Friday Wrap-Up: Nuclear, Batteries and Reflections from New York

NextEra Energy

Across the shows: 2 speakers in other episodes, 3 bullish and 0 bearish calls, past 30 days

• Nicolai Tangen · Norges Bank Investment ManagementBullish

  NextEra is a world-leading, very strong utility that has profited greatly as power demand surges.

  Energy was a flat, boring sector for years. Rising electricity demand worldwide is now driving very fast growth in power companies, both in grid and generation. Tangen calls NextEra one of the world leaders and a very strong US company, and says it has profited greatly from this shift.

  “NextEra is one of those companies who has profited greatly from this, right? It's very interesting, because the whole energy space was really a boring space in the past, flat as a pancake.”at 0:35

AI infrastructure & data centers

• Nicolai Tangen · Norges Bank Investment Management

  Local opposition to data-centre build-outs over power prices and jobs is shaping licensing and permits.

  Protests against data-centre build-outs are growing because residents do not want them in their neighbourhoods. The projects raise electricity prices for most people, and fears of job losses from AI adoption add to the resistance. This became a major issue in the midterm campaigns, and licensing and permissions may change after the election result.

  “There's been a lot of protests against the data center build outs, because people don't want to have them in the neighborhoods. They lead to higher electricity prices for most people.”at 1:37

• Nicolai Tangen · Norges Bank Investment Management

  Established players with secured power supply gain share prices; new data-centre entrants will struggle to get energy.

  Hyperscalers and established energy players have already locked in substantial energy supply, and their share prices rose on that. Newer players will find it harder to secure power, so the competitive landscape for AI infrastructure is being redrawn around access to electricity.

  “some of the established players, their share prices went up because they already have secured quite a lot of energy supply going forward, while some of the new players, it will be more difficult for them.”at 2:13

Renewables & clean energy

• Nicolai Tangen · Norges Bank Investment Management

  Battery storage is becoming more important because solar output is produced at different times than it is needed.

  Solar and similar sources generate power at times that do not match when it is consumed. Batteries bridge that gap, so their role grows. The fund's first direct battery investment, a 10% stake in a venture with Brookfield, is one he expects could become the biggest battery platform in the US.

  “What is also interesting, I think, is that batteries are becoming more important because you basically produce energy from solar and so on at a different time than you actually need it.”at 2:56

• Nicolai Tangen · Norges Bank Investment Management

  Renewable infrastructure returns improved once political backlash cut competition for green assets.

  Early on, green infrastructure was a hot segment with strong competition and high prices, so potential returns were limited and the fund invested slowly. After a backlash tied to US politics, green investments fell out of favour. Competition eased and the assets became more interesting and profitable, so the fund accelerated, with deals in Spain, Portugal, the US and a 25% stake in TenneT Germany. Energy-supply diversification after Middle East events adds to the opportunity.

  “we had a backlash against this, partly because of a change in The US politics. Then green investments became less popular, there was less competition, and they suddenly became a lot more interesting and profitable.”at 4:28

Nuclear energy

• Nicolai Tangen · Norges Bank Investment Management

  Nuclear will grow in importance as baseload power for round-the-clock AI data-centre demand, with small modular reactors building out.

  Data centres need power around the clock, so supply must be firm. Solar and other intermittent sources do not provide that, so nuclear becomes more important as base load. Tangen expects small modular nuclear stations to see a build-up.

  “Absolutely. So you just need a supply. And it means that nuclear is going to be more important because you have the base load. The small modular nuclear stations, you will see a build up of that.”at 2:38