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Chapter 1: 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. ā Deals impresario, I believe is our- Correct. Okay. And you are grand high priest, JFK- Of deals. Of all finance. Is that right? Bien sĆ»r.
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.
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Chapter 2: Why is the NextEra and Dominion merger significant?
In the press release, I don't think they ever use the word data center.
That's very interesting.
Which is very interesting. And they, in fact, use another word, which is affordability a gazillion times, which is now one of Trump's favorite words as well.
Yeah. And this touches on the kind of political aspect of this deal, which is pretty significant. You know, how it's presented is extremely important.
A hundred percent, because I think the logic is quite clear. You need scale to kind of help. feed all this demand for power.
So they're going to have to build a lot of stuff. And if they're a bigger company, they can build it for cheaper.
CapEx is another kind of buzzword this year. So everybody needs to invest a ton of money. And in some way, it's great for America. It creates a lot of jobs in... Industries which were previously maybe less sexy, you know. Yes. We always loved writing about tech. Now it's all about industrials. It's all about power, utilities.
Heavy asset, low obsolescence. Exactly. Halo companies, they call them, yeah. But, yeah, so I think the logic, it basically ā
is quite obvious to everybody.
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Chapter 3: How does the merger impact the energy landscape on the East Coast?
And it's funny because before we broke this deal, like I didn't even know about data center alley. There's this town in northern Virginia called Ashburn where there's like 150 data centers. Can you imagine? There's only 50,000 residents. I mean, there's something so like kind of Martian and soulless about the idea of living in a town full of data centers.
If you live in that town, you should just get a dividend. It should be like living in Alaska and you just get a cut of the oil money. Well, that is kind of what the bill credit is, right?
Yeah, yeah. You know what I mean? It is a dividend for the users. It impacts, if I'm not mistaken, mostly Republican states. Ah. And that's, again, it's kind of, it's one of those situations where- Well, Virginia's purple. It is. Famously, right? It is, but it's kind of- The Carolinas aren't. Sure. And there's a sense of people that have suffered the brunt of AI the most are not based in cities.
They're more in rural areas, which again tend to be more Republican than Democrat. And so there's an irony there. And so Trump really finds himself in the position where it's not an easy thing to manage.
Do you think the deal is going through? Oliver? Yeah. Yeah. You think it's going to work? Yeah. I just think... It is kind of your baby. You broke it. So basically, if it doesn't go through, it's a commentary on you.
We're completely objective on it. But I think that there is a degree of empire building here from John Ketchum, who's the CEO of NextEra. And this is kind of quite an extraordinary pivot from a few years ago, where really they were just being subsidized so much by the Biden administration. And now they're pushing in to a whole new territory, right? Yeah.
The reason I think the reason I'm confident that it will that will go through is that I think nowadays when people go about doing big deals, the first thought they have before they've even got together in the room and started negotiating is what is our Trump strategy? What is the strategy with the administration? Right.
And it's no coincidence that a company like NextEra was among the companies that donated to Trump's ballroom, beautiful ballroom. So that's just one like little leg of I'm sure what is a much larger strategy to try and convince the Trump administration of the merits of that. And on this show before we've we've discussed the railroad merger that happened.
And that now is beginning to go through its regulatory process. And it's maybe not quite as smooth as everyone imagined it would be. Right. And I'm sure this won't be easy, but they will have a very detailed, thought out strategy of how to convince the Trump administration and also how to convince the local regulators.
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Chapter 4: What role does AI play in the energy sector?
Now we're seeing, for example, the tech companies were left out of ā Kind of the mega merger mania that we saw in the last 10 years. And now they found ways of actually doing deals which are not traditional M&A. So starting even with like Microsoft not really owning OpenAI, but being in the foundation or...
You have Facebook, instead of acquiring a company, it now kind of buys out the 10 best employees for $15 billion. So is that M&A? I mean, it kind of is, but it isn't. And why are they doing that? In the case of Facebook or Meta, it's probably because it makes it easier not to go through the whole antitrust regulatory process, right? It's an acqui-hire.
Yeah, rather than an outright deal. in the same way we've been talking a lot about scale throughout this conversation, in tech, in a way, the driving factor is speed, is that the technology is evolving at such a rapid pace. You know, we went from kind of GPT-4 to GPT-5, and like, now people are like, we're going to get AGI at some point, you know. Artificial General Intelligence. Exactly.
Our robot overlord. Let's not get into whether or not that's going to happen or not. But, you know, so if you're a tech company, right, and if you're one of the, you know, the big players in AI, you have to think about, okay, if I'm
buying something if i had a regulatory process that takes 18 months what i'm buying might be irrelevant by the time i actually get to buy it and own it right and and that's what's driving a lot of these kind of acquihires or new structures around deals but the thing that's so striking i think that this deal made us think about i think for the first time is just how like
AI, to us as the average consumer, it's a digital phenomenon, right? You go on your phone, you go into ChatGPT or into Claude or whatever, you know, and you ask it, whatever, what should I have for breakfast this morning? But there's a huge physical infrastructure, right? In the background. And in a way that I don't think we've ever really seen because, like, you think about the internet, right?
And telecommunications, like, yes, we laid kind of subsea cables and the Internet also needed data centers, too. But the level of demand for all this physical infrastructure is like it's reaching like constantly new heights. And it's kind of fascinating how it like cascades from one industry to the next to the next. It's like. First, you have the data centers themselves.
Then there's the power companies serving the data centers. So it has effects on the oil and gas companies. Then it has effects on industrials companies because they're the ones doing the picks and shovels story for the energy companies, i.e. like working on their pipelines and little like widgets.
So much of this frothiness we're seeing in deal making at the moment, when you trace a lot of it back, it's kind of etymology. It starts with AI. Yeah.
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Chapter 5: How are data centers influencing energy demand?
A 30-day free trial is available to everyone else. Just go to ft.com slash unhedged offer. I'm Rob Armstrong. Thanks for listening.