Big energy getting bigger
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What is the main topic discussed in this episode?
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Pushkin. The AI boom runs on two things, money and electricity. And as it turns out, electricity runs on money too. Today on the show, the huge next era Dominion deal, deal making and AI, electricity and money and everything else. I'm Rob Armstrong, and this is Unhedged, the markets and finance podcast from the Financial Times and Pushkin. I am joined on the show today by two fan favorites and show regulars, James Fontanella Kahn and Oliver Bad News Barnes. Gentlemen, welcome back to the show. Now is the part of the show where I get your titles wrong. Go for it. So, Oliver, you are the U.S. – Deals impresario, I believe is our- Correct. Okay. And you are grand high priest, JFK- Of deals. Of all finance.
Is that right? Bien sûr. Actually, you should say your real titles.
US finance editor. And I am the US deals correspondent. The atmosphere in here is electric. Yeah.
Let's start by just there's been a big deal in utilities. And it's always a bit of a big ask for a financial journalist to make the utility industry interesting. How dare you say that? Tell us about what this deal is and why it is interesting. I'll let you start, Oliver.
It's interesting first in its scale. It's the biggest deal of the year. It's an all-stock acquisition, kind of framed as a combination or merger, but really it's an acquisition. It's NextEra, the world's largest listed utility group by market cap, buying Dominion. The deal is, it values Dominion about $67 billion equity value, around $120 billion enterprise value.
Okay, place these for me geographically.
Where are these monsters located? Sure. So NextEra, their kind of home base is in Florida. They own a subsidiary called Florida Power and Light, and that serves around 10 million customers in Florida. And this is the grid, the power generation, or both? Both. Their home turf is Florida and Florida Power and Light. And then Dominion basically has a real foothold in Virginia and the Carolinas.
But they don't touch. In other words, the footprints, the geographic footprints don't touch, but they're nearby, but not overlapping.
But they don't overlap, but they will now be contiguous. So like now, if this deal closes, you know, Nextera will control half of the eastern seaboard of the U.S., If to frame it in a proper empire building way. But in essence, there are two elements to these businesses. In their core, they're regulated utilities providing power to everyday Americans, businesses up and down Florida, up and down the Carolinas and Virginia. But then there's another part to the business, which is the power generation element of it. So if you look what's... what's grown next era so much. It's not just this core regulated utility part. It's the fact that they operate in almost every U.S. state as a power generator. And they're a huge renewable energy generator.
They benefited a lot from Biden's Inflation Reduction Act agenda and Green Push. And now, obviously, that's fallen by the wayside somewhat. They have to pivot towards this other huge opportunity outside regulated utilities, which is data centers.
Of course, we're going to focus a lot on the data centers here. I want to just make sure I have the kind of regulated, unregulated distinction correct. My understanding is the government allows you to have a monopoly supplying power in a certain area. And in return, your profits are limited to a certain amount. Correct. Right. Broadly speaking, whereas unregulated, you're just a company that makes energy and selling it to whoever's out there buying it.
And there's also rules and don't get me too into specifics here, but there's also rules about how much of a company's revenue streams can come from regulated versus unregulated. So in a way, it can't get too lopsided.
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Chapters
5 chapters
1
What is the main topic discussed in this episode?
0:00–6:19
2
Why is the NextEra and Dominion merger significant?
6:19–13:02
3
How does the merger impact the energy landscape on the East Coast?
13:02–16:58
4
What role does AI play in the energy sector?
16:58–22:27
5
How are data centers influencing energy demand?
22:27–22:38