June 13, 2025 • 38 mins
Watch Alix and Paul LIVE every day on YouTube: http://bit.ly/3vTiACF.
Hosts: Paul Sweeney and Alix Steel
On this podcast:
- Geetha Ranganathan, Bloomberg Intelligence Analyst on US Media, discusses Warner Brothers Discovery splitting into two independent companies.
- Ben Elliott, Bloomberg Intelligence Consumer Finance Analyst, discusses Walmart ’s credit cards once again being issued by Synchrony Financial.
- Sam Fazeli, Bloomberg Intelligence, Director of Research for Global Industries and Senior Pharmaceuticals Analyst, discusses the latest in the biotech space.
- Scott Levine Bloomberg Intelligence Senior Energy & Industrial Services Analyst, discusses the White House’s goals for nuclear energy.
- Janet Lorin, Bloomberg Higher Education Finance Reporter, discusses her Bloomberg story: “Oil Rich University of Texas Cashes In on AI, Crypto, and Power.”
- Oliver Metcalfe, BNEF Head of Wind Research, discusses BNEF’s outlook for offshore wind.
Bloomberg Intelligence, the research arm of Bloomberg L.P., has more than 400 professionals who provide in-depth analysis on more than 2,000 companies and 135 industries while considering strategic, equity and credit perspectives. BI also provides interactive data from over 500 independent contributors. It is available exclusively for Bloomberg Terminal subscribers.
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Episode Transcript
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Speaker 1 (00:02):
Bloomberg Audio Studios, Podcasts, radio news. This is Bloomberg Intelligence
with Alex Steel and Paul Sweeney.
Speaker 2 (00:13):
The real our performance has been in US corporate high yield.
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Are the companies lean enough? Have they trimmed all the fats?
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The semiconductor business is a really cyclical.
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Business, breaking market headlines and corporate news from across the globe.
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Do investors like the M and A that we've seen?
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These are two big time blue chip companies.
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Window between the peak and cunt changing super fast.
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Bloomberg Intelligence with Alex Steele and Paul Sweeney on Bloomberg Radio.
Speaker 2 (00:42):
On Today's Bloomberg Intelligence Show, we dig inside the big
business stories impacting Wall Street and the global markets.
Speaker 4 (00:46):
Each and every week we provide in depth research and
data on some of the two thousand companies in one
hundred and thirty industries our analysts cover worldwide.
Speaker 2 (00:54):
Today, we'll take a look at Moderna's new COVID shut
and vaccine trial.
Speaker 4 (00:58):
Plus we'll take a look at how one university system
is benefiting from AI, crypto and power.
Speaker 2 (01:03):
But first we moved to some news in the media space.
Speaker 4 (01:05):
This week, we heard that Warner Brothers Discovery is splitting
into two independent companies, Global Networks and Streaming and Studios.
Speaker 2 (01:11):
Global Networks will include entertainment, sports, and cable television brands
such as CNN, TNT, and TBS, and will hold a
twenty percent stake in Streaming and Studios.
Speaker 4 (01:20):
Its separations expected to be completed by mid twenty twenty six,
allowing each company to pursue deals and investment opportunities on
their own.
Speaker 2 (01:26):
For more on this and the latest media news, we
were joined by Githa Rang and Athan Bloomberg Intelligence, senior
media analysts.
Speaker 4 (01:32):
We first asked Etha if she likes Warner's plan and
if it's at all surprising and exciting.
Speaker 5 (01:38):
We like the plant. This has been many months in
the making, so last December they had actually reorganized the
existing business into these two separate units, the TV business
and then the streaming of the studio business, kind of
eventually paving the way for exactly the announcement.
Speaker 6 (01:53):
I think the.
Speaker 5 (01:53):
Surprising part and this is a little bit of a
pleasant surprise for Warner Brothers. Discovery has really been on
the debt side, so as you well know well the
linear TV business is challenged, but the bigger problem for
WBD has really been a huge amount of debt. And
this debt was really as part of the combination of
Warner Brothers and Discovery, which happened a few years ago.
(02:15):
At that point, the company had over fifty five billion
dollars in debt. They've paid about nineteen billion down, but
they still have thirty five billion. But what they're doing
now as part of this transaction is they have a
tender offer out there, really kind of looking to streamline
the capital structure. So when you have these two new
public companies, there's going to be a much more manageable
debt load at both of those companies. And I think
(02:37):
investors are really reacting positively to that news.
Speaker 7 (02:40):
Keetha.
Speaker 2 (02:41):
When they put the companies together, one of the arguments
was to create scale to compete against Netflix and Disney.
Speaker 6 (02:47):
What happened to that.
Speaker 5 (02:48):
Argument, Yeah, exactly, Paul. You know, yes, they did create
scale as far as the TV networks part of the
business was concerned. You know, you have Discuss, which is
really the leader when it comes to nonfiction. You have
you know, the Warner Networks and HBO, which is the
leader when it comes to fiction and quality dramas and
(03:08):
scripted series. And they thought that that would do well,
but unfortunately what happened is, you know, and all media companies,
as you will know Paul, have this conundrum because they
have the TV business, which brings in a lot of
the cash, but is literally a no growth business. In fact,
it does in decline. Both advertising as well as affiliate
fees are in decline. But then you had the streaming business,
(03:29):
which initially kind of had a little bit of trouble
because you know, in that whole game of subscribers and
that land gradt for subscribers, they actually ended up incurring
a huge amount of losses. But there is this whole
wave of content cost rationalization. We've seen a turnaround and
all of the streaming businesses and Warner Brothers Discovery actually
has kind of led the charge there. So they were
(03:50):
actually the first to get profitable in terms of streaming.
And so now we're seeing this huge disconnect, or at
least they are saying that there is this huge disconnect
between TV network's business and the streaming of the studios businesses,
which should arguably get a much higher multiple, and that's
kind of the reason for this split. So we've we're
seeing how multiple companies do this. Actually, so Comcast, which
(04:11):
has the NBC division, they're splitting out their cable networks.
We had Lions Skate and Stars, where you have Lions
Skate as an independent movie studio, Stars as the media networks,
and now you have Warner Brothers Discovery. So there's this
whole big movement now towards you know, this vertical kind
of separation if you will, I mean, do.
Speaker 4 (04:27):
They all come together then and create kind of one
less great TV network thing?
Speaker 5 (04:34):
Yeah, that's kind of the plan. So the most logical combination,
and this has been floated around for for months now,
is that with this news of the Comcast, you know,
the NBC cable network separation, who would have would that
become like this kind of roll up vehicle. And that's
kind of what you know, a lot of the industry
experts are thinking, they're expecting now that you have this
(04:55):
news with Warner Brothers Discovery, everybody's kind of expecting down
the road some common nation of maybe that Warner Brothers
Discovery TV assets along with the Comcast assets and who
knows who else kind of spins off their networks and
then that becomes this giant kind of TV network umbrella.
Going back to Paul's point about scale, because scale really
matters now at this business.
Speaker 2 (05:17):
All right, how about Paramount you other sick child in
your coverage, what's going on there?
Speaker 5 (05:24):
Yeah, So we really don't know what's going on there.
So there's been a lot of ups and downs, Paul,
with the whole closing of the deal. So the Paramount
sky Dance transaction, it was announced last year sometime in July.
It was supposed to close by the first half, by
the end of the first half of twenty twenty five,
but there's just been so many different press reports. They've
(05:44):
had to do different things to appease the current administration
to a peace President Trump, I'm not sure he is
yielding so easily. So we're actually it's still kind of
fifty to fifty Paul, whether that transaction actually, yeah, actually closes.
So there's just too many up in the air. And
then again there is the lingering question because we know
that Skydance was really only interested in the Paramount's studio business.
(06:07):
So again what they kind of do with the TV
networks business, what they do with the streaming business, that's
all a huge question mark. So visibility very very limited
right now for Paramount.
Speaker 4 (06:18):
I guess I just wonder if you stick all the
cable networks together, how does that actually generate real income?
I mean, I know that's a cash cow to some extent, right,
but then you have a lot of debt and there's
no growth.
Speaker 3 (06:29):
Like, what kind of asset is that?
Speaker 5 (06:32):
Yeah, it's definitely a melting ice cube kind of an asset,
which is exactly what you know, the TV networks have been.
The argument that all of these media companies are making
alex is that somehow by kind of banding together, you know,
because each one of them will have one or two
networks that is kind of a must have networks. If
you're looking at Warner, you have CNN, you know. If
(06:53):
you're looking at again, if you're looking at the NBC networks,
you have USA, you have MSNBC. So you know, there
are definitely all going to be some must have networks
in each portfolio, and kind of putting them all together
will stem that rate of decliner. At least that is
the argument that they're making. But again we've seen that
court cutting has actually been far worse than what was
(07:14):
initially projected, so again it remains to be seen. But
the idea is they want to milk it till it
kind of runs dry.
Speaker 2 (07:21):
Our thanks to get it Wrong Andathen Bloomberg Intelligence Senior media.
Speaker 4 (07:23):
Analyst, we moved to some news at the world's largest retailer, Walmart.
Speaker 2 (07:27):
This week we heard that Walmart's credit cards will once
again be issued by the consumer financing company Synchrony Financial.
Synchrony previously issued Walmart credit cards for nearly two decades
until twenty eighteen.
Speaker 4 (07:38):
Walmart will now use its fintech startup One Paid a
partner with Synchrony, and they'll offer co branded and private
label cards in the US later this year.
Speaker 2 (07:45):
This comes as Walmart makes a renewed push into financial
services and for more. We were joined by Ben Elliott,
Bloomberg Intelligence consumer finance analyst.
Speaker 4 (07:53):
We first asked Ben for some background on Synchrony, which
initially lost a partnership with Walmart to Capital One.
Speaker 8 (07:59):
Yes, so they had it for twenty years right up
until twenty eighteen when the renewal sort of negotiations between
the two companies got contentious. Walmart was demanding too much
for Synchrony, and so Synchrony sort of sort of backed down.
And at the time it was a really big deal,
and so this is an equally large deal that they're
coming back.
Speaker 3 (08:19):
Why did it go away?
Speaker 8 (08:20):
So the way Synchrony works is they have these large partners,
right the top five partners are more than fifty percent
of their net interest in fees. And what they do
is they share the economics with the partner programs and
something called a retailer share arrangement. So every couple of
years the partnerships are up for renewal. And Walmart is
a gigantic corporation. They have huge leverage and they were
demanding essentially more of the economics than Synchrony could provide
(08:43):
and still be profitable.
Speaker 2 (08:45):
Ben talk to us about these kind of branded credit
cards if you will. I mean, my daughter is a
master at managing points and managing points and doing all
that kind of full time job it is, but it
pays off every time she's traveling somewhere it's oh, it's
on points points. Talk to us about that. The business
of those kinds of cards and kind of the economics.
Speaker 8 (09:06):
Yeah, So Syncrety is not so much in that business.
They're in the business of providing a credit option, usually
to sort of a lower credit worthiness, lower income borrower
that is really focused on a single retail partner. So
this partnership is going to be there's gonna be two cards.
One's a general purpose card that kind of does what
you're talking about, but the rewards sort of value proposition
(09:28):
will typically be a little bit lower. The card will
be more accessible, and then the other card will be
just used at Walmart. And details are still pretty light
on what the reward structure might look like. But the
goal is to drive through put at Walmart and not
necessarily at sort of other retailers.
Speaker 4 (09:45):
So they also have cards with like JC penny Low's
Amazon PayPal for example. And you mentioned sort of a
different type of band of consumer. How is that band
of consumer doing.
Speaker 8 (09:57):
So Synchrony likes to say that they're managing, they're not thriving,
and they're not struggling. You know, this is a it's
sort of like a subset of wallet share, all right.
So the Syncrety is just seeing how these consumers are
behaving at a single retailer for the most part. But
there's not a lot of stress. But if you look
back at twenty eighteen when they first decided not to
(10:18):
renew the Walmart partnership, it's kind of overnight their charge
offs went down like sixty seventy basis points, so presumably
this particular customer set is charging off a little bit higher,
like maybe one percentage point higher than your typical borrower.
So there's going to be it's an interesting time for
Syncrony to go out and look for these sort of
more marginal buyers basically to get growth.
Speaker 2 (10:41):
Ben your coverage of consumer finance companies, you get a
good view those companies, get a good view of how
the consumer is doing, how they're spending their money. What
are you hearing from these companies these days?
Speaker 8 (10:52):
So if you look across spending categories, everything is still
typically growing a couple percentage points above GDP. There's one
obvious standout, which is travel, which is basically people cutting
back on their most incremental spend. But if you kind
of think about travel, right, you're booking your flights a
couple of months maybe a year in advance, and growth
in that category is down double digits. So if you
(11:15):
kind of extrapolate that forward, will we see similar shrinking
in hotel spending, entertainment, leisure things like that? You know,
could be a little bit of a canary in the
coal mine.
Speaker 4 (11:26):
What is Synchrony's flexibility when dealing, when they're managing, when
they're saying that their consumer isn't thriving and they're not
dropping off, but they're managing. What does that translate for Synchrony.
Speaker 8 (11:37):
Well, so this goes back to what we talked about
the retailer share arrangements. So you share both the profits
and you share the costs, right, so you know, if
charge offs were to rise, the retailer in this case,
Walmart is going to pick up some of those charge offs.
So that kind of like you know, softens the blow
a little bit for Synchrony as a as an issuer.
(11:57):
But they have other sort of tools in their toolbox.
One big one was the late fee, which CFPB had
been trying to cap at eight dollars instead of about
thirty dollars. But they can use those things like that
to incentivize borrowers to pay even when it gets to
be more painful.
Speaker 2 (12:12):
Ben are your consumer finance companies? Are they talking about
credit quality concerns at this point?
Speaker 6 (12:17):
Yet?
Speaker 8 (12:18):
Credit quality is still great for companies like Amex, it's pristine, unimpeachable.
But the thing to look at is delinquency. Just the
mechanics the way charge offs work. First, you have to
go delinquent before you stop paying. And we're not really
seeing any sort of increase beyond kind of like seasonal
trends in delinquency.
Speaker 2 (12:36):
Our thanks to Ben Elliott, Bloomberg Intelligence consumer finance analyst.
Speaker 4 (12:40):
Coming up, we're going to break down the White House's
plans for nuclear energy.
Speaker 2 (12:43):
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Speaker 3 (13:15):
We moved next to the biotech space this week.
Speaker 4 (13:17):
We were joined by Sam Fazzelli, Bloomberg Intelligence, Director of
Research for Global Industries and senior pharmaceutical analyst.
Speaker 2 (13:22):
He joined to discuss the latest in the biotech space
from Moderness recent COVID vaccine approval and placebo trial to
new obesity drugs from the biotech company met Sarah.
Speaker 4 (13:32):
We first began with the money side of things and
asked Sam for his take on why more biotech companies
are returning cash back to their shareholders.
Speaker 6 (13:39):
So, I think companies are coming to a realization that
they can't just sit on a large pilot cash. The
latest one that just happened was seven hundred million dollars
in the bank, and the assets weren't particularly going in
the direction that athy shareholders were happy with, which is
(13:59):
why the company was sitting at a negative enterprise value
of like one hundred million or ninety million, depending on
when you're looking at it. And I think they thought, well, no,
actually two hundred eighty eight million. Sorry, they thought this
time to return some of that cash to shareholders. And
you're seeing more of this happening. Investors got tired of
companies essentially constantly saying, we'll find a better thing to
(14:21):
do with your cash, and they investors go, we know
what to do with our cash.
Speaker 4 (14:25):
That is like a really weird thing for about tech company, right,
because this isn't the whole value proposition. Eventually, is that
you spend all this money on R ANDD to make
that super cool thing that's going to make up bazillion dollars.
Speaker 6 (14:36):
Right, sure, Alex. But if you start off saying I
am the expert in this area, and I'm going to
take this expertise and translate this idea into a product,
and that doesn't work out, then you say, actually, I
have another idea that wasn't necessarily your expertise. That's where
investors get a little bit edgy.
Speaker 2 (14:54):
Yeah, so, Sam, I know the FDA recently approved modarrens
new COVID BAX seen what's new about it and is
it better?
Speaker 6 (15:05):
Well, actually, they did a real trial of comparing this
new version. I'll tell you what's new about it with
the standard vaccine spike facts that we've been getting. I
don't even know how to pronounce the new name m
next via something like that. I could never It's not
an easy roar rolling off the tongue. What they've done
(15:27):
is that they've taken the dose from fifty micrograms to
ten micrograms, and what that does is that it gives
you less reactions, and in fact, in this particular trial,
they showed even higher antibody responses compared to the old one.
So there is a small possibility it was only a
few ten percent or so higher. A small possibility you
get a much better efficacy in a real world setting.
(15:50):
But it seemed to go in that direction here, So
and that now is going to become the base of
all their vaccines going forward.
Speaker 4 (15:57):
Right, But that's a good news if you take the
VACS scene. But then you're not allowed to get the
vaccine unless you have underlying commorbidities, right.
Speaker 6 (16:06):
Yeah, alex is only you not allowed to get direction
because you don't have a whole bunch of the qualifying factors.
You're not old, you are, you're over sixty four, you're
not you're not come morbidity. Except the one thing you have,
which is something that doesn't show up in these conversations,
(16:27):
is a risk of a really bad reaction to COVID, right,
which is something that you've experienced. So what is going
on though, is that the company has whatever specifically, has
committed to the FDA to do a placebo control trial
in a fifty to sixty four year or sixty five
year group of individuals without come moobilities compared to a
(16:48):
placebo I eat nothing so that will be where they
will have to do this trial, and by committing to it,
this trial needs to be large in order to show
a difference. And I remember a whole bunch of people
going into these trials now with previous immunity, which means
the difference is going to be smaller, which means you're
going to need larger trials. So I hope it works
(17:09):
out and I hope the cost isn't punitive for modernaw.
Speaker 2 (17:13):
New obesity data from a Newish biotech met Sarah and
their obesity issue. What's going on there? What do they
have for the market.
Speaker 6 (17:21):
Yes, so they've got a new mechanism, which they're not
the only people following it. Lily's doing it, and I
was doing it Zealand and now in partnership with Rash
are doing it. And it's targeting not jlp ones but
amelin in the same sort of pathway of hormones that
hunger and satiety, et cetera, but slightly different. And the
(17:45):
theory is that you're going to get a drug that
is less difficult to tolerate. Nausea and vomiting is the
biggest one with these drugs because they impact the gut
and so here they've presented data that shows pretty good
weight loss the thirty six week readout, thirty six day readout, sorry,
five weeks, and you've got unfortunately one hundred percent nausea rates,
(18:09):
but they are at the very low grade. I is
just feeling a little I'm assuming yuck. And then what
you've got is that it only seems to majority of
them seem to pass after the first week. So I
think this is good.
Speaker 2 (18:26):
Our thanks to Sam Fazzelli, Bloomberg Intelligence, Director of Research
for Global Industries and senior pharmaceuticals analysts.
Speaker 4 (18:31):
We move next to the energy sector, specifically nuclear energy. Recently,
the White House announced it's gold a quadruple US nuclear
generation capacity by twenty fifty.
Speaker 2 (18:40):
The goal is to have reliable energy supply to meet
the growing demand for artificial intelligence from more.
Speaker 4 (18:45):
We were drawn by Scott Levine, Bloomberg Intelligence, senior Energy
and Industrial Services analyst.
Speaker 2 (18:49):
We first asked Scott to explain the complicated relationship with
nuclear energy and what the Trump administration would like to
do with it.
Speaker 9 (18:56):
Nuclear has always kind of been a bit of a
strange one for environmentalists and for the industry overall. You know,
it's an emissions free power source, right, which would seem
to align well with the goals of environmentalists. However, safety concerns,
you know, end up being an issue three Mile Island,
(19:18):
Fukushima and otherwise. And so you know, with the combination
of demand from AI for power of all types, coupled
with the fact that it is an emissions free power
source has really brought it back into the forefront and
supporting the AI demands story. So you have the demand
(19:42):
picture has clearly strengthened as a result of that. The
two things that really blew a hole in the story
the last time it was in vogue and the Obama
administration was really the shale revolution which made natural gas
so cheap as an alternative, and then in twenty eleven
Fukushima created all kinds of concerns there. So the two
(20:05):
really blew a hole in the story then. And now,
you know, in fifteen years has gone by since then,
and the memory has faded, and now it's back in
the forefront folks minds.
Speaker 4 (20:15):
So expanding or keeping alive or recommissioning a nuclear plant
is one thing, and that's what we're doing three Mile Island.
We're getting it back up and running again. Then Constellation
also made that deal with Meta on Monday or Tuesday.
That is just continuing to expand. It's going to keep
going with its nuclear reactor, right, but building a new
one is like a whole different thing.
Speaker 3 (20:36):
How expensive is that?
Speaker 9 (20:38):
Yeah, so we've only built one plant in the last
thirty years in this country. It was in Georgia. It
was initially expected to cost under fifteen billion dollars and
take seven and a half years, and it ended up
costing over thirty billion dollars to complete and taking about
(21:00):
as long as expected. And that was the one that
got through, right.
Speaker 4 (21:04):
Well, but President Trump and what he outlined those executive
orders is aimed to reduce the time and the money.
Speaker 3 (21:09):
But does it kind of do it that much?
Speaker 9 (21:12):
I mean in theory, In theory it's possible, yes, but
there's so much we don't know, right, I Mean, our
expectation would be that, you know, we may not even
see full sized reactors built at this point, right. Small
modular reactors, yes, where I want to go are being developed,
(21:32):
there are, you know, and so these are going to
be much more they're you know, modular built. They're smaller
in terms of the unionization. Uh, and so they could
be built conceivably behind the grid if the regulators can
get comfortable with the safety aspects. So uh uh it's conceivable.
But none of those have been built yet, right, So
(21:53):
a lot of it's still on the come uh and
a lot of will depend on the uh progress of
technology goes to the regulators, et cetera.
Speaker 2 (22:01):
Is the technology there, because we've had people come through
here to kind of apply that it is there.
Speaker 9 (22:06):
It is on paper. You know, there's a have we
built one of them? We have not built any of
them in the US. There have been a couple built
over seas. Only one design has been approved, and that
is New Scales small modular reactor, and that's basically mimics
a light water reactor. It's a smaller version of the
(22:26):
plants that are in service now. Two thirds are the
ones in service in the US or Westinghouse one third
give or takeer ge, and those are all light water reactors.
And then there's a whole other list of companies that
are building these more innovative technology gas cool reactors, salt
cool reactors. None of those are in service, right and
you know, half of those are in the process of
(22:48):
commercialization in some way, shape or form, but none have
been built here.
Speaker 4 (22:52):
No, why is nuclear so interesting to hyperscalers Because.
Speaker 9 (22:57):
It's emission's free, and because it runs twenty five or
by seven, right, And that's the big knock on wind
and solar, right, And so those two things in and
of themselves, they need to be twenty four x seven.
They need to be basedload in order to support data
center needs number one and number two missions free, you know,
supports the environmental mandates of the metas, the Googles, the
(23:19):
Microsoft's of the world. And those are two huge positives
that can't be ignored. So if indeed we need power
for a longer period of time than it's taken to
train these models, and all indications suggest that will be
the case for inferencing purposes nuclears, positives are really too
great to ignore.
Speaker 2 (23:40):
But it's expensive. Yes, we're going to pay for this.
Federal governments can some subsides. Is the President posing that?
Speaker 9 (23:47):
Yeah, they are proposing that. And that's really kind of
the big unknown right now. How much money are they
willing to put behind this? When they built the scale VC, sorry,
the Southern Company plant Vogel and Georgia. If I'm administration
put eight over eight billion loan guarantees towards that, and
it ended up costing thirty one to thirty four billion dollars. Yeah,
and so we're in an age now right where the
(24:10):
budgets are concerned, and some renewable projects are being canceled,
others are being allowed to move forward, whether it's hydrogen,
whether it's carbon capture, et cetera. So you know, Trump's
saying he loves nuclears is a big positive there. But
how much money they're willing to put behind specific projects
(24:31):
is really the key question.
Speaker 4 (24:32):
And that's such an interesting point because therein lies the
problem with hyperscalers. They're not used to taking on that
particular kind of risk. Also, they need power yesterday. So
saying that we can get this to you, let's just
be generous and say seven, it would say four.
Speaker 3 (24:46):
They need it yesterday. Four is not going to be
good enough.
Speaker 4 (24:48):
So are they going to actually like help offset the
cost for something that won't be available to them in
four years in an industry like tech that changes really fast.
Speaker 9 (24:56):
I mean, they have a look all every hyper scaler
has made positive comments regarding nuclear. Then it comes down
to like how much how subsidy is done. Is that exactly?
And so you know, the reality here is they need
interim solutions now to support the growth. They also need
longer term solutions. Nuclear certainly could be a longer term solution.
But you know, we'll see what the details are. We'll
(25:17):
see where the government's willing to subsidize a portion of
those investments. The one thing I can say is utilities
are probably going to be redis in to put a
lot of money behind this on their own without that backing,
given the history of the last three decades.
Speaker 2 (25:30):
Our thanks to Scott Levine Bloomberg Intelligence senior Energy and
Industrial anast.
Speaker 4 (25:34):
Coming up on the program, we're going to break down
the state of offshore wind in the US.
Speaker 2 (25:38):
You're listening to Bloomberg Intelligence on Bloomberg Radio, providing in
depth research and data on two thousand companies and one
hundred and thirty industries. You can access Bloomberg Intelligence if yeah,
be I go on the terminal.
Speaker 4 (25:48):
I'm Paul Sweeney and a Malex Steel and this is Bloomberg.
Speaker 1 (25:59):
You're listening to the Bloomberg Intelligence podcast. Catch us live
weekdays at ten am heasterne on Apple Cocklay and Android
Auto with the Bloomberg Business App, listen on demand wherever
you get your podcasts, or watch us live on YouTube.
Speaker 4 (26:13):
This week we focus on higher education in a story
titled Oil Rich University of Texas Cash is in on AI,
Crypto and Power. You can find it on Bloomberg dot
Com and the Terminal.
Speaker 2 (26:22):
This story discusses how the University of Texas System is
generating cash from new projects on its land from a
mix of renewable energy, crypto and oil and natural gas
production from more.
Speaker 4 (26:32):
We are joined by Janet Lauren, Bloomberg Higher Education finance reporter.
Speaker 2 (26:35):
We first asked Janet to explain how the University of
Texas System is benefiting from AI, crypto and power.
Speaker 10 (26:41):
So, the University of Texas System has lanned two point
one million acres in the premium basin that the State
of Texas set aside for higher education in the eighteen
hundreds when the land was supposed to be worthless. But
then something happened in nineteen twenty three struck oil and
for the first hundred years the University of Texas grew
(27:01):
its endowment with oil and gas, and now in the
next century they're looking for revenue from above the surface.
They've had, they've started with a few wind and solar facilities,
they have a crypto mining center, and they're looking to
expand to you know, augment their revenue from surface ventures.
Speaker 3 (27:22):
So that's so fascinating to me.
Speaker 4 (27:24):
How quickly are they diversifying, Like how quickly is the
money moving? And I wonder what policy in DC is
also sort of filtering down into what the university invests in.
Speaker 10 (27:35):
Well, the university actually isn't really investing in anything. They
are the landholder, So they're signing lots of leases.
Speaker 4 (27:42):
Sure, but they're like choosing to then maybe sign it
for one part of energy and not another.
Speaker 3 (27:46):
One might say, well.
Speaker 10 (27:47):
They're they're looking to find new revenue sources. They've had
a few wind and solar facilities on the land, and
they just signed a preliminary agreement to lease about two
hundred thousand acres or ten percent of their land to
a company called Apex Clean Energy for wind and solar.
And their customers include companies like Meta and the Army
(28:09):
and eBay. So and right now these are you know,
these things take years and years and years to build.
The wind and solar facilities I saw that are up
and running for a couple of years. You know, those
deals were initially signed several years ago, but it just
takes time. And there's new transmission lines that were just
approved in Texas in three of them at ten billion
(28:30):
dollars to move power into the Permian. So these wind
and solar are producing them and then these lines will
be able to take them.
Speaker 2 (28:41):
It's you know, Texas is such an interesting, you know
place in the world for many reasons, one of which
is me. When I think of Texas, I think a
big oil you know, the oil rigs and cowboys and
all that kind of great stuff. But it's also like
the one of the biggest renewals places. They've got a
lot of wind, and I got a lot of sun,
and they got a lot of land. So how does
Texas kind of bounce those things?
Speaker 10 (29:02):
Well, they need an all all, all in approach. And
the University of Texas has you know, really grown its endowment.
It's you know, forty eight billion, you know, coming close
to Harvard. And I did a story a couple of
years ago about their record year in oil. You know
a few years ago they got over two billion dollars
in oil and gas revenue.
Speaker 4 (29:23):
Yeah, that's amazing and it's just cash into the into
the endowment. Can other universities replicate the monetization of their
land in a similar way, Like what what other universities
have this kind of option?
Speaker 10 (29:37):
Everybody in Texas knows, never sell your mineral rights. But
you can't really come close to this, I mean rice
in Texas. They also have revenue coming from oil, you know,
from land, but nothing even comes close to this University
of Oklahoma. You know, I did a store several years
ago about you know, people gift them.
Speaker 3 (29:56):
Land, they keep the mineral rights.
Speaker 10 (29:57):
With fracking, they got you know, huge increases over time.
But you know, you just can't compare anything to two
million acres in the Permian basin, so one of the
they are the one of the largest landholders in Texas.
Speaker 2 (30:10):
Still it's you have a great chart in here that
just kind of shows the growth of revenue from their
oil and gas business, which is still the vast majority
of it. But this surface piece sounds like it can
be totally incremental.
Speaker 10 (30:24):
Yes, And you know the head of University Lands, which
is the unit of the University of Texas system that
runs it. You know, initially he's saying, we're kind of
looking for a couple of singles here and there test
the waters, and now they're looking for bigger projects where
they can have wind and solar power generation, you know,
on larger swaths of land to generate more money. Now
(30:44):
keep in mind, under these projects, the wind turbines that
I saw, they have oil underneath, and you know that
business is also working, so it's all concurrent.
Speaker 2 (30:53):
All right, You've got I have to ask you this question.
Als can answer for you. There's a picture here an
operator flaring excess natural gas at a well at Ute
Manage Land in Cood, Texas. So there's gas escaping from
the well and they just kind of let it on
fire so it doesn't go into the atmosphere.
Speaker 4 (31:08):
Yeah, I mean in theory, they want to capture it economically,
because if you capture it, you can then use it.
And also with any sort of environmental restrictions, you got
to capture it. But those restrictions are changing, let's say.
Speaker 10 (31:21):
And down the road, maybe you can use that natural
gas to power.
Speaker 4 (31:24):
A data So yeah, it's like you gotta make it
economic and if you can use it for something else,
that's where.
Speaker 3 (31:28):
You got it.
Speaker 4 (31:28):
Silly question, What are they using all this money for sports?
Speaker 3 (31:32):
Teams like saying a good question.
Speaker 10 (31:35):
So the money from oil gas goes to basically building things.
It's not for operations. So if you look at their campus,
you know, and we described in the story a couple
of buildings, you know, fifty million dollars for Texas A
and M's new business school. You know, tens of millions
of dollars for new hospital facilities. You know, they run
(31:58):
a bunch of medical schools, different different types of technology
within those medical schools and those health systems. You know,
I forget the number of schools between the two systems,
but it's something like twenty plus, you know, M. D.
Anderson Cancer Center. Ye, So they build buildings, all right.
Speaker 4 (32:14):
Thanks to Janet Lauren, a Bloomberg Higher Education Finance reporter,
each week we take a look at research from Bloomberg
and EF previously known as New Energy Finance.
Speaker 2 (32:23):
They're the team at Bloomberg that tracks and analyzes the
energy transition from commodities to power, transport, industries, buildings, and
agricultural sectors.
Speaker 4 (32:30):
This week we looked at BNF's outlook for offshore wind
for more. We were joined by Oliver Metcalp Bloomberg B
and EM, head of wind Research.
Speaker 2 (32:37):
We first s Oliver to discuss the state of offshore
wind in the US.
Speaker 7 (32:41):
Well, offshore wind projects in the US at the moment
are facing a really, really difficult outlook. It's been tough
over the last few years. There have been rising costs,
supply chain bottlenecks that have hit the sector really hard.
High interest rates for such an expensive technology is also
something that raises costs a lot. There have been strong
political headwinds since the since the Trump administration took office.
(33:05):
So the Trump administration withdrew the permit for that Atlantic
Shores project. That was a project that had already faced
those higher costs I was talking about already facing a
lot of economic difficulties, and the removal of that permit
was that the final straw that really pushed the developers
over the edge. The project isn't completely canceled, so SHERL
and EDF that own that lease area that kind of
(33:27):
marine area are going to hold onto that lease. There's
potential that they could develop that in a different form
in the future if there's a more friendly administration to
off your wind. But yeah, a bit of a bleak
out outlook for the sector at the moment. In the US.
Speaker 4 (33:40):
What about projects that already are outshore offshore and are
already producing. Could those lose their lease and get shut down.
Speaker 7 (33:47):
It's not looking like that at the moment. So the
Trump administration put a stop work order on a currently
under construction project that would feed parent to New York
called Empire Wind that's getting developed by the big Norway
and oil men called Equinor. That and the Equinor had
already invested over a couple of billions of dollars in
(34:09):
that project. Thank thankfully for the sector, the stop work
order has been lifted. Now that's a good sign for
the other projects. There are five under construction US offshore
wind projects at the moment, So the fact that that
project was allowed to go ahead is a very very
good single signal for other investors that are building projects
like AUSTID, like you mentioned, that have projects in the pipeline.
(34:32):
So those five projects we're expecting to go ahead. All
the other ones kind of further out in the pipeline,
federal permitting of projects, federal leasing of new seabed areas
to build projects, the kind of developer, the development environment
has has ground to a standstill for those projects that
are a little bit further out into the pipeline in
US off your wind.
Speaker 2 (34:53):
What's the rest of the world doing with offshore winning
these days?
Speaker 7 (34:57):
Well, some of those effects that I was talking about
that have hit the U have hit other markets around
the world. So costs have risen globally, there have been
supply chain constraints, there have been high interest rates. That's
kind of a global story. But we're seeing a lot
of growth despite that around the world for offshore wind,
particularly European countries in the North Sea are building mega projects.
(35:18):
We're expecting the largest project in the world to start
to start commissioning their turbines next year, a project called
Doggerbank off the coast of the UK. And then we're
just beginning to see markets in Asia start to pick up.
So we're beginning to see the globalization of the offshore
wind industry. So that's markets like Taiwan, Japan, South Korea
(35:39):
starting to install their first commercial scale projects, and over
the next few years we're expecting them to start installing
kind of industrial sized projects that we're already seeing in
the North Sea.
Speaker 4 (35:49):
You mentioned this earlier, but a couple of things that
sort of went wrong for offshore wind before the political
environment shifted was interest rates and also supply chain issues.
So a lot of at least of the way it
was described to me by some of the players, is
that they took on a lot of the commodity and
supply chain risk and they didn't properly share that with say,
customers and other developers, and that that really hurt them
(36:09):
during COVID. Have those two issues, though, sorted themselves out globally.
Speaker 7 (36:15):
So there's a couple of different ways that those issues
are slowly starting to resolve themselves. So firstly, suppliers are
pushing to share a bit more of that risk when
they're signing contracts, so things like linking contract price, your
final contract price the customer pays to a steel price
index or a copper price index, for example, to partially
(36:38):
protect you from these commodity price movements. Another way that
government's reacting to this kind of thing is linking the
price of the subsidy you get paid too similar indexes,
So linking the price of subsidies to the consumer price
index to protect a developer against kind of some of
those inflationary impacts. Same goes for commodity prices. So there's
(37:01):
a bit a bit of a resolution on the policy side,
and then also a bit of a push from supply
chain contracts to protect themselves in some of the deals
they're signing.
Speaker 2 (37:10):
What's the profitability of land based wind farms versus offshore.
Speaker 7 (37:17):
It really depends in the market you're looking at. Typically,
the kind of required returns for an investor on an
onshore wind farm is lower than an offshore wind farm,
where we're kind of more looking kind of nine plus
internal rates of return on a project. Partially that's because
the perceived risks of building something on shore are lower
(37:39):
than building something offshore. Every time you need to fix
a turbine, kind of the whole construction process is just
much more difficult when you're doing it on water versus
when you're doing it just on land. And also on
shore wind projects have been operating, we've been building them
for a lot longer, and so just the perceived risks
and how we understand those risks, it's much further along
(38:01):
for on shore wind firms than on show wind firms.
All right.
Speaker 4 (38:04):
Thanks to Oliver met Kaploomberg b A, the app head
of Wind Research.
Speaker 1 (38:07):
This is the Bloomberg Intelligence podcast, available on Apple, Spotify,
and anywhere else you get your podcasts. Listen live each weekday,
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Speaker 2 (00:13):
The real our performance has been in US corporate high yield.
Speaker 3 (00:16):
Are the companies lean enough? Have they trimmed all the fats?
Speaker 2 (00:19):
The semiconductor business is a really cyclical.
Speaker 1 (00:21):
Business, breaking market headlines and corporate news from across the globe.
Speaker 4 (00:26):
Do investors like the M and A that we've seen?
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These are two big time blue chip companies.
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Window between the peak and cunt changing super fast.
Speaker 1 (00:35):
Bloomberg Intelligence with Alex Steele and Paul Sweeney on Bloomberg Radio.
Speaker 2 (00:42):
On Today's Bloomberg Intelligence Show, we dig inside the big
business stories impacting Wall Street and the global markets.
Speaker 4 (00:46):
Each and every week we provide in depth research and
data on some of the two thousand companies in one
hundred and thirty industries our analysts cover worldwide.
Speaker 2 (00:54):
Today, we'll take a look at Moderna's new COVID shut
and vaccine trial.
Speaker 4 (00:58):
Plus we'll take a look at how one university system
is benefiting from AI, crypto and power.
Speaker 2 (01:03):
But first we moved to some news in the media space.
Speaker 4 (01:05):
This week, we heard that Warner Brothers Discovery is splitting
into two independent companies, Global Networks and Streaming and Studios.
Speaker 2 (01:11):
Global Networks will include entertainment, sports, and cable television brands
such as CNN, TNT, and TBS, and will hold a
twenty percent stake in Streaming and Studios.
Speaker 4 (01:20):
Its separations expected to be completed by mid twenty twenty six,
allowing each company to pursue deals and investment opportunities on
their own.
Speaker 2 (01:26):
For more on this and the latest media news, we
were joined by Githa Rang and Athan Bloomberg Intelligence, senior
media analysts.
Speaker 4 (01:32):
We first asked Etha if she likes Warner's plan and
if it's at all surprising and exciting.
Speaker 5 (01:38):
We like the plant. This has been many months in
the making, so last December they had actually reorganized the
existing business into these two separate units, the TV business
and then the streaming of the studio business, kind of
eventually paving the way for exactly the announcement.
Speaker 6 (01:53):
I think the.
Speaker 5 (01:53):
Surprising part and this is a little bit of a
pleasant surprise for Warner Brothers. Discovery has really been on
the debt side, so as you well know well the
linear TV business is challenged, but the bigger problem for
WBD has really been a huge amount of debt. And
this debt was really as part of the combination of
Warner Brothers and Discovery, which happened a few years ago.
(02:15):
At that point, the company had over fifty five billion
dollars in debt. They've paid about nineteen billion down, but
they still have thirty five billion. But what they're doing
now as part of this transaction is they have a
tender offer out there, really kind of looking to streamline
the capital structure. So when you have these two new
public companies, there's going to be a much more manageable
debt load at both of those companies. And I think
(02:37):
investors are really reacting positively to that news.
Speaker 7 (02:40):
Keetha.
Speaker 2 (02:41):
When they put the companies together, one of the arguments
was to create scale to compete against Netflix and Disney.
Speaker 6 (02:47):
What happened to that.
Speaker 5 (02:48):
Argument, Yeah, exactly, Paul. You know, yes, they did create
scale as far as the TV networks part of the
business was concerned. You know, you have Discuss, which is
really the leader when it comes to nonfiction. You have
you know, the Warner Networks and HBO, which is the
leader when it comes to fiction and quality dramas and
(03:08):
scripted series. And they thought that that would do well,
but unfortunately what happened is, you know, and all media companies,
as you will know Paul, have this conundrum because they
have the TV business, which brings in a lot of
the cash, but is literally a no growth business. In fact,
it does in decline. Both advertising as well as affiliate
fees are in decline. But then you had the streaming business,
(03:29):
which initially kind of had a little bit of trouble
because you know, in that whole game of subscribers and
that land gradt for subscribers, they actually ended up incurring
a huge amount of losses. But there is this whole
wave of content cost rationalization. We've seen a turnaround and
all of the streaming businesses and Warner Brothers Discovery actually
has kind of led the charge there. So they were
(03:50):
actually the first to get profitable in terms of streaming.
And so now we're seeing this huge disconnect, or at
least they are saying that there is this huge disconnect
between TV network's business and the streaming of the studios businesses,
which should arguably get a much higher multiple, and that's
kind of the reason for this split. So we've we're
seeing how multiple companies do this. Actually, so Comcast, which
(04:11):
has the NBC division, they're splitting out their cable networks.
We had Lions Skate and Stars, where you have Lions
Skate as an independent movie studio, Stars as the media networks,
and now you have Warner Brothers Discovery. So there's this
whole big movement now towards you know, this vertical kind
of separation if you will, I mean, do.
Speaker 4 (04:27):
They all come together then and create kind of one
less great TV network thing?
Speaker 5 (04:34):
Yeah, that's kind of the plan. So the most logical combination,
and this has been floated around for for months now,
is that with this news of the Comcast, you know,
the NBC cable network separation, who would have would that
become like this kind of roll up vehicle. And that's
kind of what you know, a lot of the industry
experts are thinking, they're expecting now that you have this
(04:55):
news with Warner Brothers Discovery, everybody's kind of expecting down
the road some common nation of maybe that Warner Brothers
Discovery TV assets along with the Comcast assets and who
knows who else kind of spins off their networks and
then that becomes this giant kind of TV network umbrella.
Going back to Paul's point about scale, because scale really
matters now at this business.
Speaker 2 (05:17):
All right, how about Paramount you other sick child in
your coverage, what's going on there?
Speaker 5 (05:24):
Yeah, So we really don't know what's going on there.
So there's been a lot of ups and downs, Paul,
with the whole closing of the deal. So the Paramount
sky Dance transaction, it was announced last year sometime in July.
It was supposed to close by the first half, by
the end of the first half of twenty twenty five,
but there's just been so many different press reports. They've
(05:44):
had to do different things to appease the current administration
to a peace President Trump, I'm not sure he is
yielding so easily. So we're actually it's still kind of
fifty to fifty Paul, whether that transaction actually, yeah, actually closes.
So there's just too many up in the air. And
then again there is the lingering question because we know
that Skydance was really only interested in the Paramount's studio business.
(06:07):
So again what they kind of do with the TV
networks business, what they do with the streaming business, that's
all a huge question mark. So visibility very very limited
right now for Paramount.
Speaker 4 (06:18):
I guess I just wonder if you stick all the
cable networks together, how does that actually generate real income?
I mean, I know that's a cash cow to some extent, right,
but then you have a lot of debt and there's
no growth.
Speaker 3 (06:29):
Like, what kind of asset is that?
Speaker 5 (06:32):
Yeah, it's definitely a melting ice cube kind of an asset,
which is exactly what you know, the TV networks have been.
The argument that all of these media companies are making
alex is that somehow by kind of banding together, you know,
because each one of them will have one or two
networks that is kind of a must have networks. If
you're looking at Warner, you have CNN, you know. If
(06:53):
you're looking at again, if you're looking at the NBC networks,
you have USA, you have MSNBC. So you know, there
are definitely all going to be some must have networks
in each portfolio, and kind of putting them all together
will stem that rate of decliner. At least that is
the argument that they're making. But again we've seen that
court cutting has actually been far worse than what was
(07:14):
initially projected, so again it remains to be seen. But
the idea is they want to milk it till it
kind of runs dry.
Speaker 2 (07:21):
Our thanks to get it Wrong Andathen Bloomberg Intelligence Senior media.
Speaker 4 (07:23):
Analyst, we moved to some news at the world's largest retailer, Walmart.
Speaker 2 (07:27):
This week we heard that Walmart's credit cards will once
again be issued by the consumer financing company Synchrony Financial.
Synchrony previously issued Walmart credit cards for nearly two decades
until twenty eighteen.
Speaker 4 (07:38):
Walmart will now use its fintech startup One Paid a
partner with Synchrony, and they'll offer co branded and private
label cards in the US later this year.
Speaker 2 (07:45):
This comes as Walmart makes a renewed push into financial
services and for more. We were joined by Ben Elliott,
Bloomberg Intelligence consumer finance analyst.
Speaker 4 (07:53):
We first asked Ben for some background on Synchrony, which
initially lost a partnership with Walmart to Capital One.
Speaker 8 (07:59):
Yes, so they had it for twenty years right up
until twenty eighteen when the renewal sort of negotiations between
the two companies got contentious. Walmart was demanding too much
for Synchrony, and so Synchrony sort of sort of backed down.
And at the time it was a really big deal,
and so this is an equally large deal that they're
coming back.
Speaker 3 (08:19):
Why did it go away?
Speaker 8 (08:20):
So the way Synchrony works is they have these large partners,
right the top five partners are more than fifty percent
of their net interest in fees. And what they do
is they share the economics with the partner programs and
something called a retailer share arrangement. So every couple of
years the partnerships are up for renewal. And Walmart is
a gigantic corporation. They have huge leverage and they were
demanding essentially more of the economics than Synchrony could provide
(08:43):
and still be profitable.
Speaker 2 (08:45):
Ben talk to us about these kind of branded credit
cards if you will. I mean, my daughter is a
master at managing points and managing points and doing all
that kind of full time job it is, but it
pays off every time she's traveling somewhere it's oh, it's
on points points. Talk to us about that. The business
of those kinds of cards and kind of the economics.
Speaker 8 (09:06):
Yeah, So Syncrety is not so much in that business.
They're in the business of providing a credit option, usually
to sort of a lower credit worthiness, lower income borrower
that is really focused on a single retail partner. So
this partnership is going to be there's gonna be two cards.
One's a general purpose card that kind of does what
you're talking about, but the rewards sort of value proposition
(09:28):
will typically be a little bit lower. The card will
be more accessible, and then the other card will be
just used at Walmart. And details are still pretty light
on what the reward structure might look like. But the
goal is to drive through put at Walmart and not
necessarily at sort of other retailers.
Speaker 4 (09:45):
So they also have cards with like JC penny Low's
Amazon PayPal for example. And you mentioned sort of a
different type of band of consumer. How is that band
of consumer doing.
Speaker 8 (09:57):
So Synchrony likes to say that they're managing, they're not thriving,
and they're not struggling. You know, this is a it's
sort of like a subset of wallet share, all right.
So the Syncrety is just seeing how these consumers are
behaving at a single retailer for the most part. But
there's not a lot of stress. But if you look
back at twenty eighteen when they first decided not to
(10:18):
renew the Walmart partnership, it's kind of overnight their charge
offs went down like sixty seventy basis points, so presumably
this particular customer set is charging off a little bit higher,
like maybe one percentage point higher than your typical borrower.
So there's going to be it's an interesting time for
Syncrony to go out and look for these sort of
more marginal buyers basically to get growth.
Speaker 2 (10:41):
Ben your coverage of consumer finance companies, you get a
good view those companies, get a good view of how
the consumer is doing, how they're spending their money. What
are you hearing from these companies these days?
Speaker 8 (10:52):
So if you look across spending categories, everything is still
typically growing a couple percentage points above GDP. There's one
obvious standout, which is travel, which is basically people cutting
back on their most incremental spend. But if you kind
of think about travel, right, you're booking your flights a
couple of months maybe a year in advance, and growth
in that category is down double digits. So if you
(11:15):
kind of extrapolate that forward, will we see similar shrinking
in hotel spending, entertainment, leisure things like that? You know,
could be a little bit of a canary in the
coal mine.
Speaker 4 (11:26):
What is Synchrony's flexibility when dealing, when they're managing, when
they're saying that their consumer isn't thriving and they're not
dropping off, but they're managing. What does that translate for Synchrony.
Speaker 8 (11:37):
Well, so this goes back to what we talked about
the retailer share arrangements. So you share both the profits
and you share the costs, right, so you know, if
charge offs were to rise, the retailer in this case,
Walmart is going to pick up some of those charge offs.
So that kind of like you know, softens the blow
a little bit for Synchrony as a as an issuer.
(11:57):
But they have other sort of tools in their toolbox.
One big one was the late fee, which CFPB had
been trying to cap at eight dollars instead of about
thirty dollars. But they can use those things like that
to incentivize borrowers to pay even when it gets to
be more painful.
Speaker 2 (12:12):
Ben are your consumer finance companies? Are they talking about
credit quality concerns at this point?
Speaker 6 (12:17):
Yet?
Speaker 8 (12:18):
Credit quality is still great for companies like Amex, it's pristine, unimpeachable.
But the thing to look at is delinquency. Just the
mechanics the way charge offs work. First, you have to
go delinquent before you stop paying. And we're not really
seeing any sort of increase beyond kind of like seasonal
trends in delinquency.
Speaker 2 (12:36):
Our thanks to Ben Elliott, Bloomberg Intelligence consumer finance analyst.
Speaker 4 (12:40):
Coming up, we're going to break down the White House's
plans for nuclear energy.
Speaker 2 (12:43):
You're listening to Bloomberg Intelligence on Bloomberg Radio, providing in
depth research and data on two thousand companies and one
hundred and thirty industries. You can access Bloomberg Intelligence via
b I go on the terminal.
Speaker 4 (12:52):
I'm Paul Sweeney and a Malex Steel, and this is Bloomberg.
Speaker 1 (13:00):
You're listening to the Bloomberg Intelligence Podcast. Catch us live
weekdays at ten am Eastern on Apple, Coarclay, and Android
Auto with the Bloomberg Business App. Listen on demand wherever
you get your podcasts, or watch us live on YouTube.
Speaker 3 (13:15):
We moved next to the biotech space this week.
Speaker 4 (13:17):
We were joined by Sam Fazzelli, Bloomberg Intelligence, Director of
Research for Global Industries and senior pharmaceutical analyst.
Speaker 2 (13:22):
He joined to discuss the latest in the biotech space
from Moderness recent COVID vaccine approval and placebo trial to
new obesity drugs from the biotech company met Sarah.
Speaker 4 (13:32):
We first began with the money side of things and
asked Sam for his take on why more biotech companies
are returning cash back to their shareholders.
Speaker 6 (13:39):
So, I think companies are coming to a realization that
they can't just sit on a large pilot cash. The
latest one that just happened was seven hundred million dollars
in the bank, and the assets weren't particularly going in
the direction that athy shareholders were happy with, which is
(13:59):
why the company was sitting at a negative enterprise value
of like one hundred million or ninety million, depending on
when you're looking at it. And I think they thought, well, no,
actually two hundred eighty eight million. Sorry, they thought this
time to return some of that cash to shareholders. And
you're seeing more of this happening. Investors got tired of
companies essentially constantly saying, we'll find a better thing to
(14:21):
do with your cash, and they investors go, we know
what to do with our cash.
Speaker 4 (14:25):
That is like a really weird thing for about tech company, right,
because this isn't the whole value proposition. Eventually, is that
you spend all this money on R ANDD to make
that super cool thing that's going to make up bazillion dollars.
Speaker 6 (14:36):
Right, sure, Alex. But if you start off saying I
am the expert in this area, and I'm going to
take this expertise and translate this idea into a product,
and that doesn't work out, then you say, actually, I
have another idea that wasn't necessarily your expertise. That's where
investors get a little bit edgy.
Speaker 2 (14:54):
Yeah, so, Sam, I know the FDA recently approved modarrens
new COVID BAX seen what's new about it and is
it better?
Speaker 6 (15:05):
Well, actually, they did a real trial of comparing this
new version. I'll tell you what's new about it with
the standard vaccine spike facts that we've been getting. I
don't even know how to pronounce the new name m
next via something like that. I could never It's not
an easy roar rolling off the tongue. What they've done
(15:27):
is that they've taken the dose from fifty micrograms to
ten micrograms, and what that does is that it gives
you less reactions, and in fact, in this particular trial,
they showed even higher antibody responses compared to the old one.
So there is a small possibility it was only a
few ten percent or so higher. A small possibility you
get a much better efficacy in a real world setting.
(15:50):
But it seemed to go in that direction here, So
and that now is going to become the base of
all their vaccines going forward.
Speaker 4 (15:57):
Right, But that's a good news if you take the
VACS scene. But then you're not allowed to get the
vaccine unless you have underlying commorbidities, right.
Speaker 6 (16:06):
Yeah, alex is only you not allowed to get direction
because you don't have a whole bunch of the qualifying factors.
You're not old, you are, you're over sixty four, you're
not you're not come morbidity. Except the one thing you have,
which is something that doesn't show up in these conversations,
(16:27):
is a risk of a really bad reaction to COVID, right,
which is something that you've experienced. So what is going
on though, is that the company has whatever specifically, has
committed to the FDA to do a placebo control trial
in a fifty to sixty four year or sixty five
year group of individuals without come moobilities compared to a
(16:48):
placebo I eat nothing so that will be where they
will have to do this trial, and by committing to it,
this trial needs to be large in order to show
a difference. And I remember a whole bunch of people
going into these trials now with previous immunity, which means
the difference is going to be smaller, which means you're
going to need larger trials. So I hope it works
(17:09):
out and I hope the cost isn't punitive for modernaw.
Speaker 2 (17:13):
New obesity data from a Newish biotech met Sarah and
their obesity issue. What's going on there? What do they
have for the market.
Speaker 6 (17:21):
Yes, so they've got a new mechanism, which they're not
the only people following it. Lily's doing it, and I
was doing it Zealand and now in partnership with Rash
are doing it. And it's targeting not jlp ones but
amelin in the same sort of pathway of hormones that
hunger and satiety, et cetera, but slightly different. And the
(17:45):
theory is that you're going to get a drug that
is less difficult to tolerate. Nausea and vomiting is the
biggest one with these drugs because they impact the gut
and so here they've presented data that shows pretty good
weight loss the thirty six week readout, thirty six day readout, sorry,
five weeks, and you've got unfortunately one hundred percent nausea rates,
(18:09):
but they are at the very low grade. I is
just feeling a little I'm assuming yuck. And then what
you've got is that it only seems to majority of
them seem to pass after the first week. So I
think this is good.
Speaker 2 (18:26):
Our thanks to Sam Fazzelli, Bloomberg Intelligence, Director of Research
for Global Industries and senior pharmaceuticals analysts.
Speaker 4 (18:31):
We move next to the energy sector, specifically nuclear energy. Recently,
the White House announced it's gold a quadruple US nuclear
generation capacity by twenty fifty.
Speaker 2 (18:40):
The goal is to have reliable energy supply to meet
the growing demand for artificial intelligence from more.
Speaker 4 (18:45):
We were drawn by Scott Levine, Bloomberg Intelligence, senior Energy
and Industrial Services analyst.
Speaker 2 (18:49):
We first asked Scott to explain the complicated relationship with
nuclear energy and what the Trump administration would like to
do with it.
Speaker 9 (18:56):
Nuclear has always kind of been a bit of a
strange one for environmentalists and for the industry overall. You know,
it's an emissions free power source, right, which would seem
to align well with the goals of environmentalists. However, safety concerns,
you know, end up being an issue three Mile Island,
(19:18):
Fukushima and otherwise. And so you know, with the combination
of demand from AI for power of all types, coupled
with the fact that it is an emissions free power
source has really brought it back into the forefront and
supporting the AI demands story. So you have the demand
(19:42):
picture has clearly strengthened as a result of that. The
two things that really blew a hole in the story
the last time it was in vogue and the Obama
administration was really the shale revolution which made natural gas
so cheap as an alternative, and then in twenty eleven
Fukushima created all kinds of concerns there. So the two
(20:05):
really blew a hole in the story then. And now,
you know, in fifteen years has gone by since then,
and the memory has faded, and now it's back in
the forefront folks minds.
Speaker 4 (20:15):
So expanding or keeping alive or recommissioning a nuclear plant
is one thing, and that's what we're doing three Mile Island.
We're getting it back up and running again. Then Constellation
also made that deal with Meta on Monday or Tuesday.
That is just continuing to expand. It's going to keep
going with its nuclear reactor, right, but building a new
one is like a whole different thing.
Speaker 3 (20:36):
How expensive is that?
Speaker 9 (20:38):
Yeah, so we've only built one plant in the last
thirty years in this country. It was in Georgia. It
was initially expected to cost under fifteen billion dollars and
take seven and a half years, and it ended up
costing over thirty billion dollars to complete and taking about
(21:00):
as long as expected. And that was the one that
got through, right.
Speaker 4 (21:04):
Well, but President Trump and what he outlined those executive
orders is aimed to reduce the time and the money.
Speaker 3 (21:09):
But does it kind of do it that much?
Speaker 9 (21:12):
I mean in theory, In theory it's possible, yes, but
there's so much we don't know, right, I Mean, our
expectation would be that, you know, we may not even
see full sized reactors built at this point, right. Small
modular reactors, yes, where I want to go are being developed,
(21:32):
there are, you know, and so these are going to
be much more they're you know, modular built. They're smaller
in terms of the unionization. Uh, and so they could
be built conceivably behind the grid if the regulators can
get comfortable with the safety aspects. So uh uh it's conceivable.
But none of those have been built yet, right, So
(21:53):
a lot of it's still on the come uh and
a lot of will depend on the uh progress of
technology goes to the regulators, et cetera.
Speaker 2 (22:01):
Is the technology there, because we've had people come through
here to kind of apply that it is there.
Speaker 9 (22:06):
It is on paper. You know, there's a have we
built one of them? We have not built any of
them in the US. There have been a couple built
over seas. Only one design has been approved, and that
is New Scales small modular reactor, and that's basically mimics
a light water reactor. It's a smaller version of the
(22:26):
plants that are in service now. Two thirds are the
ones in service in the US or Westinghouse one third
give or takeer ge, and those are all light water reactors.
And then there's a whole other list of companies that
are building these more innovative technology gas cool reactors, salt
cool reactors. None of those are in service, right and
you know, half of those are in the process of
(22:48):
commercialization in some way, shape or form, but none have
been built here.
Speaker 4 (22:52):
No, why is nuclear so interesting to hyperscalers Because.
Speaker 9 (22:57):
It's emission's free, and because it runs twenty five or
by seven, right, And that's the big knock on wind
and solar, right, And so those two things in and
of themselves, they need to be twenty four x seven.
They need to be basedload in order to support data
center needs number one and number two missions free, you know,
supports the environmental mandates of the metas, the Googles, the
(23:19):
Microsoft's of the world. And those are two huge positives
that can't be ignored. So if indeed we need power
for a longer period of time than it's taken to
train these models, and all indications suggest that will be
the case for inferencing purposes nuclears, positives are really too
great to ignore.
Speaker 2 (23:40):
But it's expensive. Yes, we're going to pay for this.
Federal governments can some subsides. Is the President posing that?
Speaker 9 (23:47):
Yeah, they are proposing that. And that's really kind of
the big unknown right now. How much money are they
willing to put behind this? When they built the scale VC, sorry,
the Southern Company plant Vogel and Georgia. If I'm administration
put eight over eight billion loan guarantees towards that, and
it ended up costing thirty one to thirty four billion dollars. Yeah,
and so we're in an age now right where the
(24:10):
budgets are concerned, and some renewable projects are being canceled,
others are being allowed to move forward, whether it's hydrogen,
whether it's carbon capture, et cetera. So you know, Trump's
saying he loves nuclears is a big positive there. But
how much money they're willing to put behind specific projects
(24:31):
is really the key question.
Speaker 4 (24:32):
And that's such an interesting point because therein lies the
problem with hyperscalers. They're not used to taking on that
particular kind of risk. Also, they need power yesterday. So
saying that we can get this to you, let's just
be generous and say seven, it would say four.
Speaker 3 (24:46):
They need it yesterday. Four is not going to be
good enough.
Speaker 4 (24:48):
So are they going to actually like help offset the
cost for something that won't be available to them in
four years in an industry like tech that changes really fast.
Speaker 9 (24:56):
I mean, they have a look all every hyper scaler
has made positive comments regarding nuclear. Then it comes down
to like how much how subsidy is done. Is that exactly?
And so you know, the reality here is they need
interim solutions now to support the growth. They also need
longer term solutions. Nuclear certainly could be a longer term solution.
But you know, we'll see what the details are. We'll
(25:17):
see where the government's willing to subsidize a portion of
those investments. The one thing I can say is utilities
are probably going to be redis in to put a
lot of money behind this on their own without that backing,
given the history of the last three decades.
Speaker 2 (25:30):
Our thanks to Scott Levine Bloomberg Intelligence senior Energy and
Industrial anast.
Speaker 4 (25:34):
Coming up on the program, we're going to break down
the state of offshore wind in the US.
Speaker 2 (25:38):
You're listening to Bloomberg Intelligence on Bloomberg Radio, providing in
depth research and data on two thousand companies and one
hundred and thirty industries. You can access Bloomberg Intelligence if yeah,
be I go on the terminal.
Speaker 4 (25:48):
I'm Paul Sweeney and a Malex Steel and this is Bloomberg.
Speaker 1 (25:59):
You're listening to the Bloomberg Intelligence podcast. Catch us live
weekdays at ten am heasterne on Apple Cocklay and Android
Auto with the Bloomberg Business App, listen on demand wherever
you get your podcasts, or watch us live on YouTube.
Speaker 4 (26:13):
This week we focus on higher education in a story
titled Oil Rich University of Texas Cash is in on AI,
Crypto and Power. You can find it on Bloomberg dot
Com and the Terminal.
Speaker 2 (26:22):
This story discusses how the University of Texas System is
generating cash from new projects on its land from a
mix of renewable energy, crypto and oil and natural gas
production from more.
Speaker 4 (26:32):
We are joined by Janet Lauren, Bloomberg Higher Education finance reporter.
Speaker 2 (26:35):
We first asked Janet to explain how the University of
Texas System is benefiting from AI, crypto and power.
Speaker 10 (26:41):
So, the University of Texas System has lanned two point
one million acres in the premium basin that the State
of Texas set aside for higher education in the eighteen
hundreds when the land was supposed to be worthless. But
then something happened in nineteen twenty three struck oil and
for the first hundred years the University of Texas grew
(27:01):
its endowment with oil and gas, and now in the
next century they're looking for revenue from above the surface.
They've had, they've started with a few wind and solar facilities,
they have a crypto mining center, and they're looking to
expand to you know, augment their revenue from surface ventures.
Speaker 3 (27:22):
So that's so fascinating to me.
Speaker 4 (27:24):
How quickly are they diversifying, Like how quickly is the
money moving? And I wonder what policy in DC is
also sort of filtering down into what the university invests in.
Speaker 10 (27:35):
Well, the university actually isn't really investing in anything. They
are the landholder, So they're signing lots of leases.
Speaker 4 (27:42):
Sure, but they're like choosing to then maybe sign it
for one part of energy and not another.
Speaker 3 (27:46):
One might say, well.
Speaker 10 (27:47):
They're they're looking to find new revenue sources. They've had
a few wind and solar facilities on the land, and
they just signed a preliminary agreement to lease about two
hundred thousand acres or ten percent of their land to
a company called Apex Clean Energy for wind and solar.
And their customers include companies like Meta and the Army
(28:09):
and eBay. So and right now these are you know,
these things take years and years and years to build.
The wind and solar facilities I saw that are up
and running for a couple of years. You know, those
deals were initially signed several years ago, but it just
takes time. And there's new transmission lines that were just
approved in Texas in three of them at ten billion
(28:30):
dollars to move power into the Permian. So these wind
and solar are producing them and then these lines will
be able to take them.
Speaker 2 (28:41):
It's you know, Texas is such an interesting, you know
place in the world for many reasons, one of which
is me. When I think of Texas, I think a
big oil you know, the oil rigs and cowboys and
all that kind of great stuff. But it's also like
the one of the biggest renewals places. They've got a
lot of wind, and I got a lot of sun,
and they got a lot of land. So how does
Texas kind of bounce those things?
Speaker 10 (29:02):
Well, they need an all all, all in approach. And
the University of Texas has you know, really grown its endowment.
It's you know, forty eight billion, you know, coming close
to Harvard. And I did a story a couple of
years ago about their record year in oil. You know
a few years ago they got over two billion dollars
in oil and gas revenue.
Speaker 4 (29:23):
Yeah, that's amazing and it's just cash into the into
the endowment. Can other universities replicate the monetization of their
land in a similar way, Like what what other universities
have this kind of option?
Speaker 10 (29:37):
Everybody in Texas knows, never sell your mineral rights. But
you can't really come close to this, I mean rice
in Texas. They also have revenue coming from oil, you know,
from land, but nothing even comes close to this University
of Oklahoma. You know, I did a store several years
ago about you know, people gift them.
Speaker 3 (29:56):
Land, they keep the mineral rights.
Speaker 10 (29:57):
With fracking, they got you know, huge increases over time.
But you know, you just can't compare anything to two
million acres in the Permian basin, so one of the
they are the one of the largest landholders in Texas.
Speaker 2 (30:10):
Still it's you have a great chart in here that
just kind of shows the growth of revenue from their
oil and gas business, which is still the vast majority
of it. But this surface piece sounds like it can
be totally incremental.
Speaker 10 (30:24):
Yes, And you know the head of University Lands, which
is the unit of the University of Texas system that
runs it. You know, initially he's saying, we're kind of
looking for a couple of singles here and there test
the waters, and now they're looking for bigger projects where
they can have wind and solar power generation, you know,
on larger swaths of land to generate more money. Now
(30:44):
keep in mind, under these projects, the wind turbines that
I saw, they have oil underneath, and you know that
business is also working, so it's all concurrent.
Speaker 2 (30:53):
All right, You've got I have to ask you this question.
Als can answer for you. There's a picture here an
operator flaring excess natural gas at a well at Ute
Manage Land in Cood, Texas. So there's gas escaping from
the well and they just kind of let it on
fire so it doesn't go into the atmosphere.
Speaker 4 (31:08):
Yeah, I mean in theory, they want to capture it economically,
because if you capture it, you can then use it.
And also with any sort of environmental restrictions, you got
to capture it. But those restrictions are changing, let's say.
Speaker 10 (31:21):
And down the road, maybe you can use that natural
gas to power.
Speaker 4 (31:24):
A data So yeah, it's like you gotta make it
economic and if you can use it for something else,
that's where.
Speaker 3 (31:28):
You got it.
Speaker 4 (31:28):
Silly question, What are they using all this money for sports?
Speaker 3 (31:32):
Teams like saying a good question.
Speaker 10 (31:35):
So the money from oil gas goes to basically building things.
It's not for operations. So if you look at their campus,
you know, and we described in the story a couple
of buildings, you know, fifty million dollars for Texas A
and M's new business school. You know, tens of millions
of dollars for new hospital facilities. You know, they run
(31:58):
a bunch of medical schools, different different types of technology
within those medical schools and those health systems. You know,
I forget the number of schools between the two systems,
but it's something like twenty plus, you know, M. D.
Anderson Cancer Center. Ye, So they build buildings, all right.
Speaker 4 (32:14):
Thanks to Janet Lauren, a Bloomberg Higher Education Finance reporter,
each week we take a look at research from Bloomberg
and EF previously known as New Energy Finance.
Speaker 2 (32:23):
They're the team at Bloomberg that tracks and analyzes the
energy transition from commodities to power, transport, industries, buildings, and
agricultural sectors.
Speaker 4 (32:30):
This week we looked at BNF's outlook for offshore wind
for more. We were joined by Oliver Metcalp Bloomberg B
and EM, head of wind Research.
Speaker 2 (32:37):
We first s Oliver to discuss the state of offshore
wind in the US.
Speaker 7 (32:41):
Well, offshore wind projects in the US at the moment
are facing a really, really difficult outlook. It's been tough
over the last few years. There have been rising costs,
supply chain bottlenecks that have hit the sector really hard.
High interest rates for such an expensive technology is also
something that raises costs a lot. There have been strong
political headwinds since the since the Trump administration took office.
(33:05):
So the Trump administration withdrew the permit for that Atlantic
Shores project. That was a project that had already faced
those higher costs I was talking about already facing a
lot of economic difficulties, and the removal of that permit
was that the final straw that really pushed the developers
over the edge. The project isn't completely canceled, so SHERL
and EDF that own that lease area that kind of
(33:27):
marine area are going to hold onto that lease. There's
potential that they could develop that in a different form
in the future if there's a more friendly administration to
off your wind. But yeah, a bit of a bleak
out outlook for the sector at the moment. In the US.
Speaker 4 (33:40):
What about projects that already are outshore offshore and are
already producing. Could those lose their lease and get shut down.
Speaker 7 (33:47):
It's not looking like that at the moment. So the
Trump administration put a stop work order on a currently
under construction project that would feed parent to New York
called Empire Wind that's getting developed by the big Norway
and oil men called Equinor. That and the Equinor had
already invested over a couple of billions of dollars in
(34:09):
that project. Thank thankfully for the sector, the stop work
order has been lifted. Now that's a good sign for
the other projects. There are five under construction US offshore
wind projects at the moment, So the fact that that
project was allowed to go ahead is a very very
good single signal for other investors that are building projects
like AUSTID, like you mentioned, that have projects in the pipeline.
(34:32):
So those five projects we're expecting to go ahead. All
the other ones kind of further out in the pipeline,
federal permitting of projects, federal leasing of new seabed areas
to build projects, the kind of developer, the development environment
has has ground to a standstill for those projects that
are a little bit further out into the pipeline in
US off your wind.
Speaker 2 (34:53):
What's the rest of the world doing with offshore winning
these days?
Speaker 7 (34:57):
Well, some of those effects that I was talking about
that have hit the U have hit other markets around
the world. So costs have risen globally, there have been
supply chain constraints, there have been high interest rates. That's
kind of a global story. But we're seeing a lot
of growth despite that around the world for offshore wind,
particularly European countries in the North Sea are building mega projects.
(35:18):
We're expecting the largest project in the world to start
to start commissioning their turbines next year, a project called
Doggerbank off the coast of the UK. And then we're
just beginning to see markets in Asia start to pick up.
So we're beginning to see the globalization of the offshore
wind industry. So that's markets like Taiwan, Japan, South Korea
(35:39):
starting to install their first commercial scale projects, and over
the next few years we're expecting them to start installing
kind of industrial sized projects that we're already seeing in
the North Sea.
Speaker 4 (35:49):
You mentioned this earlier, but a couple of things that
sort of went wrong for offshore wind before the political
environment shifted was interest rates and also supply chain issues.
So a lot of at least of the way it
was described to me by some of the players, is
that they took on a lot of the commodity and
supply chain risk and they didn't properly share that with say,
customers and other developers, and that that really hurt them
(36:09):
during COVID. Have those two issues, though, sorted themselves out globally.
Speaker 7 (36:15):
So there's a couple of different ways that those issues
are slowly starting to resolve themselves. So firstly, suppliers are
pushing to share a bit more of that risk when
they're signing contracts, so things like linking contract price, your
final contract price the customer pays to a steel price
index or a copper price index, for example, to partially
(36:38):
protect you from these commodity price movements. Another way that
government's reacting to this kind of thing is linking the
price of the subsidy you get paid too similar indexes,
So linking the price of subsidies to the consumer price
index to protect a developer against kind of some of
those inflationary impacts. Same goes for commodity prices. So there's
(37:01):
a bit a bit of a resolution on the policy side,
and then also a bit of a push from supply
chain contracts to protect themselves in some of the deals
they're signing.
Speaker 2 (37:10):
What's the profitability of land based wind farms versus offshore.
Speaker 7 (37:17):
It really depends in the market you're looking at. Typically,
the kind of required returns for an investor on an
onshore wind farm is lower than an offshore wind farm,
where we're kind of more looking kind of nine plus
internal rates of return on a project. Partially that's because
the perceived risks of building something on shore are lower
(37:39):
than building something offshore. Every time you need to fix
a turbine, kind of the whole construction process is just
much more difficult when you're doing it on water versus
when you're doing it just on land. And also on
shore wind projects have been operating, we've been building them
for a lot longer, and so just the perceived risks
and how we understand those risks, it's much further along
(38:01):
for on shore wind firms than on show wind firms.
All right.
Speaker 4 (38:04):
Thanks to Oliver met Kaploomberg b A, the app head
of Wind Research.
Speaker 1 (38:07):
This is the Bloomberg Intelligence podcast, available on Apple, Spotify,
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ten am to noon Eastern on Bloomberg dot Com, the
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