Latest / Bloomberg Intelligence / BI Weekend: Oracle, Kohl’s Earnings, CERAWeek

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BI Weekend: Oracle, Kohl’s Earnings, CERAWeek · Bloomberg Intelligence

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Speaker 1: Bloomberg Audio Studios, podcasts, radio news. This is Bloomberg Intelligence
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Speaker 2: The real our performance has been in US corporate high yield.
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Speaker 4: Have they trimmed all the facts?
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Speaker 5: Do investors like the M and A that we've seen?
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Speaker 2: These are two big time blue chip companies.
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Speaker 5: Window between the peak and cunt changing super fast.
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Speaker 1: Bloomberg Intelligence with Alex Steele and Paul Sweeney on Bloomberg Radio.
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Speaker 2: On Today's Bloomberg Intelligence Show, we dig inside the big
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Speaker 2: business stories impacting Wall Street and the global markets.
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Speaker 5: Each and every week we provide in depth research and
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Speaker 5: data on some of the two thousand companies and one
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Speaker 5: hundred and thirty industries our analysts cover worldwide.
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Speaker 2: Today, we'll look at why shares of the Danis drugmaker
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Speaker 2: Novo Nordisk could drop the most since late December.
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Speaker 5: Plus we'll discuss why the department Storeles gave a week
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Speaker 5: sales outlook for the year.
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Speaker 2: But first we begin with the computer technology company Oracle.
1:05
Speaker 5: This week, the company shares fell out here gave a
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Speaker 5: sales and profit forecast for the current quarter that fell short,
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Speaker 5: and analyst expectations for more.
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Speaker 2: Guest hosts Isabelle Lee and I were joined by Anna
1:14
Speaker 2: Rock RNA Bloomberg Intelligence Technology Analysts. We first asked Anorrock
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Speaker 2: for his take on Oracle and why investors reacted negatively
1:20
Speaker 2: to its earnings.
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Speaker 6: Yeah, the little bit likeness in for Q that you
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Speaker 6: alluded to is primarily due to supply challenges, which is,
1:27
Speaker 6: you know, the data center expansion everybody's undertaking, so the
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Speaker 6: realization of revenues from that. I'm to be honest, a
1:34
Speaker 6: bit surprised about the stock reaction because the company gave
1:37
Speaker 6: two or three really interesting nuggets for us to chew on.
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Speaker 6: The first one was very large bookings in quarter or
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Speaker 6: so their remaining performance obligations of the contracts booked, you know,
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Speaker 6: spiked up sixty three one hundred and thirty billion, and
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Speaker 6: along with that for their FI twenty six which starts
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Speaker 6: in June, and FY twenty seven, they talked about sales
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Speaker 6: growth of fifteen percent twenty percent, respectively. So those are
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Speaker 6: very strong numbers. So we are a bit surprised about
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Speaker 6: the reaction.
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Speaker 7: How did Oracle and other companies really react to Chinese
2:09
Speaker 7: upstart Deep Seek. I mean they release an open source
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Speaker 7: AA and that torpedo basically the whole a outlook that
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Speaker 7: I mentioned it under earnings call and any of their statements.
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Speaker 6: Yeah, so they were already talking about some of that impact.
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Speaker 6: But these guys reported very strong bookings. But I think
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Speaker 6: your question is probably the most important one right now,
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Speaker 6: because I think one reason for the stock selling off
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Speaker 6: despite these bookings could be, you know, do this does
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Speaker 6: this trait continue going forward in the next two years
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Speaker 6: or so? And I think that's really why people may
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Speaker 6: be skeptical that there twenty percent growth they are talking
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Speaker 6: about two years from now. You know how dependable that
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Speaker 6: is depending on you know, do the companies such as
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Speaker 6: the cloud vendors keep on spending very aggressively on capital.
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Speaker 2: Expenditures, margins, profit margins? Would you learn at Oracle kind
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Speaker 2: of some folks are calling that out.
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Speaker 8: Yeah, so we we.
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Speaker 6: Think that to go down next year. They really did
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Speaker 6: not address that issue because I think they're going to
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Speaker 6: talk about it in four Q See when you take
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Speaker 6: up your capis from seven billion to fourteen to sixteen
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Speaker 6: to twenty over the next know, just let's say two years,
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Speaker 6: it's going to have an impact on profitability because the
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Speaker 6: business that's coming in it's less profitable than your core
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Speaker 6: database business or your applications business. So we think margin
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Speaker 6: is going to be dented by one hundred to two
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Speaker 6: hundred basis points next year. Consensus doesn't have that figured
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Speaker 6: it in their outlook at this point. We think those
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Speaker 6: numbers do come down.
3:33
Speaker 2: Our Thanks to anorog Run, a Bloomberg Intelligence technology analyst.
3:36
Speaker 5: This week, I was at Sarah Week's Global Energy Conference
3:39
Speaker 5: in Houston, Texas. It's where all the energy CEOs and
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Speaker 5: officials meet to discuss policy and make deals, and I
3:44
Speaker 5: had the pleasure I was speaking with Larry Coben, CEO
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Speaker 5: of Energy Energy.
3:49
Speaker 2: Energy Energy is involved in energy generation and retail electricity,
3:53
Speaker 2: and it provides energy and related services to residential, industrial,
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Speaker 2: and commercial customers.
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Speaker 5: Larry Coben and I discussed power demand and energy and
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Speaker 5: I first asked him if rising power growth is driven
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Speaker 5: primarily by data demand and AI.
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Speaker 9: I think it's a lot of things. It's also on
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Speaker 9: shoring of manufacturing. For example, here in Texas, there's a
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Speaker 9: one gig Samsung plant that's going to be opened in
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Speaker 9: a couple of years. It's the Internet of Things, it's
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Speaker 9: smart homes, people are just it's electric cars. People are
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Speaker 9: just using more electricity in ways that they never did before.
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Speaker 9: And as a result of that, that's part of the
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Speaker 9: demand cycle. Obviously, data centers are a big part of it.
4:30
Speaker 9: But data centers aside. All of the people who build
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Speaker 9: data centers also are involved with cloud and a whole
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Speaker 9: slew of other services search that we don't think about
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Speaker 9: because we've had them for so long, but growth for
4:43
Speaker 9: those is increasing every.
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Speaker 10: Bit as much.
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Speaker 5: And you guys are one of the largest independent power
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Speaker 5: producers in the United States, right, so you can really
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Speaker 5: take advantage of this. Where is the biggest demand for
4:54
Speaker 5: what kind of power? Give me some insights into the
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Speaker 5: conversations you're having right now.
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Speaker 9: Sure, I think you know competitive markets. The two biggest
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Speaker 9: ones would be Texas and PJAM in the northeast. Texas
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Speaker 9: is a primary focus for us that we do have
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Speaker 9: a strong PJM presence. One of the things we like
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Speaker 9: about Texas is it has a friendlier permitting environment and
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Speaker 9: it has one Public Utilities Commission.
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Speaker 10: And one governor.
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Speaker 9: Urkatt has thirteen states in it, plus the District of Columbia.
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Speaker 9: So that's fourteen commissions, fourteen governor like people, and FIRK,
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Speaker 9: which doesn't have any jurisdiction here. So but I think
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Speaker 9: you're going to see data centers in all of these
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Speaker 9: places and every and in other places where economic growth
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Speaker 9: is going on.
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Speaker 10: It's not going to be limited. But I think Texas
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Speaker 10: is going to be first.
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Speaker 5: Do you think that the hyperscaler hype about how much
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Speaker 5: they're going to spend on power demand is real.
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Speaker 4: Right to fall short?
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Speaker 10: I think yes, I mean it won't. It will not
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Speaker 10: fall short. It may even go up.
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Speaker 4: Okay.
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Speaker 9: And the reason I think that is, you know, it's
5:54
Speaker 9: interesting after Deep Seek, everybody was super concerned about that,
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Speaker 9: and then three of the hyperscalers came out.
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Speaker 10: Essentially doubled their capital commitments.
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Speaker 9: Now if they actually, after looking at Deepseek, decide it's
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Speaker 9: going to be twice as much, then that gives me
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Speaker 9: a great deal of comfort.
6:09
Speaker 10: The power demand is going to be there.
6:11
Speaker 9: And you know, I know everybody's talking about GEVNS paradox
6:14
Speaker 9: because everyone has now googled it for the first time.
6:16
Speaker 9: I'm actually old enough to remember what it was originally.
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Speaker 9: But you know, I think people will start using this
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Speaker 9: more and more. I already see it in our business.
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Speaker 9: We are using enormous amounts of AI and customer service
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Speaker 9: and we're only just scratching the surface.
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Speaker 5: Speaking of you're going to be developing five point four
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Speaker 5: gigawatts by twenty thirty two, right, how much of that
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Speaker 5: is going to be fully contracted and how much of
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Speaker 5: that will be more merchants spot price?
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Speaker 10: You know, we have.
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Speaker 9: One point five gigs that is shovel ready that will
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Speaker 9: probably go Most of that will go directly into the
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Speaker 9: Texas market. Okay, anything we build beyond that, I would
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Speaker 9: anticipate would be fully contracted for related either to a
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Speaker 9: data center or another kind.
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Speaker 10: Of large user along the way. We are not in.
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Speaker 9: The business of taking merchant risks some of the other
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Speaker 9: folks are. We actually like to protect our downside and
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Speaker 9: give ourselves a lot of optionality to the upside so
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Speaker 9: that we don't have to care whether the growth is
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Speaker 9: two percent or ten percent. Both of those are ginormous
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Speaker 9: for us.
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Speaker 5: So what kind of pricing are we talking about for
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Speaker 5: a gas fire plant.
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Speaker 4: For renewable for other power? Like, what does it look
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Speaker 4: like right now?
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Speaker 9: I mean gas fired plants. We think they're going to
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Speaker 9: be done for fifteen hundred to two thousand a kW installed.
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Speaker 9: The ones that are shovel ready because we started on
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Speaker 9: them five years ago will be much less. But if
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Speaker 9: you're not in the business actively doing it, you're going
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Speaker 9: to have a hard time hitting the top end of
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Speaker 9: the range. Renewable pricing hasn't changed dramatically. It's just that
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Speaker 9: the load curve is changing as people need. There's more
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Speaker 9: twenty four to seven power use coming in. And you know,
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Speaker 9: sun doesn't shine at night, wind doesn't always blow.
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Speaker 10: But renewables aren't dead. They're going to be sure.
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Speaker 9: Yes, actually I am sure, okay, because there's still a
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Speaker 9: place for them when they're working in conjunction with gas plants,
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Speaker 9: I mean part of our portfolio. Now we actually shut
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Speaker 9: off our fossil fuel plants during the day when there's
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Speaker 9: a lot of salta in win in Texas. We buy
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Speaker 9: from the grid their power and sell it to our customers,
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Speaker 9: generating it ourselves. Those options are still going to be available,
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Speaker 9: at least in competitive markets.
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Speaker 5: Well, speaking of your renewable unit is thirty percent of
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Speaker 5: your annual earnings right, and it's twenty percent of the
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Speaker 5: renewable market share here in the US.
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Speaker 4: How much do you think that can grow for you?
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Speaker 9: I are renewable. You know, we generally actually contract for
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Speaker 9: renewables rather than own them. It's a strange thing because
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Speaker 9: we own two coal plants. Everyone else gets cheaper renewable
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Speaker 9: capital than we do, even though we're a big company
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Speaker 9: and quite good at this, and as a result, what
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Speaker 9: we generally do is contract for that power from other developers.
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Speaker 10: Right now, we've.
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Speaker 9: Got two gigs and we're probably going to have a
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Speaker 9: solicitation for more going forward. So I still see it
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Speaker 9: as an integral part of our strategy, and a lot
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Speaker 9: of them also will be driven by what the customers want.
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Speaker 9: So the end of the day, we are in the
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Speaker 9: customer service business, not the electricity business. So it's our
9:13
Speaker 9: job to sell you the kind of electrons that you
9:15
Speaker 9: want in terms of you know, time, place, and and
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Speaker 9: fuel generation. So if you want green electrons, decarbonized electrons,
9:24
Speaker 9: we will have them and we will sell.
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Speaker 10: Them to you.
9:26
Speaker 3: Thank you.
9:28
Speaker 5: In terms of in terms of the actual agreements, how
9:33
Speaker 5: many agreements are you talking about that's like, hey, we're
9:35
Speaker 5: going to sign like yeah, yeah, well we like your
9:38
Speaker 5: electricity will sign in versus like firm demand.
9:41
Speaker 4: Here's your paycheck.
9:43
Speaker 10: You know we do this every day.
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Speaker 9: We actually supply power already to every one of the hyperscalers.
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Speaker 9: We have the second largest commercial CNI electricity book in
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Speaker 9: the country and the largest natural gas one. So we
9:55
Speaker 9: sign those kind of arrangements. Some of them are short terms,
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Speaker 9: some of them are long term. I think the new
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Speaker 9: data center ones will all be at least ten and
10:02
Speaker 9: probably closer to twenty years.
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Speaker 10: ABE is we won't.
10:05
Speaker 9: Want to dedicate our site to something that's less than that. B.
10:08
Speaker 9: We won't want to build a dedicated power plant for
10:11
Speaker 9: less than that. And see if you're going to pay
10:13
Speaker 9: all that money for those chips and to build a
10:15
Speaker 9: data center, which actually costs more than a power plant,
10:18
Speaker 9: you're going to want that kind of stability.
10:20
Speaker 10: For an extended period of time.
10:22
Speaker 9: So I think a lot of those are going to
10:24
Speaker 9: be fixed price deals off market with power scale. They
10:28
Speaker 9: will still be in front of the meter because people
10:30
Speaker 9: will want to be connected to the grid, but they
10:33
Speaker 9: will definitely be long term fixed contracts.
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Speaker 4: How soon you're signing more.
10:36
Speaker 3: Of those.
10:39
Speaker 10: Stay tuned? Fair question?
10:42
Speaker 9: You know my next earning is call is may it
10:43
Speaker 9: will not be then, okay, but you know we're working
10:47
Speaker 9: on these as fast as we possibly can.
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Speaker 10: They're complicated.
10:50
Speaker 9: People, you know, think electricity is just like flicking a switch.
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Speaker 9: It's super complicated. But we are making substantial progress towards
10:58
Speaker 9: some very interesting trends. Actions talking both to hyper scalers
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Speaker 9: and to developers were.
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Speaker 4: I let you go, though. What makes it complicated? Is
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Speaker 4: it the pricing?
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Speaker 3: Is it?
11:08
Speaker 4: How to structure the deal?
11:09
Speaker 5: Like is your power going to the grid and then
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Speaker 5: selling back to the hyper scale?
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Speaker 3: Like?
11:13
Speaker 4: What makes it so hard?
11:14
Speaker 9: You need interconnection agreement, You need a construction agreement, you
11:18
Speaker 9: need a turbine agreement. Now you know we have all
11:21
Speaker 9: of these in place generically, but they all need to
11:24
Speaker 9: be site specific. You need to decide how big a
11:27
Speaker 9: data center you want to put on the site. How
11:30
Speaker 9: fast are you going to grow that data center? So
11:32
Speaker 9: are you going to start at two hundred megs and
11:34
Speaker 9: go up two hundred a year? Do you want to
11:35
Speaker 9: start at a gig? So what makes it complicated is
11:39
Speaker 9: putting all of those pieces together. And what people forget
11:42
Speaker 9: is actually for this type of data center is new,
11:45
Speaker 9: unlike existing data centers where people have done lots of them.
11:49
Speaker 9: There aren't a lot of AI data centers out there yet.
11:52
Speaker 9: But it's complicated, but so is general power plant development.
11:56
Speaker 9: All the permitting in those things. So it's nothing that
11:59
Speaker 9: we're worried about, something we actually think we're pretty good at.
12:02
Speaker 4: But hyberkailers are willing to put down that money. You're
12:05
Speaker 4: showing up knocking on your door.
12:07
Speaker 10: They're there, they're there. Okay, they're there.
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Speaker 9: We're there, and you know, because of the agreements Wen
12:11
Speaker 9: asked last week, the turbines and the contractors are there.
12:14
Speaker 5: All right, thanks to Larry Coben, CEO of nerg Energy.
12:18
Speaker 5: All right, coming up, we're gonna have more from the
12:19
Speaker 5: Sarah Week Energy Conference and a conversation with CEO of
12:22
Speaker 5: ge Vernova.
12:23
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12:54
Speaker 2: We move next to the drug and pharmaceutical space. This week,
12:57
Speaker 2: shares of the Danish drugmaker Noko Nordisk dropped the since
13:00
Speaker 2: December twentieth.
13:01
Speaker 5: That's after Novo said that people treated with the obesity
13:04
Speaker 5: drug Kagri Semma showed underwhelming weight loss, and a clinical
13:07
Speaker 5: trial of people with diabetes For.
13:09
Speaker 2: More guests, Isabelle Lee and I were joined by Sam Fazzelli,
13:12
Speaker 2: Bloomberg Intelligence, Director of Research for Global Industries and senior
13:15
Speaker 2: pharmaceuticals analysts, who first asked Sam where Novo is now
13:19
Speaker 2: in a fast growing market for weight loss treatments.
13:22
Speaker 8: Fifteen point seven percent is what they lost in the
13:24
Speaker 8: sixty eight big trial, and then when you correct that
13:27
Speaker 8: for the placebo, so obviously you tell people to also diet,
13:30
Speaker 8: et cetera, that falls down to twelve point six percent
13:36
Speaker 8: is not a big number. Therefore, people are upset and
13:40
Speaker 8: this was supposed to be the drug that is going
13:42
Speaker 8: to beat or hope they hoped would beat potentially or
13:46
Speaker 8: be their main way of competing with zeppetite from or
13:49
Speaker 8: Munjaro from Eli Lilly. The reality is it's actually in
13:54
Speaker 8: this trial it seems about in line with what cha
13:56
Speaker 8: Zeppetite gave us. So it's not that it's that bad.
14:00
Speaker 8: It's just these guys set themselves up a while ago
14:03
Speaker 8: saying twenty five percent in OBEs, twenty percent or so
14:06
Speaker 8: in obi's diabetics. Diabetics for some reason respond less. And
14:10
Speaker 8: of course both of those have been lower. We had
14:12
Speaker 8: that one the first one in the obesity population before Christmas,
14:15
Speaker 8: if you remember, and this one. So this market is
14:18
Speaker 8: so awful, with the sea of red everywhere that it's
14:22
Speaker 8: really difficult to parse out specific company thing or people
14:26
Speaker 8: are just miffed taking a.
14:28
Speaker 7: Step back when it comes to the reintroduction of legislation
14:31
Speaker 7: to modify the Inflation Reduction Act. How does large pharma
14:35
Speaker 7: sit amidst all of.
14:36
Speaker 8: Those Oh, just a small question then, right, No, I mean, look,
14:40
Speaker 8: at the end of the day, a lot of these
14:42
Speaker 8: folks are being told you're going to have your within
14:45
Speaker 8: that context, We've done a lot of analysis on this.
14:48
Speaker 8: Every year fifteen drugs are chosen to be negotiated for
14:52
Speaker 8: price by the Medicare plans. So and it's possible that
14:58
Speaker 8: novos we go V is going to be part of
15:01
Speaker 8: one of those four twenty twenty six or twenty twenty seven,
15:03
Speaker 8: I can't remember exactly that's what's happening with these guys,
15:07
Speaker 8: but there a lot of farmer companies have said, look,
15:09
Speaker 8: we can manage this. It's within our realms to be
15:11
Speaker 8: able to cope. And so I think the market is
15:13
Speaker 8: generally accepted that IRA isn't that bad for the farmer industry.
15:18
Speaker 2: SAM talk to us about kind of these generic weight
15:22
Speaker 2: loss drugs, and I guess they're I don't know if
15:26
Speaker 2: they're generic or if they're a different term.
15:28
Speaker 8: But compounded compound phrase.
15:31
Speaker 2: Look for how effective are they should and how safe
15:34
Speaker 2: are they?
15:35
Speaker 3: Well?
15:35
Speaker 8: I mean, look, you the companies buy active from somebody
15:43
Speaker 8: and they make it in the pharmacy and they sell
15:46
Speaker 8: it to you. Right, so it's usually a needle and
15:49
Speaker 8: as yringe, right, a needle and syringe in a wile.
15:52
Speaker 8: And how safe are they?
15:53
Speaker 6: Who knows?
15:55
Speaker 8: No one's done trials on them. I think the FDA
15:58
Speaker 8: has to believe, even they do go through rigorous and
16:02
Speaker 8: assessment that the active that they're buying isn't going to
16:05
Speaker 8: kill people. And I don't think that there's been that
16:07
Speaker 8: much issue. But then at the end of the day,
16:10
Speaker 8: it's not the branded drug, it's not the drug that
16:12
Speaker 8: the manufacturers live and die by if there's an issue.
16:16
Speaker 8: So the reality is they should be out of the
16:19
Speaker 8: way anyway because they can only sell what are essentially
16:23
Speaker 8: on patent drugs which they're not supposed to write if
16:27
Speaker 8: there's a shortage, and the FDA said there's no shortage
16:29
Speaker 8: for either of the drugs from Novo or Lilina, so
16:31
Speaker 8: those folks have to take them off the market.
16:33
Speaker 7: Going back to this tagrisema, if Nova plants take regulatory
16:37
Speaker 7: approval in the first quarter of next year, what happens
16:40
Speaker 7: if it gets approved and if it doesn't.
16:42
Speaker 8: Yeah, so look, these are all drugs that are in
16:48
Speaker 8: the evolution of the pipeline of the company, so we go.
16:52
Speaker 8: V from Novo is often viewed as less impactful in
16:57
Speaker 8: terms of efficacy than Lili's Monjaro. So here comes Novo
17:01
Speaker 8: with something that matches it with a slightly different mechanism
17:04
Speaker 8: that potentially can help you maintain a little bit more
17:08
Speaker 8: muscle rather than what you get with some of these
17:12
Speaker 8: earlier versions like Pickov. So that's the idea, but they
17:15
Speaker 8: still have to prove that and then of course there'll
17:17
Speaker 8: be another generation that we'll call triple therapy from Lily.
17:21
Speaker 8: So basically what they're trying to do is to keep
17:23
Speaker 8: raising the bar and raising the bar on efficacy and
17:26
Speaker 8: raising the bar on giving you the good weight loss e,
17:30
Speaker 8: less muscle, morephat our.
17:32
Speaker 2: Thanks to Sam Fazelli, Bloomberg Intelligence, Director of Research for
17:35
Speaker 2: Global Industries and senior pharmaceuticals Analysts.
17:37
Speaker 5: This week, I was at SMP Globals Sarah Week Energy
17:40
Speaker 5: Conference in Houston, Texas.
17:42
Speaker 2: It's where all the energy CEOs and officials meet to
17:45
Speaker 2: discuss policy and make deals.
17:47
Speaker 5: HI the pleasure of speaking with Scott Straisik, CEO of
17:49
Speaker 5: ge Vernova.
17:50
Speaker 2: Gevnova is a gas and wind turbine manufacturer and it
17:53
Speaker 2: was spun off a year ago by General Electric.
17:56
Speaker 5: I spoke to its CEO about the company's grid investments
17:58
Speaker 5: and artificial intelligence and energy, and I begin by asking
18:01
Speaker 5: Scott what he thinks the biggest change is leading the
18:04
Speaker 5: company in the last.
18:05
Speaker 11: Year, and I'm proud of the first year, but most
18:08
Speaker 11: importantly it's really just the beginning for us because a
18:10
Speaker 11: lot of these trends, whether it be AI, whether it
18:13
Speaker 11: be the electrification of these industries, it's really just starting.
18:16
Speaker 11: So our end markets continue to strengthen. I think there's
18:19
Speaker 11: a more reality based focus on both the need for
18:22
Speaker 11: gas and nuclears, so the demand cycle for both of
18:25
Speaker 11: those continues to get even stronger today than where we
18:28
Speaker 11: were twelve months ago. And it really then comes back
18:31
Speaker 11: to how do we deliver safely and in a high
18:34
Speaker 11: quality way to serve this incredible market that we're walking into.
18:38
Speaker 5: Your backlog is huge, right, it's like seventy three billion dollars, right?
18:41
Speaker 5: Can you give me perspective, like how much of that
18:43
Speaker 5: is AI demand driven?
18:44
Speaker 3: How much of that is like wind stuff? How much
18:47
Speaker 3: of that.
18:47
Speaker 5: Is transformers which is the stuff you got to plug.
18:50
Speaker 3: Into the grid.
18:50
Speaker 12: You bet.
18:51
Speaker 11: It's still a very small proportion of our backlog is
18:53
Speaker 11: directly attached to AI. I mean, when you really think
18:56
Speaker 11: about even data centers in total, there's only about sixty
18:59
Speaker 11: gig goofs of data centers globally today, and only fifteen
19:03
Speaker 11: percent of that it's really explicitly related to AI. Most
19:06
Speaker 11: of it's still cloud and storage. So that's why there's
19:09
Speaker 11: so much growth to come, because we're really just starting.
19:12
Speaker 11: But I'm sure us sitting down a few years from now,
19:14
Speaker 11: it's going to be a larger proportion of our backlog.
19:17
Speaker 3: How much do you think it would be best guess.
19:19
Speaker 11: Oh, it's going to be a lot more. There's no
19:21
Speaker 11: question about dear. No, I don't think we get to
19:23
Speaker 11: that proportion. But it's going to become more AI centric,
19:26
Speaker 11: and it's becoming even more US based because the amount
19:30
Speaker 11: of growth that we're going to see in the US
19:32
Speaker 11: the rest of the decade relative to the rest of
19:33
Speaker 11: the world, it's going to be more tomorrow than it's
19:36
Speaker 11: certainly been the last five to ten years.
19:38
Speaker 5: In the meantime, you cannot get a CEO on the
19:39
Speaker 5: stage at Sarah Week that isn't talking about GeV Ronova
19:42
Speaker 5: because everyone's buying your gas turbines at the end of
19:45
Speaker 5: the day. How much of this is firm contracting. How
19:49
Speaker 5: much of that is just like, yeah, we like it,
19:51
Speaker 5: we're gonna buy it. Can you give me some insight
19:52
Speaker 5: into that.
19:53
Speaker 11: Well, we're very firm in contract, certainly with our gas turbine,
19:57
Speaker 11: our transformer, our switch gear backlaw really through twenty seven
20:01
Speaker 11: into twenty eight right now, I would expect by the
20:03
Speaker 11: end of the summer will be largely sold out.
20:06
Speaker 12: Through the end of twenty eight with those equipment.
20:10
Speaker 11: But we're also looking to kind of find ways to
20:12
Speaker 11: get better every day and a culture of continuous improvement,
20:15
Speaker 11: and if we can increase capacity smartly as we figure
20:18
Speaker 11: out this ramp, we'll do that. But for context, last
20:21
Speaker 11: fall we announced a really almost thirty five percent increase
20:25
Speaker 11: in supply from twenty five levels to twenty seven. So
20:29
Speaker 11: thirty five percent increases a lot. It doesn't mean we
20:31
Speaker 11: stop there, but we've got to get there first and
20:33
Speaker 11: then re evaluate what the art of the possible really is.
20:37
Speaker 5: Okay, So to that point, what are the issues with execution?
20:40
Speaker 3: Then?
20:40
Speaker 5: Like, it's a lofty goal, right, you're investing six hundred
20:43
Speaker 5: million dollars to plants in the US.
20:44
Speaker 4: It's a lot.
20:45
Speaker 3: How fast can that happen? And what are the roadblocks
20:47
Speaker 3: for you?
20:47
Speaker 11: It's got to happen in the next two years, you know, really,
20:50
Speaker 11: this company is going to look very different between now
20:52
Speaker 11: and the summer at twenty six.
20:53
Speaker 3: What's the biggest hurdle for you to get that done?
20:55
Speaker 12: Workers?
20:56
Speaker 11: Right, We're going to add over We're going to add
20:57
Speaker 11: over fifteen hundred employees. That's a combination of engineering and
21:01
Speaker 11: craft labor. That's all in the US. Take gas as
21:05
Speaker 11: an example. We've got to add over five hundred heavy
21:08
Speaker 11: duty pieces of machinery into our global factories to drive
21:12
Speaker 11: this growth in this ramp. So that's a lot in
21:15
Speaker 11: existing factory footprints. We're highly capable of doing it, but
21:18
Speaker 11: it's a lot between now and let's say the fourth
21:20
Speaker 11: of July of next year. So I like our chances,
21:24
Speaker 11: but there's a lot of work to do.
21:26
Speaker 5: Talk to me about the wind part, okay, because that's
21:28
Speaker 5: sort of like the cousin no one wants to talk
21:31
Speaker 5: about right now, or the oncle. If someone came to
21:34
Speaker 5: you and said, hey, Scott, I'd like to buy your
21:36
Speaker 5: wind business, would you be like, yes, take it off
21:38
Speaker 5: my hands.
21:39
Speaker 3: No.
21:39
Speaker 12: I don't think it's that simple.
21:40
Speaker 11: I think at the end of the day, we've got
21:41
Speaker 11: a big onshore wind business today. Even in the US,
21:44
Speaker 11: we have over thirty five thousand wind turbans that are
21:47
Speaker 11: spinning creating electricity today. We see real opportunities to repower
21:52
Speaker 11: that existing install base using the infrastructure that's already been built,
21:55
Speaker 11: but putting longer blades onto the wind turbines that helps
21:58
Speaker 11: the world.
21:59
Speaker 12: We think that there's a role for wind, and with
22:01
Speaker 12: that role for wind.
22:02
Speaker 11: We're focused today on just operationally running this business better
22:06
Speaker 11: every day, waiting for the growth and inflection that comes.
22:09
Speaker 11: So we really are a believer in and all the
22:11
Speaker 11: above technology suite. But we'll also look at our portfolio
22:15
Speaker 11: every day with a steely eye and on what creates
22:18
Speaker 11: value for our shareholders. But there's no binary yes or
22:21
Speaker 11: no answer to that question. But we're focused on running
22:24
Speaker 11: these businesses better and ultimately creating value.
22:27
Speaker 3: All right, So sticking to the wind.
22:29
Speaker 5: The other part of your business, which I think is
22:30
Speaker 5: so cool, are the transformers.
22:32
Speaker 3: So yes, you can have.
22:32
Speaker 5: All the wind farms you want, all the solarer that
22:34
Speaker 5: you want, but if you have to plug it into
22:36
Speaker 5: the grid, so I think it is like a big socket.
22:37
Speaker 3: I'm sure it's much more complicated than that. But talk
22:40
Speaker 3: to you about the growth.
22:40
Speaker 5: There, because everyone talks you about AI and data demand,
22:43
Speaker 5: but like, that's where the potential growth is.
22:45
Speaker 3: Walk me through the percentages.
22:46
Speaker 11: And that's also for context where a lot of our
22:49
Speaker 11: first interactions really came to be more intimate with the hyperscalers.
22:53
Speaker 11: I mean, we did over half a billion dollars of
22:55
Speaker 11: direct electrical equipment with the hyperscalers and orders last year withsformers.
23:00
Speaker 12: With switch gears attached to their data centers.
23:04
Speaker 11: That's a business that we see substantially growing from here.
23:07
Speaker 11: Two years ago, our backlog coming into twenty twenty three
23:11
Speaker 11: was about six billion dollars equipment backlog. It's north of
23:14
Speaker 11: twenty billion dollars today. So it's a growth rate.
23:18
Speaker 12: It'll stay growing.
23:19
Speaker 11: Our backlogs certainly will grow at that same level for
23:21
Speaker 11: another year here to expanding margins. So this is I
23:26
Speaker 11: think we can have debates between nuclear gas when what
23:30
Speaker 11: are the power generation sources that are going to power
23:33
Speaker 11: the world?
23:33
Speaker 12: Regardless, we need to invest in the grid.
23:36
Speaker 5: Yes, and that then leads us to transformers. Before I
23:38
Speaker 5: let you go, North America's what like twenty twenty five
23:40
Speaker 5: percent of your business right now? Uncertainty is quite high.
23:43
Speaker 5: We saw it with the nfib A survey of small businesses.
23:47
Speaker 5: Is now a good time to invest in the US
23:50
Speaker 5: and what part of that business do you think it
23:52
Speaker 5: could be in the next five years.
23:54
Speaker 12: I think it's a great time to invest in the US.
23:56
Speaker 11: Yes, We've gone through multiple decades with very little load growth,
24:01
Speaker 11: and it's really impossible to underwrite a case that we
24:04
Speaker 11: don't need substantially more electrical equipment and supply here over
24:08
Speaker 11: the next decade. And yeah, that's data centers, but it's
24:11
Speaker 11: not just that we're reindustrializing parts of the US to
24:15
Speaker 11: an extent that is going to require more electrical load.
24:18
Speaker 11: You know, EVS, home heating, there's a lot of other
24:21
Speaker 11: factors and beyond that, we just need to modernize what
24:24
Speaker 11: we have for resilience and energy security.
24:27
Speaker 5: Aw big of a percentage could the US or North
24:29
Speaker 5: America be in your portfolio in five years?
24:31
Speaker 11: It's going to grow as a proportion, for sure, but
24:33
Speaker 11: it's not the only market. We're continuing to see real
24:36
Speaker 11: growth in Asia and in Europe. But we're very bullish
24:40
Speaker 11: on the US and we're going to keep investing in
24:42
Speaker 11: the US. You cited the six hundred million dollars and
24:45
Speaker 11: fifteen hundred jobs attached to that, but that's not the end,
24:48
Speaker 11: that's just the beginning as we continue to serve this market.
24:51
Speaker 3: All right.
24:51
Speaker 5: Thanks to Scott Straisik, CEO of g e Vernova. Coming up,
24:55
Speaker 5: we'll have more from the Sarah Week Energy Conference and
24:57
Speaker 5: a conversation with Joe Dominguez, the CEO of Constellation Energy.
25:01
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25:39
Speaker 2: Next to the retail space. This week, the department store
25:41
Speaker 2: Coles said that comparable sales this year will drop as
25:44
Speaker 2: much as six percent.
25:45
Speaker 5: This comes as the company has been making sweeping changes
25:47
Speaker 5: in an attempt to get back on track after three
25:49
Speaker 5: years of declining sales.
25:51
Speaker 2: For more guestsos Isabel Lee and I were joined by
25:53
Speaker 2: Mary Ross Gilbert, Bloomberg Intelligence, senior equity analysts covering retail.
25:56
Speaker 2: We first asked Mary about Cole's guidance and why came
25:58
Speaker 2: in weaker than expected.
26:00
Speaker 3: With regard to.
26:01
Speaker 13: Cole's guidance, First of all, I think they're really hoping
26:04
Speaker 13: to beat the numbers, but they're expecting their comp sales
26:08
Speaker 13: to be down five to seven percent in this coming year.
26:12
Speaker 13: And if you look at the performance in the fourth quarter,
26:15
Speaker 13: their revenues came in sort of in line, fairly close.
26:18
Speaker 13: Their comp sales were down about six point seven percent.
26:21
Speaker 3: But when you look at.
26:22
Speaker 13: What's going on this so for a business was up
26:24
Speaker 13: thirteen percent on a comp basis, that means that the
26:28
Speaker 13: rest of their categories and they're mostly apparel related, were
26:32
Speaker 13: down double digits. So it's it's very concerning because that's
26:35
Speaker 13: so for a business since they brought it in is
26:38
Speaker 13: now one point eight billion in annual revenues. Meanwhile, they
26:42
Speaker 13: lost about three billion in revenues and now we're looking
26:45
Speaker 13: for further declines this year. So that's what's really concerning.
26:50
Speaker 13: Now we have a new CEO. This is the third
26:52
Speaker 13: CEO in four years, Ashley Buchanan, and you know, he
26:57
Speaker 13: gave a quick peek at what he sees are the
27:01
Speaker 13: opportunities they need to really get their merchandise assortments right.
27:05
Speaker 13: They did bring back in private label jewelry and petites,
27:11
Speaker 13: because those were some of the things that they took
27:13
Speaker 13: out when they brought in some new brands and they
27:17
Speaker 13: found that they were alienating their core customer. Another issue
27:21
Speaker 13: was on the promotional side. They always have these great
27:23
Speaker 13: little coupons, but what they did was they had raised
27:27
Speaker 13: the number of brands that were excluded from the promotions
27:30
Speaker 13: to an all time high in twenty twenty four. Their
27:33
Speaker 13: objective is to reduce that to make it more compelling.
27:37
Speaker 13: So they have a number of strategies that they have
27:39
Speaker 13: to employ here and it's going to take time. So
27:43
Speaker 13: that's why the outlook for this year looks dismal, along
27:46
Speaker 13: with the fact that the consumer climate, particularly for their
27:49
Speaker 13: low income cohort are challenged by still high inflation and
27:55
Speaker 13: just an uncertain environment with the ramifications of higher tariffs.
28:00
Speaker 7: Among the many things that jumped out to me is
28:02
Speaker 7: why are they're bringing back find Jewelry. How do you
28:04
Speaker 7: square that with a struggling consumer base. They're not the
28:07
Speaker 7: latest retailer to cast out on the strength of the
28:10
Speaker 7: US consumer.
28:12
Speaker 13: Yes, Isabelle, So it's a good point, but it's important
28:16
Speaker 13: that you have that for a gifting option. And these
28:18
Speaker 13: items are not It includes not just fine jewelry but
28:22
Speaker 13: also costume jewelry and that category. Because they did bring
28:27
Speaker 13: it back in, their sales were flat. So that shows
28:31
Speaker 13: that that strategy of bringing it back because it's very
28:33
Speaker 13: important for gifting. And once again, if you look at
28:36
Speaker 13: the promotions that they offer for a jewelry, they have
28:38
Speaker 13: buy one item, get the second item like half off
28:41
Speaker 13: or something like that. So they do have some compelling
28:44
Speaker 13: value that they're bringing the consumer there. It's important for gifting,
28:48
Speaker 13: so for example for Valentine's Day and then also for
28:51
Speaker 13: the holidays.
28:53
Speaker 2: What are they saying, Mary about tariffs and their ability
28:56
Speaker 2: to pass along price increases or conversely take it in
29:02
Speaker 2: their margin.
29:03
Speaker 13: Yeah, so tariffs, it wasn't a huge topic on their call,
29:07
Speaker 13: and if you look at the past, they weren't really impacted.
29:11
Speaker 13: They were able to pass it on. And I think
29:13
Speaker 13: what they do is they work with their vendors and
29:16
Speaker 13: they source So if you look at their private slash
29:18
Speaker 13: exclusive labels, that business they're able to you know, they
29:24
Speaker 13: haven't disclosed exactly how much they source from China, but
29:27
Speaker 13: they're able to basically work with their vendors on you know,
29:32
Speaker 13: creating that price the product at a price point that
29:35
Speaker 13: fits into their value equation. And so the last time around,
29:40
Speaker 13: if you looked at twenty eighteen twenty nineteen, they really
29:44
Speaker 13: didn't call out a specific impact related to tariffs. They
29:47
Speaker 13: said that they were they were okay, they were able
29:50
Speaker 13: to offset it with either cost savings or just the
29:54
Speaker 13: way that they were able to price it in. You know,
29:56
Speaker 13: in terms of building the margin.
30:00
Speaker 7: How about store visits calls? Isn't the only ones struggling
30:03
Speaker 7: with that. I myself have just shopped basically online. How
30:06
Speaker 7: are they attempting to attract customers back in store?
30:11
Speaker 3: Yeah?
30:11
Speaker 13: So Isabelle. Actually their stores performed better. Now remember they
30:16
Speaker 13: were you know, the sales were down, but they outperformed online.
30:21
Speaker 13: So you know, earlier in the year we had seen
30:24
Speaker 13: where online did better than in store, but actually, you know,
30:29
Speaker 13: the stores are are doing better than online. So they're
30:32
Speaker 13: actually and we're seeing that from a number of retailers
30:35
Speaker 13: where we do see really good performance in store. And
30:39
Speaker 13: if you look at off price, I mean that's really
30:41
Speaker 13: based and built on in store visits.
30:45
Speaker 2: Our thanks to Mary Ross Gilbert Bloomberg Intelligence senior equity
30:47
Speaker 2: analysts covering retail.
30:49
Speaker 3: This week, I was.
30:49
Speaker 5: At SMP Globals Sarah Week's Energy Conference in Houston, Texas.
30:53
Speaker 5: It's where all the energy CEOs and officials meet to
30:55
Speaker 5: discuss policy, make deals, and talk to shareholders. I had
30:58
Speaker 5: the pleasure of speaking to Joe Domingaz see of Constellation Energy.
31:01
Speaker 2: Constellation operates to the largest fleet of nuclear reactors in
31:04
Speaker 2: the US, and the company recently signed its largest ever
31:07
Speaker 2: power purchase agreement with Microsoft.
31:09
Speaker 5: It's a deal that will restore Constellation's three Mile Island
31:12
Speaker 5: nuclear plant, and it shows that carbon free electricity is
31:14
Speaker 5: more valuable when it's available around the clock. I began
31:17
Speaker 5: the conversation with Joe Dominguez by talking about the company
31:20
Speaker 5: and asking about recession and slowing growth and whether he's
31:23
Speaker 5: noticing any of that At Constellation.
31:25
Speaker 14: We don't see an end in sight right now. We're
31:27
Speaker 14: starting to see it get rationalized, and by that I
31:29
Speaker 14: mean we're not seeing the same request for data centers
31:32
Speaker 14: popping up in five or six utilities. So I think
31:35
Speaker 14: the hyperscalers are beginning to figure out where they want
31:39
Speaker 14: to go. And it's not the frenzy of activity, but
31:42
Speaker 14: in terms of the deal pace, it continues the same
31:44
Speaker 14: way we saw it last year.
31:46
Speaker 5: And how are the deals? Like, how is it to
31:48
Speaker 5: get them done? Is it hard?
31:50
Speaker 3: Is it coming up with the structure the money?
31:53
Speaker 8: Like?
31:53
Speaker 3: What is it?
31:53
Speaker 14: It's not hard, but they're complicated because they're multi billion
31:57
Speaker 14: dollar deals, right, So we're talking about twenty year deals
32:00
Speaker 14: for power that sometimes could cost five or ten billion dollars.
32:03
Speaker 14: So like any commercial deal of that scale, it's going
32:06
Speaker 14: to take a long time to negotiate, and each time
32:09
Speaker 14: you need to do that with a new party, you
32:11
Speaker 14: have to go through all the terms and conditions again.
32:13
Speaker 14: But I think we're going to get some some deals
32:16
Speaker 14: done this year.
32:17
Speaker 5: Can you give me some hints, like in maybe areas,
32:20
Speaker 5: what kind of deals?
32:22
Speaker 3: Like what kind of power?
32:23
Speaker 14: Well, I think nuclear continues to be very attractive for
32:27
Speaker 14: the hyperscalers because it operates twenty four to seven, it's cleaned,
32:31
Speaker 14: so it meets their environmental goals, and it matches up
32:33
Speaker 14: really well from a reliability standpoint.
32:35
Speaker 3: So let's go to money then for a second.
32:37
Speaker 5: So coming up with the deals is very interesting, particularly
32:40
Speaker 5: the one you do with Microsoft to restart three Mile Island.
32:43
Speaker 3: Are your costs going up right now.
32:46
Speaker 10: A little bit?
32:47
Speaker 14: But it's really labor inflation that we mostly see now.
32:51
Speaker 14: Remember we have existing nuclear plants that are already built,
32:54
Speaker 14: so a lot of the cost of the raw materials
32:57
Speaker 14: that you're saying, you know, potentially impacted by tariff's in
33:00
Speaker 14: the long run. But in escalation through inflation, we're not
33:03
Speaker 14: seeing much of that tiny bid on uranium pricing. But
33:07
Speaker 14: most of what we're seeing is labor contracting.
33:09
Speaker 5: If you wind up seeing an increase right even in labor,
33:12
Speaker 5: how does that change in your contracts, Like you already
33:15
Speaker 5: said it, you have to go back to them and say, hey, listen,
33:18
Speaker 5: we got to renegotiate my costs.
33:19
Speaker 3: Are going on now.
33:20
Speaker 14: There's no reopeners up or down for those sorts of inflation, So.
33:23
Speaker 3: You're really shaking on that risk.
33:25
Speaker 14: Sure, yeah, we're taking it on for over twenty year period.
33:28
Speaker 14: And that's the importance of being able to do this
33:31
Speaker 14: with nuclear right we know exactly what our cost structure
33:34
Speaker 14: is going to be within a range for ten and
33:37
Speaker 14: twenty years.
33:38
Speaker 12: Harder to do with our.
33:39
Speaker 14: Natural gas assets, where we don't know what the price
33:42
Speaker 14: of natural gas is going to be ten years out,
33:44
Speaker 14: or whether we're going to have a carbon tax, or
33:46
Speaker 14: what the changes in environmental regulations are.
33:48
Speaker 3: Going to be So how do you manage that risk?
33:50
Speaker 14: Well, I think what's really difficult to do that In
33:53
Speaker 14: the case of natural gas, I think there what you're
33:55
Speaker 14: doing is something that looks more like an index product
33:58
Speaker 14: that is indexed either inflation or natural gas prices.
34:02
Speaker 5: When you talk about the different parts of your business,
34:05
Speaker 5: how much of the capex that you're spending is going
34:07
Speaker 5: to new stuff, beefing up old stuff, or just replacing
34:12
Speaker 5: and making sure everything stays on track.
34:13
Speaker 14: Yeah, So for us alex we face a critical decision
34:17
Speaker 14: as to whether to relicnse the nuclear plants for another
34:20
Speaker 14: twenty years, and we're facing that across the fleet. So
34:24
Speaker 14: when you say new, if we don't do this, it's
34:27
Speaker 14: going to be retired, very much like Three Mile Island
34:29
Speaker 14: was retired. So the distinction between keeping existing open and
34:35
Speaker 14: something that's truly new is immaterial.
34:38
Speaker 10: Right.
34:38
Speaker 14: If it's gone, it's gone. It's the same as if
34:41
Speaker 14: it were never built. So we are investing all of
34:44
Speaker 14: our moneies to secure that fleet for the future, and
34:47
Speaker 14: we're also doing uprights and restarts and other things like that.
34:50
Speaker 14: In terms of a percentage to your question, I would
34:53
Speaker 14: say ninety percent of our spend is in the existing
34:57
Speaker 14: assets and getting them ready to run for decades.
35:00
Speaker 5: So when we talk about power demand booming and increasing
35:04
Speaker 5: by multiple digits, right, I mean.
35:08
Speaker 3: Would be huge.
35:09
Speaker 5: How do you play that, Like, if it's not new,
35:11
Speaker 5: is it just expanding?
35:13
Speaker 14: Well, it is expanding. A lot of our clients are
35:16
Speaker 14: interesting interested in operating that's increasing the output of existing
35:21
Speaker 14: nuclear plants, and we're doing that in a number of
35:23
Speaker 14: different regions. Obviously, the restart is more limited. You had
35:27
Speaker 14: one plant there that you could turn on, and I
35:29
Speaker 14: think there might be another in the nation. And then
35:31
Speaker 14: the rest of that is going to be probably spent
35:35
Speaker 14: on renewables, storage and natural gas for the time being
35:39
Speaker 14: and then the fullness of time new nuclear m and
35:41
Speaker 14: A for that.
35:42
Speaker 5: I know you just bought Calpine, so that really beefs
35:43
Speaker 5: up your natural gas. Nuclear is now fifty percent of
35:46
Speaker 5: your portfolio versus say seventy.
35:48
Speaker 3: That was a big shift. What else is in your pipeline.
35:50
Speaker 14: For that, Well, we've got a lot on our plate.
35:52
Speaker 10: We've got a lot of food.
35:53
Speaker 14: Yeah, and so this year we're going to spend making
35:57
Speaker 14: sure that we're ready to integrate Calpine and prepared for
36:01
Speaker 14: regulator our approvals at the back end of the year.
36:03
Speaker 14: But as you said, it's a big deal, and I
36:05
Speaker 14: think what we've indicated as a company is M and
36:07
Speaker 14: A is a big part of our strategy.
36:10
Speaker 5: Yes, M and A in beefing up nuclear, natural gas,
36:14
Speaker 5: or you want to divers all of the above.
36:15
Speaker 10: All of the above.
36:16
Speaker 14: I think storage is going to increasingly be a part
36:19
Speaker 14: of the story, so we'll look at those opportunities as well.
36:22
Speaker 5: Everyone now wants to get into power. It is the
36:24
Speaker 5: coolest thing right now in the market. Whether you're looking
36:27
Speaker 5: integrated utilities, regulated utilities, even energy companies, are you seeing
36:31
Speaker 5: more competition.
36:32
Speaker 14: I think what people are trying to figure out is
36:35
Speaker 14: whether they too can secure longer term contracts. I don't
36:39
Speaker 14: see people building spec power plants hoping the demand will come.
36:44
Speaker 14: So I think there's going to be a lot of
36:47
Speaker 14: interest there, but it's largely going to be fossil. It'll
36:50
Speaker 14: continue to be renewables, but it always has been renewables,
36:54
Speaker 14: and then we'll see whether they could get deals done
36:56
Speaker 14: all right.
36:56
Speaker 5: Thanks to Joe Domingez, CEO of Constellation Energy.
37:00
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