WEBVTT 1 00:00:04.839 --> 00:00:08.400 With laurents segal and from London and Gerard Reed from Berlin. 2 00:00:08.880 --> 00:00:13.599 This is Redefining Energy today. On redefining energy or actually 3 00:00:13.720 --> 00:00:17.480 going to talk about a company or an institution, KKR, 4 00:00:18.160 --> 00:00:20.399 which is one of the biggest private equity businesses in 5 00:00:20.399 --> 00:00:25.440 the world and they're heavily involved in the energy infrastructure sector. 6 00:00:26.120 --> 00:00:29.359 Yeah, because on this podcast we talk a lot about 7 00:00:29.559 --> 00:00:33.640 those big private investors, but at some point it is 8 00:00:33.719 --> 00:00:37.920 great to really understand how they function, how they think, 9 00:00:38.159 --> 00:00:42.560 what is their strategy, how it's evolving. So if we 10 00:00:42.560 --> 00:00:46.640 look at KKR, they've invested dozens of billions in the 11 00:00:46.719 --> 00:00:50.320 acquisition of assets in our sector. And I'm just going 12 00:00:50.359 --> 00:00:52.719 to name a few because you're going to hear about 13 00:00:52.719 --> 00:00:58.719 them during the conversation. Zeno b Adventus, albionma Conto, Global 14 00:00:58.840 --> 00:01:04.799 actis Igny, sms at Shiona and Kavis ecg Any Bayou 15 00:01:04.840 --> 00:01:07.680 fuels crazy. The level of their activity. 16 00:01:08.280 --> 00:01:11.280 For me, it's really interesting on as their strategies because 17 00:01:11.280 --> 00:01:14.959 what they're really doing is they want to create platforms 18 00:01:15.439 --> 00:01:20.200 and they want to create next generation energy services businesses. 19 00:01:20.359 --> 00:01:23.120 And you know, it's energy service and a victag. So 20 00:01:23.319 --> 00:01:26.000 you've got a business that's looking at mobility. You've got 21 00:01:26.000 --> 00:01:28.319 a business is looking at in turn industrial and commercial. 22 00:01:28.719 --> 00:01:32.519 They're in different regions, and and and and they all 23 00:01:32.560 --> 00:01:36.879 have some form of competitive advantage. And basically what KKR 24 00:01:36.920 --> 00:01:38.439 doesn't help these businesses scale. 25 00:01:39.159 --> 00:01:43.079 We have the pleasure and the privilege of inviting Emmanuel 26 00:01:43.159 --> 00:01:47.000 la Gaigue, who is a partner at kirk and co 27 00:01:47.159 --> 00:01:49.879 head of the Global Climate Group. 28 00:01:50.439 --> 00:01:53.680 Yeah, and guide Lauren. I've known for a long, long while. 29 00:01:53.719 --> 00:01:56.200 He's been in this whole energy space the whole of 30 00:01:56.200 --> 00:01:58.599 his career. You know, he was formerly had a strategy 31 00:01:58.599 --> 00:02:02.560 at Schneider. Yeah. Great guy to have on board to 32 00:02:02.599 --> 00:02:06.040 talk about not just KKR, but also just how he 33 00:02:06.200 --> 00:02:08.840 sees the future and how he's trying to create it 34 00:02:08.879 --> 00:02:11.080 with the businesses that is investing in scaling. 35 00:02:11.639 --> 00:02:15.280 And of course we're asking about the topics right now 36 00:02:15.680 --> 00:02:20.319 that isn't a Hi what he thinks about hydrogen green premium. 37 00:02:20.400 --> 00:02:23.800 I mean really really a treat for us and I 38 00:02:23.800 --> 00:02:25.280 guess for our listeners. 39 00:02:25.319 --> 00:02:28.039 Agree, totally listen. Why don't we bring him on the show. 40 00:02:29.159 --> 00:02:30.840 Emanuel, Welcome to the show. 41 00:02:31.240 --> 00:02:33.759 Thank you, Lauren, Thank you. Jerrar gread to be here. 42 00:02:34.400 --> 00:02:39.240 Ko manages seven hundred billion which is enormous people don't realize, 43 00:02:39.639 --> 00:02:43.159 out of which probably ten percent are dedicated to energy 44 00:02:43.199 --> 00:02:48.000 Infatulu Emanuel, first, can you give us a big picture 45 00:02:48.039 --> 00:02:50.360 of how all this fits into KKO strategy. 46 00:02:51.159 --> 00:02:54.240 Yeah, So, as you said, the infrastrator franchise within KKI 47 00:02:54.360 --> 00:02:57.360 is roughly seventy to eighty billion of asset under management. 48 00:02:58.000 --> 00:03:01.680 That's a platform that started actually right after the global 49 00:03:01.719 --> 00:03:04.120 financial crisis in two thousand and nine and has been 50 00:03:04.439 --> 00:03:07.639 growing extremely fast in them used to take KEK is 51 00:03:07.719 --> 00:03:11.039 the second larger infrastruture investor on the planet, the largest 52 00:03:11.080 --> 00:03:13.560 in Asia Pacific, and so we are very proud of 53 00:03:13.560 --> 00:03:16.479 it and how our things are being developing and out 54 00:03:16.520 --> 00:03:20.479 of this, if we look at energy assets and assets 55 00:03:20.680 --> 00:03:23.960 linked to the energy transition, almost a third of those 56 00:03:24.000 --> 00:03:28.280 investments have been in and around energy. The important point 57 00:03:28.280 --> 00:03:32.000 here is that sometimes when people think about infrastructure, the 58 00:03:32.080 --> 00:03:34.840 thing that come to mind is tow roads and ports 59 00:03:34.879 --> 00:03:38.599 and airports. This is not what we do. It's a 60 00:03:38.719 --> 00:03:40.080 very different type of assets. 61 00:03:40.719 --> 00:03:41.919 Today. Most of the. 62 00:03:41.879 --> 00:03:44.759 Activity across the platform is in data centers and how 63 00:03:44.800 --> 00:03:47.520 you bower the data centers and our AI is changing 64 00:03:47.560 --> 00:03:50.960 the paradigm with what we're doing with my cohead and 65 00:03:50.960 --> 00:03:54.680 partner Charlie around climate under decombonization of a number of 66 00:03:54.719 --> 00:03:58.199 supply chains. We're talking about private assets and not so 67 00:03:58.280 --> 00:04:01.960 much what was to twenty five years ago infrastructure. 68 00:04:02.000 --> 00:04:03.800 I think that's one of the ingredients of. 69 00:04:03.680 --> 00:04:06.560 The success of the car infrastructure platform. So it's like, 70 00:04:06.680 --> 00:04:10.280 how do you build businesses which are buying large private 71 00:04:10.360 --> 00:04:14.199 infrastructure businesses with no sensitivity to GDP or very low 72 00:04:14.240 --> 00:04:18.639 sensitivity or exposure to GDP, predictability of cash flows, downside 73 00:04:18.639 --> 00:04:22.360 protections and all the things that in the volatile environment 74 00:04:22.439 --> 00:04:24.720 are becoming a really interesting place to go for. 75 00:04:25.600 --> 00:04:28.120 And Mana, let me just jump in there maybe just 76 00:04:28.160 --> 00:04:30.759 before we talk about your strategy and the types of 77 00:04:30.800 --> 00:04:34.480 companies you invest in, could you talk about how you 78 00:04:34.600 --> 00:04:37.040 look at risk and reward. Do you have a sort 79 00:04:37.040 --> 00:04:39.600 of one view of it or do you have different 80 00:04:39.639 --> 00:04:42.680 funds that look at different types of risk rewards? Just 81 00:04:42.720 --> 00:04:44.120 maybe talk a little bit about that. 82 00:04:44.879 --> 00:04:49.800 Yeah, we have different strategies. Just take one sector, renewables. 83 00:04:50.079 --> 00:04:54.240 If you're investing in operating assets of wind and solar, 84 00:04:54.319 --> 00:04:57.639 where you have long term PPAs everything is built so 85 00:04:57.680 --> 00:05:00.720 it's very predictable, it's a lower risk glor return strategy, 86 00:05:00.879 --> 00:05:04.040 so that would go into our core strategy. If you 87 00:05:04.120 --> 00:05:07.959 invest in a brown to green conversion, you take generating 88 00:05:08.000 --> 00:05:12.360 assets on agreed, then you're converting them away from fossil 89 00:05:12.399 --> 00:05:15.600 fuels and into renewables and biomass, where there's a bit 90 00:05:15.639 --> 00:05:17.920 more work, there's a bit more of a personal leverage, 91 00:05:18.000 --> 00:05:21.800 but it's still relatively predictable and stable asset. So you 92 00:05:21.839 --> 00:05:24.439 would put this in it's a higher risk and higher return. 93 00:05:24.480 --> 00:05:28.079 That's more of a corplus type of strategy. And then 94 00:05:28.439 --> 00:05:31.839 when you look at an asset like Adventus here in 95 00:05:31.879 --> 00:05:36.120 the US, where we basically sell high tech solar and 96 00:05:36.199 --> 00:05:40.879 battery projects in the places of the US where it's 97 00:05:41.120 --> 00:05:44.360 highly needed, very high in the interconnection queue, so there's 98 00:05:44.480 --> 00:05:47.399 much more development work there. So that goes into the 99 00:05:47.399 --> 00:05:50.959 Climate Fund, which is more about developing the next generation 100 00:05:51.040 --> 00:05:53.600 of the carbonization asset. So we have to be very 101 00:05:53.600 --> 00:05:57.399 disciplined on how we treat everything and which asset will 102 00:05:57.399 --> 00:06:01.120 go in which box. The beauty of having several strategies 103 00:06:01.160 --> 00:06:03.759 and several ways to treat that risk return is that 104 00:06:03.759 --> 00:06:06.839 we can cover the entire span of what's happening, for instance, 105 00:06:06.839 --> 00:06:09.399 in renewables and I could take the example of AI 106 00:06:09.480 --> 00:06:11.639 in at a center all the places where we can 107 00:06:11.720 --> 00:06:14.279 be very clear with our investors, right, so they know 108 00:06:14.439 --> 00:06:17.360 exactly which strategy is going to invest in, which type 109 00:06:17.600 --> 00:06:18.600 risk return asset. 110 00:06:19.319 --> 00:06:22.800 Emanuel, when I read the presentation of all various activities, 111 00:06:23.319 --> 00:06:28.680 you were on a geographical split forty America, forty Europe 112 00:06:28.720 --> 00:06:31.920 twenty Asia. If I'm not mistaken, have you been able 113 00:06:32.040 --> 00:06:35.560 to follow or you have like even flows or how 114 00:06:35.600 --> 00:06:39.160 do you cope with the geographical diversification small. 115 00:06:39.000 --> 00:06:41.959 Less how things are unfolding? Where we have that split 116 00:06:42.120 --> 00:06:45.519 is mostly for the climate strategies. But we say to 117 00:06:45.600 --> 00:06:49.399 decombanization strategy together with the positive returns, right, so it's 118 00:06:49.399 --> 00:06:52.040 returns first because we don't think there should be a 119 00:06:52.079 --> 00:06:55.279 trade off between the cambonization and return. So it has 120 00:06:55.360 --> 00:06:58.120 to create a return and also decoveranize the same time 121 00:06:58.120 --> 00:07:00.279 with But we say so if we do the is 122 00:07:00.639 --> 00:07:03.279 that's going to be mostly in no easid countries. Therefore 123 00:07:04.160 --> 00:07:07.160 split between North America, Europe and Asia Developed Asia. I 124 00:07:07.160 --> 00:07:10.160 should say this is roughly what's happening. We have started 125 00:07:10.160 --> 00:07:12.800 a little bit more tilty towards Europe for different reasons. 126 00:07:12.959 --> 00:07:14.839 It was easier for us to do the first deals 127 00:07:14.959 --> 00:07:18.720 there the market where also valuations and volatility were lower. 128 00:07:19.279 --> 00:07:22.079 But roughly what we were predicting is happening. 129 00:07:22.680 --> 00:07:24.680 Maneuel. Can I pick you up on that point about 130 00:07:24.800 --> 00:07:28.040 your focus on Europe and also what you said about valuations, 131 00:07:28.040 --> 00:07:30.240 because what I think very interesting about what you've done 132 00:07:30.399 --> 00:07:34.680 is you've actually taken quite a few public companies privates. 133 00:07:34.959 --> 00:07:37.160 And I sort of scratched my head and just say, 134 00:07:37.560 --> 00:07:40.040 if that's the case, then you know basically something wrong 135 00:07:40.079 --> 00:07:41.519 with our public markets in Europe. 136 00:07:42.480 --> 00:07:45.000 I don't think it's exclusive to Europe, and we see 137 00:07:45.000 --> 00:07:49.680 that everywhere public markets have become volatile and with a 138 00:07:49.759 --> 00:07:52.759 very low tolerance to risk or change. This is why 139 00:07:52.839 --> 00:07:55.720 you see all the biggest set managers, and we're not 140 00:07:55.720 --> 00:07:57.680 the only ones. When we look at Larry Fink's and 141 00:07:57.800 --> 00:08:01.759 your letter. It's all about democratizing the access to infrastructure investment. 142 00:08:02.279 --> 00:08:05.920 So the paradox of this is that private investment, and 143 00:08:06.000 --> 00:08:10.439 especially in infrastructures, is becoming more stable, more predictable, especially 144 00:08:10.439 --> 00:08:13.319 if you want to transform things, and we've seen that 145 00:08:13.600 --> 00:08:16.480 around the energy and the energy transition. Five years ago, 146 00:08:16.560 --> 00:08:19.759 six years ago, you would see CEOs of public companies 147 00:08:19.879 --> 00:08:22.639 going to their board and their shoulders with very bold 148 00:08:22.759 --> 00:08:26.399 transition strategies. Hey, we're going to invest two three billion 149 00:08:26.560 --> 00:08:29.720 into this, into that transition, and we'll create a new 150 00:08:29.800 --> 00:08:33.360 green growth engine to our portfolio. That has not happened 151 00:08:33.399 --> 00:08:35.519 because this is not what public markets are made for. 152 00:08:36.000 --> 00:08:38.200 Of course, the attractiveness of public markets, it's like it's 153 00:08:38.440 --> 00:08:40.480 the lowest tier of cost of capital. You have very 154 00:08:40.519 --> 00:08:45.240 cheap capital, but in exchange you need to give predictability. 155 00:08:44.600 --> 00:08:45.879 Very simple equity story. 156 00:08:46.679 --> 00:08:49.360 So today many of those companies who were promoting this 157 00:08:49.480 --> 00:08:52.240 type of strategy five six years ago, our companies we 158 00:08:52.279 --> 00:08:56.120 are talking to because private capital and private infrastructure is 159 00:08:56.159 --> 00:08:59.720 probably the place where this should happen. Yes, it's a 160 00:08:59.799 --> 00:09:03.320 high cost of capital that there's a guarantee of delivering. 161 00:09:03.840 --> 00:09:06.639 So for many of those companies, the conversations we are 162 00:09:06.679 --> 00:09:09.320 having are, but let's create that green growth asset that 163 00:09:09.320 --> 00:09:11.039 you were planning to do, but it's going to be 164 00:09:11.279 --> 00:09:13.320 off balance sheet of pnls, so that you don't have 165 00:09:13.360 --> 00:09:16.440 to consume capital from your shoulders and from your balance sheet. 166 00:09:16.879 --> 00:09:19.840 You don't also to force your shoulders in subscribing to 167 00:09:19.879 --> 00:09:23.279 a strategy. They may not like we build that asset. 168 00:09:23.519 --> 00:09:25.639 We give you the optionality once the asset is at 169 00:09:25.639 --> 00:09:28.120 scale and you can tell an equity story that your 170 00:09:28.159 --> 00:09:30.120 shoulders are ready to hear, but then you can take 171 00:09:30.120 --> 00:09:32.919 it back or not. If that never happens, well we'll 172 00:09:32.919 --> 00:09:35.320 go figure out what we do with this asset. So 173 00:09:35.799 --> 00:09:39.440 we see that changing because private markets are usually better 174 00:09:39.440 --> 00:09:41.799 equipped for anything that that is a transformation like this. 175 00:09:42.600 --> 00:09:45.919 And case in point two months ago there was this 176 00:09:45.960 --> 00:09:49.080 listed fun on that risk called Harmony and they've been 177 00:09:49.240 --> 00:09:52.960 taken private with an eighty eight percent premium on their 178 00:09:53.080 --> 00:09:55.960 stockitching variation. So it was very clear that the stocking 179 00:09:56.080 --> 00:10:00.519 change was not finding the value. So we really understand 180 00:10:00.600 --> 00:10:03.639 that and more. They speaking if we look just the 181 00:10:03.720 --> 00:10:06.480 last five years and you are a long term investor, 182 00:10:07.000 --> 00:10:11.120 but then you take COVID, the hydrogen bubble, Russia, Ukraine, 183 00:10:11.879 --> 00:10:16.039 now we have the treasuy wars and volativity absolutely crazy. 184 00:10:16.159 --> 00:10:19.200 So how do you survive all this? 185 00:10:19.200 --> 00:10:21.039 This is part of life, So see why you have 186 00:10:21.080 --> 00:10:25.399 to take a long term view, none jerk reaction, Understand 187 00:10:25.639 --> 00:10:28.799 where this is going, try to calibrate and measure those risks. 188 00:10:29.200 --> 00:10:31.960 We are spending a lot of time talking to governments, 189 00:10:32.279 --> 00:10:36.480 not because we want to extract subsidies or preferences or influences. 190 00:10:36.600 --> 00:10:39.120 We just want to understand where they are going. Because today, 191 00:10:39.200 --> 00:10:44.039 even in the West, policies and regulation around energy become 192 00:10:44.120 --> 00:10:47.320 somehow volatile, and when there's an election, you can have 193 00:10:47.600 --> 00:10:50.480 a change of direction. That's fair, that's how it works. 194 00:10:50.720 --> 00:10:53.159 So we just take this into account and we try 195 00:10:53.200 --> 00:10:55.480 to make the most of it. And if you think 196 00:10:55.519 --> 00:10:58.720 about it, and that's what our founders Henry Cravis Central 197 00:10:58.799 --> 00:11:03.000 Roberts always reminders when like guys at KKR, we invested 198 00:11:03.039 --> 00:11:05.679 in periods of time where inflation was double digit in 199 00:11:05.720 --> 00:11:08.480 the US and KR was successful. So that world is 200 00:11:08.519 --> 00:11:11.039 going to change around you and influence what you can 201 00:11:11.080 --> 00:11:13.440 influence and for the rest trust to apprehend those risks 202 00:11:13.440 --> 00:11:16.159 and understand them the best you can. And of course 203 00:11:16.200 --> 00:11:18.399 that long term is a bit, especially when you invest 204 00:11:18.399 --> 00:11:20.399 in energy and the cambonization, you have to take a 205 00:11:20.440 --> 00:11:23.480 long term. This is a multidicated story. Let's not try 206 00:11:23.480 --> 00:11:27.519 to think this is the next LM or SaaS do 207 00:11:27.720 --> 00:11:30.039 things take time. We're talking about the infrastructure. We're talking 208 00:11:30.080 --> 00:11:33.039 about very large investments about changing the energy mix of 209 00:11:33.159 --> 00:11:36.720 countries or companies. So that's going to be long can. 210 00:11:36.759 --> 00:11:39.320 Maybe we talked a little bit about your investment strategy, 211 00:11:39.360 --> 00:11:42.639 because from outside, what I look at is that it 212 00:11:42.759 --> 00:11:46.480 seems that you're investing in what I call platform businesses, 213 00:11:46.519 --> 00:11:50.360 in other words, businesses that you can really scale by 214 00:11:50.639 --> 00:11:53.320 bringing them into their countries, bringing them into the markets, 215 00:11:53.559 --> 00:11:56.159 or whatever it is. Is that a fair synopsis of 216 00:11:56.360 --> 00:11:57.080 what you're doing. 217 00:11:57.720 --> 00:12:01.279 Yeah, especially when the climate strategy, there is this notion 218 00:12:01.320 --> 00:12:03.039 of platform. So if you take the example of the 219 00:12:03.159 --> 00:12:08.240 NOB it's a high development, high growth platform where we 220 00:12:08.440 --> 00:12:13.039 electrify mass transit systems. We help bus operators in the 221 00:12:13.159 --> 00:12:17.559 UK and Europe, in Australia transition their diesel fleets to electric. 222 00:12:18.120 --> 00:12:18.720 This is new. 223 00:12:18.879 --> 00:12:20.600 You have to take into account or you're going to 224 00:12:20.759 --> 00:12:23.279 charge those buses, or you remove the frictions, or you 225 00:12:23.360 --> 00:12:26.200 create a return out of the favorable total cost of 226 00:12:26.240 --> 00:12:28.720 ownership that an electric fleet is bringing you over the 227 00:12:28.720 --> 00:12:31.159 diesel fleet, and so on and so forth. What we've 228 00:12:31.240 --> 00:12:34.720 done in Spain withness Power to X it's a platform 229 00:12:34.799 --> 00:12:39.240 to decarbonize the supply of electrons and molecules and steam 230 00:12:39.360 --> 00:12:43.039 to heavy industry. What we are doing now in Germany 231 00:12:43.120 --> 00:12:47.279 around the electrification of heat for industrial and buildings and 232 00:12:47.360 --> 00:12:50.919 multifamily residential buildings. We are building a platform with a 233 00:12:51.000 --> 00:12:54.679 roll up of several companies and contracted transitions from gas 234 00:12:54.759 --> 00:12:57.919 to heat pumps of heating systems and heat as a service. 235 00:12:58.399 --> 00:13:00.840 It's a very small platform today, but as we grow, 236 00:13:00.879 --> 00:13:04.759 it should be big, unstable, and therefore it's very likely 237 00:13:04.759 --> 00:13:07.279 that the next owner of that platform will be a 238 00:13:07.320 --> 00:13:10.120 corplus and infrastratural fund. So the big names you find 239 00:13:10.120 --> 00:13:12.639 infrastructure and again probably not a care because we don't 240 00:13:12.639 --> 00:13:15.960 play that game, but all the other big names in infrastructure, 241 00:13:16.159 --> 00:13:18.639 we probably have appetite for this. So we're really trying 242 00:13:18.639 --> 00:13:21.000 to build the platforms, especially when there's a story of 243 00:13:21.120 --> 00:13:25.240 direct or indirect electrification, because electrification simply brings with an 244 00:13:25.240 --> 00:13:27.720 efficiency in the system, and if you're able to transform 245 00:13:27.720 --> 00:13:31.440 that efficiency into a returning they've created something that is 246 00:13:31.480 --> 00:13:35.519 economically viable without subsidies, without premium to be so for 247 00:13:35.840 --> 00:13:36.480 and things like this. 248 00:13:37.320 --> 00:13:40.840 When I look at your portfolio and again you know 249 00:13:40.879 --> 00:13:44.240 it one hundred times better than us, you see some 250 00:13:44.320 --> 00:13:49.120 companies who do the same things or sometimes in different geography. 251 00:13:49.279 --> 00:13:53.519 So can you coordinate? Okay, let's say seller Panels, you 252 00:13:53.639 --> 00:13:57.080 made a call with all your companies. Look, guys, these 253 00:13:57.120 --> 00:14:00.879 guys has the best seller panel supply chain, or this 254 00:14:01.000 --> 00:14:05.159 guide managed to get the best deal for winterbine, or look, 255 00:14:05.200 --> 00:14:08.200 this is the best trading system that we figure out, 256 00:14:08.279 --> 00:14:10.840 So why don't everybody use it? I mean, is there 257 00:14:10.879 --> 00:14:13.039 a way to spread the best practices. 258 00:14:13.639 --> 00:14:16.519 Yeah, we have a whole team internally called caps Tone. 259 00:14:16.840 --> 00:14:20.039 That team is doing exactly that. They help the companies, 260 00:14:20.120 --> 00:14:23.840 especially when we're talking about young platforms. They help professionalized 261 00:14:23.879 --> 00:14:28.120 processes find the best resources when it comes to procure 262 00:14:28.240 --> 00:14:32.360 sol panels, batteries or the things using the breadth of 263 00:14:32.399 --> 00:14:35.759 the KKR platform, not just the different platform, the seven 264 00:14:35.840 --> 00:14:38.360 undred billion AUM and a two hundred and fifty plus 265 00:14:38.600 --> 00:14:41.879 portfolio companies of KKR and the fifty years of having 266 00:14:41.960 --> 00:14:44.960 done this. So we have a whole internal team that 267 00:14:45.039 --> 00:14:49.519 just optimizes. So helps the companies optimizing their economics, which 268 00:14:49.720 --> 00:14:53.320 of course at the end makes them stronger. Professionalizing processes, 269 00:14:53.559 --> 00:14:57.960 optimizing procurement, creating synergies when there are some always being 270 00:14:58.120 --> 00:15:02.480 very careful. So synergies are good between companies to an extent, right, 271 00:15:02.519 --> 00:15:04.279 so that you don't want them to become a distraction 272 00:15:04.799 --> 00:15:07.559 or if they are coming from several strategies or things. 273 00:15:07.600 --> 00:15:10.799 You don't want to have a distraction between even between 274 00:15:10.799 --> 00:15:14.200 teams within KKR. But that's the only limit. Otherwise we 275 00:15:14.320 --> 00:15:15.480 try to do this a lot. 276 00:15:16.120 --> 00:15:19.279 It's been twenty minutes and there's a world who have 277 00:15:19.360 --> 00:15:25.679 not pronounced it's Ai Ai Ai Ai. So what's in 278 00:15:25.759 --> 00:15:29.399 it about Ai? Because I read the recent IA report 279 00:15:29.559 --> 00:15:33.559 and everybody's going gangbusters and we need I don't know 280 00:15:33.559 --> 00:15:37.480 how much more power. What's KIKR take on AI? And 281 00:15:37.559 --> 00:15:40.399 of course we are interested by the energy and girl. 282 00:15:41.480 --> 00:15:44.000 Yeah, so if we start from the real estate angle 283 00:15:44.039 --> 00:15:47.039 of this KKR, we are own five that isn't the 284 00:15:47.120 --> 00:15:51.080 platforms across the world. So we have that constant communication 285 00:15:51.279 --> 00:15:56.080 with all the hyperscaloes, basically the seven large talking about 286 00:15:56.080 --> 00:15:58.919 the West here when not really engage in China on this, 287 00:15:59.039 --> 00:16:02.159 but in the West, we have that constant dialogue with 288 00:16:02.360 --> 00:16:05.399 the seven companies, seven large companies in that race because 289 00:16:05.440 --> 00:16:08.879 of course we build infrastructure that a center infrastructure for 290 00:16:08.960 --> 00:16:11.320 them for their cloud infrastructure. 291 00:16:10.679 --> 00:16:14.320 But also for their infrastructure, and of course. 292 00:16:14.240 --> 00:16:16.360 More and more over the last couple of years, it's like, oh, 293 00:16:16.399 --> 00:16:19.000 can I have the data center infrastructure together with the power. 294 00:16:19.080 --> 00:16:20.840 Can you do also something with the power big that 295 00:16:20.960 --> 00:16:23.759 the thing is going to become very powerented see very quickly. 296 00:16:24.440 --> 00:16:27.159 So that does take us into a journey or for 297 00:16:27.320 --> 00:16:29.440 the first question is that, okay, is it going to 298 00:16:29.480 --> 00:16:32.519 be different this time, because if you remember twelve years 299 00:16:32.519 --> 00:16:36.120 ago when all the cloud infrastructures was built, everybody was 300 00:16:36.120 --> 00:16:39.200 also scrambling for power while the it is going to 301 00:16:39.240 --> 00:16:41.440 become very energy intensive and so on and so forth. 302 00:16:41.559 --> 00:16:44.200 But at the end they were involved productivities that were 303 00:16:44.200 --> 00:16:47.360 brought in the system efficiency and other productivity on how 304 00:16:47.600 --> 00:16:51.480 the computer was organized for these good big cloud providers 305 00:16:51.759 --> 00:16:55.000 and at the end the energyman was flat. So there's 306 00:16:55.000 --> 00:16:57.120 a bit of that thinking like let's be mindful of 307 00:16:57.159 --> 00:17:01.200 what could happen. There will be other productivity moments. We 308 00:17:01.240 --> 00:17:04.880 saw DEEPSEK a few months ago. That's a productivity moment, right, 309 00:17:04.960 --> 00:17:08.920 Something that's through software is more efficient at developing llms. 310 00:17:09.240 --> 00:17:12.000 I'm sure that the big suppliers of chips will come 311 00:17:12.079 --> 00:17:16.680 with more efficient solutions and videos. Chips are becoming more 312 00:17:16.759 --> 00:17:19.720 energy efficient over and over. When it comes to energy, 313 00:17:20.039 --> 00:17:23.920 everybody starts thinking generation, we need more generation faster. While 314 00:17:23.960 --> 00:17:26.400 there's a lot of slack in the grid. The distribution 315 00:17:26.519 --> 00:17:29.039 grid in the US and in Europe is overbuilt. Especially 316 00:17:29.039 --> 00:17:31.759 in the US it's overbuilt. There is something like thirty 317 00:17:31.799 --> 00:17:35.839 percent of the interconnections are and use eighty percent. 318 00:17:35.599 --> 00:17:36.119 Of the times. 319 00:17:36.200 --> 00:17:39.720 So just discovering that slack which doesn't need any CAPEX 320 00:17:39.759 --> 00:17:42.640 anything is you just have to organize properly the demand 321 00:17:42.799 --> 00:17:46.440 respond and all this without adding more generation. This is 322 00:17:46.440 --> 00:17:49.359 why there everybody is going a bit fast into oh 323 00:17:49.400 --> 00:17:51.839 we need two times more three times more energy. 324 00:17:52.200 --> 00:17:54.759 Well maybe not, we need more energy this time. 325 00:17:54.880 --> 00:17:57.880 It's unlikely to see a repeat of the cloud story 326 00:17:57.880 --> 00:18:00.279 where the end the energy deman was flat. We will 327 00:18:00.279 --> 00:18:02.880 probably need more energy, but not as much as what 328 00:18:03.119 --> 00:18:06.599 some people would tend to say. Now to do that, 329 00:18:06.759 --> 00:18:10.559 centers are going to require energy in very high density. 330 00:18:10.599 --> 00:18:12.759 This is why people start talking about nuclear because of 331 00:18:12.799 --> 00:18:15.200 course there's so much you can do with women, solar 332 00:18:15.240 --> 00:18:18.599 and gas when gas is going to be constrained because 333 00:18:19.000 --> 00:18:22.559 you basically have five gas stourbine manufacturers and the backloger 334 00:18:22.640 --> 00:18:24.799 and five six years today. So if you want to 335 00:18:24.839 --> 00:18:27.160 build a new gas fire power plant, even say I'm 336 00:18:27.160 --> 00:18:29.079 going to run my at center i knew data center 337 00:18:29.119 --> 00:18:30.920 on gas, Yeah, you can start it in. 338 00:18:30.880 --> 00:18:31.720 Six years from now. 339 00:18:32.000 --> 00:18:34.559 So today, both in Europe and in the US, if 340 00:18:34.559 --> 00:18:37.240 you want to have power fast, you go for solar, 341 00:18:37.400 --> 00:18:39.160 and we see that we are selling a lot of 342 00:18:39.160 --> 00:18:42.839 solar projects to hyperscalers and people who are building AIDATA centers. 343 00:18:43.559 --> 00:18:47.039 Or you grab existing capacity. 344 00:18:46.400 --> 00:18:47.559 Of gas and thermal plant. 345 00:18:47.559 --> 00:18:49.680 That was the purpose of our partnership with the cl 346 00:18:50.519 --> 00:18:53.440 and eventually you will have more gas and eventually we 347 00:18:53.519 --> 00:18:58.039 see cs probably because those hyperscaler especially the big ones, 348 00:18:58.119 --> 00:19:01.319 they still worry about that cabin for print to some extent. 349 00:19:01.759 --> 00:19:04.759 And eventually it will get nuclear. Now which flavor of nuclear? 350 00:19:04.799 --> 00:19:07.920 Will it be the nuclear we have known forever Allah, 351 00:19:08.000 --> 00:19:12.039 Hinkley Point or Vogel. Will it be restarting the nuclear 352 00:19:12.039 --> 00:19:14.519 reactors like what Constellation and Microsoft start trying to do 353 00:19:15.039 --> 00:19:17.759 with one of the reactors at three Mile Island. Will 354 00:19:17.759 --> 00:19:20.200 it be a SMRs, which are very very promising on 355 00:19:20.240 --> 00:19:23.440 paper but haven't really been tried outside of Russia and 356 00:19:23.559 --> 00:19:26.440 China and the economics will see but on paper it's 357 00:19:26.480 --> 00:19:29.559 just perfect, but I'm tried. Or will it be fusion? 358 00:19:29.799 --> 00:19:32.240 Even so, all this sounds a bit far away. So 359 00:19:32.359 --> 00:19:34.519 one is known, but very expensive. The second one and 360 00:19:34.680 --> 00:19:37.039 the other three have never been tried, right, so restarting 361 00:19:37.079 --> 00:19:41.519 a reactor, SMRs or fusion seducing on paper, but we'll 362 00:19:41.519 --> 00:19:42.240 see it anyway. 363 00:19:42.599 --> 00:19:45.400 None of those is going to be available. 364 00:19:44.920 --> 00:19:48.559 For reaching cod before at least twenty thirty twenty thirty 365 00:19:48.559 --> 00:19:51.880 five if we lucky, So we see all these, there 366 00:19:51.920 --> 00:19:54.839 will be more energy demand, but not that much, not 367 00:19:54.920 --> 00:19:58.559 two times three times two. There's a lot of shortcuts, 368 00:19:58.880 --> 00:20:02.799 the slack on the grid, solar and batteries, existing formal capacities. 369 00:20:03.359 --> 00:20:05.039 That's going to be where things are going to go 370 00:20:05.039 --> 00:20:08.279 into the short term and eventually in a few years 371 00:20:08.319 --> 00:20:11.720 from now we talk about more gas and probably nuclear 372 00:20:11.920 --> 00:20:14.079 or the sources, but we'll see where it goes. 373 00:20:14.680 --> 00:20:17.880 Avanue I just maybe as we wrap up here, I 374 00:20:17.920 --> 00:20:19.920 look at it and say, we're living to the era 375 00:20:20.079 --> 00:20:24.240 of volatility. But of course volatility passes, then what happens. 376 00:20:24.279 --> 00:20:26.119 How do you see it? How do you see the future? 377 00:20:26.200 --> 00:20:29.440 Basically, Yeah, there are a lot of ext factors for volatility, 378 00:20:29.680 --> 00:20:32.119 and also within the energy world there's been a bit 379 00:20:32.160 --> 00:20:35.039 of self inflicted ones. So just look at all the 380 00:20:35.079 --> 00:20:39.039 buzz around hydrogen two years ago with a lot of 381 00:20:39.079 --> 00:20:42.559 people who didn't really care about the reality of what 382 00:20:42.599 --> 00:20:45.079 a hydrogen molecule is, if you can transport it or not, 383 00:20:45.440 --> 00:20:48.759 if it was really making sense from an industrial standpoint 384 00:20:48.880 --> 00:20:51.440 for a number of applications, and that has led the 385 00:20:51.519 --> 00:20:55.960 number of countries to build hydrogen policies which were built 386 00:20:56.000 --> 00:20:58.720 on shaky grounds. And now you have a lot of people, 387 00:20:59.000 --> 00:21:01.559 but hydrogen is not happen. Investors are not putting money 388 00:21:01.559 --> 00:21:03.920 in hydrogen, and no, we're not going to put money 389 00:21:04.000 --> 00:21:07.319 in things that don't have an economic viability over time, 390 00:21:07.599 --> 00:21:11.279 where there's no industrial logic where I'm sorry, but physics 391 00:21:11.319 --> 00:21:14.319 and supply chains are basic that you have to understand 392 00:21:14.480 --> 00:21:14.880 and take. 393 00:21:14.960 --> 00:21:15.839 So what I. 394 00:21:15.839 --> 00:21:18.319 Mean with this, Yes, there is volatility. We can always 395 00:21:18.319 --> 00:21:21.680 complain about all the phenomenons that Lauren was mentioning at 396 00:21:21.680 --> 00:21:24.680 the beginning, but sometimes also within the world of energy 397 00:21:25.039 --> 00:21:28.880 has been a bit of happy ideas and find people 398 00:21:28.920 --> 00:21:32.759 trying to apply the recipe of other industries to especially 399 00:21:32.799 --> 00:21:36.480 to the combonization, and that has created volatility, backlash and everything. 400 00:21:37.039 --> 00:21:39.200 So relatidity is part of the game. But if we 401 00:21:39.240 --> 00:21:42.640