacity because they're seeing a
Speaker 5: trend here. The trend is worrisome, it's adding risk for them,
Speaker 5: and so how do you create a long term ppa
Speaker 5: where you can also lock down that capacity is generating
Speaker 5: significant interest as well. Those would be some critical areas.
Speaker 5: Another area that's interesting is Scope three. You know, Scope
Speaker 5: three Europe is very important, but given everything that happened
Speaker 5: over the last year, especially since the election, you would
Speaker 5: think that many of the larger companies would not be
Speaker 5: interested in Scope three. But what we're seeing is a
Speaker 5: fair amount of interest in Scope three and company wanting
Speaker 5: to continue to develop strategies and implement plans to reduce
Speaker 5: their Scope three. It's a misconception to think that companies
Speaker 5: on the US side are not trying to implement their
Speaker 5: sustainability goals. They're doing it, but they're they're looking at
Speaker 5: it more in the context of risk management as well
Speaker 5: as reliability and affordability all at the same time. The
Speaker 5: conversations have become a lot more complex because of that.
Speaker 3: So when you have an a Pascalo or arrives and say, okay,
Speaker 3: I hear you. You know you took a good game,
Speaker 3: but you know I'm going to put some fuel cells
Speaker 3: or all jet engines from buying that I refurbished from
Speaker 3: the scrup yard or even SMO because we've seen meta signing.
Speaker 3: I don't know how many giga goot to this company.
Speaker 3: We have a beautiful power point, but that's pretty much
Speaker 3: the end of it. What do you tell them he
Speaker 3: said you want to go fringe, go for it, or
Speaker 3: you just say, look, we can do better.
Speaker 5: It really depends because in many cases what we see
Speaker 5: the customers they're thinking about one thing at a time.
Speaker 5: So they may come to us thinking about can we
Speaker 5: do off site renownbal project for additionality, or they may say, hey,
Speaker 5: you know, we have a certain fuel cell that we're
Speaker 5: in state in we want to implement that, And for us,
Speaker 5: it's more about broadening that conversation. It's easy to say, okay,
Speaker 5: you know, I just want a solar that flows three
Speaker 5: years from now because it's going to help me with
Speaker 5: certain targets that I had in mind. But given everything
Speaker 5: else that just mentioned, it's important to at least try
Speaker 5: to engage them in a conversation about what other things
Speaker 5: could be impactful for them and help them do some
Speaker 5: modeling and risk management so that they can understand that
Speaker 5: maybe a fuel cell is not the best because it
Speaker 5: could be more expensive, or there's some other issue that
Speaker 5: may not be the best fit, but you know, you
Speaker 5: have other options that you should consider before you make
Speaker 5: the final decision to go down that road. Those are
Speaker 5: types of things that we're starting to do quite a
Speaker 5: bit more gragi.
Speaker 4: If we go and have a look at the future,
Speaker 4: give us a view of how you see firstly, you know,
Speaker 4: how you see the US power markets developing in the
Speaker 4: next five years, and then just also talk about how
Speaker 4: you see Constellation in that evolving market, the Constellation as.
Speaker 5: A company coming all the way down from Joe Domingus
Speaker 5: to everyone else within the company. It's all about understanding
Speaker 5: and learning what are the trends, what are the technologies,
Speaker 5: and what are the products and services we can offer
Speaker 5: that match up to it for our customers. When I
Speaker 5: look at things from that lens, we really have to
Speaker 5: be on top of things in terms of what all
Speaker 5: is happening in the market on a daily basis, right,
Speaker 5: and then you add on all the volatility that we're
Speaker 5: seeing in the commodity markets itself because of political, economic,
Speaker 5: and other factors. We have to make sure that we
Speaker 5: know what the impacts are going to be of all
Speaker 5: of these changes to companies and help them in adapting
Speaker 5: their own strategies most effectively. If there's one word that
Speaker 5: I'll use, it's risk management, because risk management is becoming
Speaker 5: probably the most critical hard of any strategy that involves
Speaker 5: reliability and sustainability right now. Giving confidence that you can
Speaker 5: adapt and pivot and change, but what you're going to
Speaker 5: do is actually going to be better than what you
Speaker 5: were previously thinking. For all these reasons is what companies
Speaker 5: are looking for and hopefully that is what a company
Speaker 5: like Constellation can provide to them.
Speaker 3: Well, I thank you very much for coming on the show.
Speaker 3: We're enjoying very much and it's refreshing to have the
Speaker 3: point of view of a very professional US utility and
Speaker 3: knowing what they're doing compared to all the noise we
Speaker 3: hear around. So thank you very much for coming.
Speaker 5: Thank you for having me really appreciate it.
Speaker 4: Yeah, great conversation, Thanks a lot.
Speaker 3: Well job. Alsoll we like to thank Rash for coming
Speaker 3: on the show. I want to analyze at two level
Speaker 3: what he says and I want to analyze what he
Speaker 3: didn't say. So if we go to what he said,
Speaker 3: he said, Okay, SMR interesting, good luck guys, but come
Speaker 3: to Papa because the nuclear sites we got them. Joe Thermon. Yeah,
Speaker 3: interesting in theory, but is it going to scale? He
Speaker 3: took about batteries, but more like other guys are going
Speaker 3: to do it, despite the fact that Calpine has a
Speaker 3: big new battery last year in California, and you talk
Speaker 3: about demond response, which of course gets more interesting when
Speaker 3: you look at the press on PGM. So that's what
Speaker 3: he said. What's your view on what he said?
Speaker 4: Yes, I agree with what you said. The thing that
Speaker 4: I was struck by, which is not really related to this,
Speaker 4: but it was that he said, look at his clients
Speaker 4: have not given up on carbon emission targets, and I
Speaker 4: thought that was quite interesting. I thought, oh, because I
Speaker 4: was quite surprised at that. So, in other words, what
Speaker 4: these guys are trying to do is. Obviously they want
Speaker 4: as much power as possible and as quick as possible,
Speaker 4: but they also want to take their responsible abilities for
Speaker 4: the environment. They're still taking those seriously as well. I
Speaker 4: think that was the other thing I took out of it.
Speaker 3: Yeah, Jah, okay, and Google for sure. But when you
Speaker 3: look at Meta, they just announced that the Louisiana Project
Speaker 3: now as ten new ccgts seven gigawatt you have. Microsoft
Speaker 3: just announced two point five gigawats seven billion with Chevron
Speaker 3: in Texas. I don't know how they're going to meet
Speaker 3: their net zero commitments, but some of the hyper scale
Speaker 3: they're piling big on gas in the source of the US.
Speaker 4: Oh yeah, of course absolutely. I'm innocent that I understand.
Speaker 4: The first priority is get power as quick as possible.
Speaker 4: Simple a staff, right, that's the first priority.
Speaker 3: Now, the other part is what it didn't say, and
Speaker 3: that was almost more interesting than what he said.
Speaker 4: So what do you not say?
Speaker 3: For you? What is constellation? Constellation used to be the ugly,
Speaker 3: don't clean, and nobody wanted the nuclear fleet in their books.
Speaker 3: That's why they were spun out of Excellent a few
Speaker 3: years back. And of course, a nuclear fleet, it's the
Speaker 3: Golden Goose. For instance, one of the deals they made
Speaker 3: was to restart three mile Islands with Microsoft. That's their position.
Speaker 3: It's really to maximize the value of their nuclear fleet.
Speaker 3: In order to do so, what they want is surprised
Speaker 3: to go high. Are they going to invest in new assets, No,
Speaker 3: they're not. What they want is to upgrade their assets.
Speaker 3: But do they have any plan to do any new
Speaker 3: nuclear plants. I don't think so. So that's half of
Speaker 3: the fleet. The other half is the gas fleet. And
Speaker 3: if you analyze what a gas fleet is, a gas
Speaker 3: fleet in what we call the merit order is in
Speaker 3: the middle of the merit order. So at the beginning
Speaker 3: of the merit order, you're really gonna have your wins
Speaker 3: solar nuclear, and then you can have your gas fleet.
Speaker 3: And then at the bottom of your merit order you
Speaker 3: can have your cold lands and your pickers. So the
Speaker 3: load factors they have are in the mid forties. Okay,
Speaker 3: of course they want the load factors to increase. Now
Speaker 3: the margin they are doing when you buy gas at
Speaker 3: three dollar and mbtu, which gives you it's calculations relatively simple,
Speaker 3: but the cost of the gas they are burning into
Speaker 3: their turbine Omega whatever is about twenty dollars, and they
Speaker 3: sell it that's seventy dollars, So they make sparks spread
Speaker 3: close to fifty dollars. Omega what hour and I can
Speaker 3: tell you this is really great, but they need higher
Speaker 3: load factors because what's happening is that batteries and solar
Speaker 3: are eating their lunch every day, so they're kind of
Speaker 3: freaking out, especially in Aircot what there's a lot of
Speaker 3: renovable development. If I want to summarize their strategy, and
Speaker 3: you know, you tell me if you agree with me
Speaker 3: or not, it's to sweat their existing fleets extract the
Speaker 3: maximum value out of it. It's conservative management, considering that
Speaker 3: ninety percent of their capacity was built in the twentieth century,
Speaker 3: so that the free starts to be rather mature. And
Speaker 3: they'll tell their hyperscalers, but guys, you're going to pay.
Speaker 4: So you miss a mon thing and all of that.
Speaker 4: And it relates to the valuation of these businesses, because
Speaker 4: the evaluation of these businesses in terms of are multiples
Speaker 4: around these are like thirty year highs. So the question
Speaker 4: is why is that because there's a belief in the
Speaker 4: market that those capacity factors will go up, and why
Speaker 4: will they go up Because the hyperscalers. And that's actually
Speaker 4: the other part of the strategy is they are moving
Speaker 4: towards the hyperscalers because the hyperscalers at the end of
Speaker 4: the day, they want to have power twenty four to
Speaker 4: seven and if they get close to them in every way,
Speaker 4: then then get those capacity factors up. So that'd be
Speaker 4: the major point.
Speaker 3: I would say a few years ago, the prices for
Speaker 3: power in the US were on what the thirty dollars
Speaker 3: fifty dollars. Now they're up to seventy eighty dollars. If
Speaker 3: a nyper Scalda want to build the CCGT is gonna
Speaker 3: costume to make it what our one hundred plus dollars.
Speaker 3: So that's what they're aiming for. As you said, high
Speaker 3: a lout factors, higher prices, especially for the new clou feed.
Speaker 3: They are in a very good place. They are not
Speaker 3: going to invest more. It's really about optimizing the current fleet.
Speaker 4: Of course, absolutely, it is about getting capacity factors up,
Speaker 4: That's what we're really saying, and then selective investments when
Speaker 4: it's rerest exactly.
Speaker 3: Okay, we like to thank Uraj for coming on the show.
Speaker 3: Very interesting I.
Speaker 4: Can just say, Rajh, thanks again and Loron has ever
Speaker 4: got senior blocome forward our conversation next week.
Speaker 3: Absolutely looking forward to it.
Speaker 4: Thank you for listening to Redefining Energy.
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