SpaceX Seeks Biggest IPO Ever; Bank of America CEO Brian Moynihan

18:06Carol Massar:You're listening to the Bloomberg Business Week Daily Podcast. Catch us live weekday afternoons from 2 to 5 Eastern. Listen on Apple CarPlay and Android Auto with the Bloomberg Business app. Or watch us live on YouTube. Let's bring in our next guest, Caroline Golan, the new Chief Growth and Policy Officer and Head of Government and Regulatory Affairs at Energy. She joins us now live from Zoom. So Carolyn, thank you for joining us. Maybe we can start with this. Everyone blames data centers for higher power bills, but what's the biggest thing people are getting wrong in your view? Well, thank you for having me today.

18:45I'm really excited to have the conversation. And it's such a critical one, not only for our country, but for our communities. I think this is a complex challenge facing our entire industry. And when we sit back and we ask ourselves, where are we and where are we going? We have to reconcile the fact that we are living in an age that there is a disconnect. There is a disconnect between the pace and growth of technological advancement and the demand for economy to grow and the physical reality of the grid and how we build out infrastructure. And historically, the way we built out infrastructure in this country was really a just-in-time approach.

19:26And we did it incrementally. And we grew very, very, very small increments year over year. And now we have this huge economic opportunity in front of us, and it's asking us to grow rapidly. And in that tension, we are finding a lot of opportunity, but we're finding a lot of challenge. And I think when you ask the question, how are data centers stressing the grid? or what's the challenge in front of us, we really have to go back and say, was our infrastructure prepared for this? Was it not? And the reality is we weren't prepared for the opportunity in front of us. But I think the industry today is really working to develop the innovations to make sure that we are going to grow well in the future and unlock all the opportunity the AI economic development brings to us.

20:16Alexis Christoforous:And Caroline, we want to talk more AI in a moment with you, But I've got to talk about hurricane season, which is now actually underway. I think it started June 1st. And this time of the year, there's always that concern around electricity grid reliability. And I think maybe this year that concern is heightened because of all of the data centers that are, you know, sort of stealing the power away from that grid. How well prepared are we, do you think, for this hurricane season? I think NRG is preparing, and I think we are investing in the innovations that are going to protect our communities and ensure that we meet all customer demand.

20:57You know, I go back to this tension that we're seeing, and you're absolutely right. We have sort of three legs of the school. We need to meet customer demand and load growth. We also need to keep the lights on and make sure the grid operates reliably. And at the same time, we need to do all of this by keeping costs affordable to all of our customers. And at NRG, we're really leaning into innovations that I think before were sort of seen as pilot programs. So take the opportunity of flexible power. You know, for most of my tenure in my career, flexible power was seen as something that was on the margins.

21:32It wasn't a real capacity solution. But what we're seeing across our fleet is that flexible power can service not only the needs of today, but the needs of tomorrow. So, for example, we saw with Stormfern that we were able through flexible power to produce 1.7 gigawatt hours to make sure that we kept the lights on. And that was across 126 ,000 customers that we were able to work with to make sure that we met the grid reliably, kept costs down, and kept those lights on with the threat of, you know, extreme weather events. So if AI demand keeps exploding, I'm just really curious about this, then where does the grid hit its biggest stress point first?

22:18I think we're hitting it. And I think hitting it means opportunity, right? And I will continue to go back to that. I'm a perpetual optimist and I'm in this industry to drive innovation and to drive change. We're hitting it because on all levels, we are in a crunch to meet demand. So at the grid level, we don't have the topography. We don't have the supply chain to meet out the transmission system at the pace of demand. At the supply level, we don't have the supply chain. We don't have the workforce to meet out the power demand that's needed right now. However, we have this really interesting opportunity with the capital that's there and the demand that's there to reinvest in new solutions.

23:07And so at NRG, we're building the power plants that we need today, as you pointed out, to make sure the grid is running reliably. And we're going to need tomorrow because demand is going to continue to grow. But we're also looking at all of those different areas. What can we do on supply chain? What is the partnerships we can do on labor? What are the partnerships we can do on transmission? What are the partnerships we can do in innovative technologies? And by doing all that, we're tackling all of it. There isn't one leg of the stool that's falling down. Everything's being stressed. But in that stress, we are working across the board with partnerships at all levels to figure out what are the solutions we need today.

23:46But then they're also going to take us to the next wave of opportunity moving forward.

23:51Alexis Christoforous:I want to talk a minute about electricity bills because, you know, Now, the U.S. consumer is getting hit right now with higher electricity. I mean, energy is just higher wherever you look, natural gas, wherever you heat your home, however you're going to cool your home. And I'm wondering what NRG Energy is doing on the affordability issue. Yes, it's a wonderful question, and thank you for it. I want to say first and foremost, I'm a people person, and I joined NRG because NRG puts its people first. And we take very seriously the economic impact that is transcending across our country right now.

24:31And we were sort of engaging in, I think, three ways. The first way we're engaging is the fact that we are committed to dispatching the lowest cost power we possibly can on the system to make sure that we're keeping energy prices low. Stay with us. More from Bloomberg Businessweek Daily coming up after this.

24:54Carol Massar:You're listening to the Bloomberg Businessweek Daily podcast. Catch us live weekday afternoons from 2 to 5 Eastern. Listen on Apple CarPlay and Android Auto with the Bloomberg Business app. Or watch us live on YouTube.

25:10Alexis Christoforous:Let's head out west, shall we, Isabel, to Las Vegas at the Fontainebleau, where we have got Bloomberg TV's Tyler Kendall standing by with Bob Frenzel. He is chairman, president and CEO of Xcel Energy.

25:27Alexis Christoforous:Thanks so much, guys. As you mentioned, I'm pleased to say I am here with the CEO of Xcel Energy, Bob Frenzel. Thanks so much for joining us here on Bloomberg Television and Radio. And I want to get ourselves situated because you serve customers across eight states, from Texas to North Dakota. And we were talking a lot today about how a lot of these states are seeing a huge surge in electricity demand tied to the AI build out. How prepared are our grids to handle this giant influx when it comes to this? Yeah, well, thanks for having me. What a terrific question and something we talk about every single day at Xcel Energy.

26:00You're right. We have a large footprint across eight states and data centers are driving electricity demand both this decade. and we even see more growth into next decade with our large data center customers. Big piece of our growth, you mentioned Texas and New Mexico. We serve also oil and gas customers in the Permian and Delaware basins, some of the largest, most prolific oil and gas customers in the country, and we're building infrastructure for them too, transmission, generation, distribution. So artificial intelligence is an incredible asset for the country, and data centers are critical infrastructure, but they're not the only things that are causing electric growth across our territories.

26:38Alexis Christoforous:I want to talk about one of these deals because you signed a relatively massive deal with Google for a project in Minnesota. And I was pretty struck by this stat. Electric bills for Xcel Energy customers over the past five years were 29 percent below the national average. But as more hyperscalers get on the grid, can you keep that success rate up? We're proud of our affordability progress with our customers. We do serve six of the lowest 10 cost utilities in the country. So I'm really proud of that fact. Actually, data centers and data center development help keep bills affordable for our customers.

27:13If you think about the Pine Island transaction we did with Google, this is about a 750 megawatt data center where Google is going to pay for all of their infrastructure costs. They're going to pay for the full rate of their transmission usage, not a discount rate or an economic development rate, as we used to call them, but the full rate. and they're going to build all the new generation. We're going to build it, own it, and operate it on behalf of them, but they're going to pay for all the new generation that's going to serve their customers. And because of where we serve, we have an interesting and unique footprint at XLRM2.

27:45We can do it with wind, solar, large-scale batteries, and they're going to pay for all that, protect our existing customers. And in fact, because they're paying full transmission rates, we're going to see that over a 10 - to 15-year period, we're actually going to save our customers one to one and a half billion dollars over a 15-year period. That translates to one to two percent lower transmission costs for all of our residential customers. That's that way to help lower bills over time as opposed to raise them due to data center infrastructure.

28:14Alexis Christoforous:I wanted to pull out some more specific stats because Excel has raised its five-year capital plan by 33 % to$60 billion. dollars. At what point does that rate of spending though become a concern for existing rate payers? Is that going to get passed through? It's a great question. Look, we're building a more modern, more resilient, more sustainable grid of the future and that comes with investment. So it is sustainable. Over the last decade, we've been able to keep our bills well below the rate of inflation for our customers. And we expect over the next decade, we can keep it at or just above inflation and make sure that our customers have a more modern, more resilient, more sustainable grid for their everyday usage as well as energizing new industries like the oil and gas industry in the Permian Basin, like data centers across all eight of our states.

29:02Alexis Christoforous:I believe you're committed to closing coal plants by 2030, right? But given that we were talking about the need for more energy, is that timeline still realistic? So yesterday we filed our 21st sustainability report. I'm proud to say that Xcel Energy has lowered our carbon footprint since 2005 by 58%. and we're on a trajectory to be carbon-free by the middle of the century. Sustainable? Yes. We've actually planned these commitments for over a decade and we've built the infrastructure or in the process of building the infrastructure to make sure that we can meet the commitment to serve our customers reliably and affordably in the absence of coal, but we'll come back with wind, solar, storage, and natural gas as backup generation to make sure that we have a resilient and reliable grid for our customers.

29:49Alexis Christoforous:I wanted to ask you about natural gas because we're seeing geopolitical tensions, what's happening in the Middle East, renew this conversation about energy security. Has that changed how you're thinking about natural gas, particularly as you're trying to make this bridge away from coal power? You know, what's interesting about our conflict with the Russian conflict with Ukraine or the Iranian conflict with the United States is we've seen very little price movement in natural gas during the duration of those events. That means that we have an enormous natural gas resource here in the United States that when we need to, we can tap into it harder and faster.

30:25So we've been able to have energy security and resiliency here in the United States despite having global geopolitical conflicts. And we've had price stability, at least on the natural gas side. And so that makes me confident that when we need the gas, we'll have access to it. And when we have access to it, it'll remain reasonably affordable for our customers.

30:42Alexis Christoforous:Let's also talk about the broader alternative energy space, renewable energy. I'm wondering what you've made of the Trump administration's approach when it comes to sometimes delaying or canceling permits related to these projects. Has that changed anything in the way that you're doing business? We've been building wind farms. We serve states that basically straddle the Great Plains from Minnesota and the Dakotas to Colorado and Texas and New Mexico. One of the greatest wind resources, not just in the country, but in the world, to build wind farms. So we've been a leader in wind energy for 25 years.

31:14I think that's going to go unabated for us because we can, with the same amount of capital, deliver a lower-cost energy product to our customers using wind. So our projects that are under construction remain under construction. Our projects that are in development are still in development. We're working through the permitting challenges, and we feel like we're going to be successful with wind now, wind into the future. And increasingly, we're doing a lot of solar, particularly in our southwestern business. As you can imagine, Texas, New Mexico, southern parts of Colorado are incredible solar resources.

31:46And then lastly, I'd say batteries have been an incredible asset for both the country and for Xcel Energy. We're going to build the largest long-duration energy storage project as part of this Google deal you mentioned in Minnesota with Form Energy. I'm really excited about commercializing new technologies to make sure that we can remain on a sustainability journey that we've been on for half a century.

32:08Alexis Christoforous:In the final minute that I have you, I did want to ask you about something that's come up here today, which is this potential NextEra-Dominion merger. I'm just wondering your thoughts on it, if that's making you think about your positioning any differently. Well, look, we've had an enormous partnership with NextEra over 25 years. They've been a partner in helping us build and own and operate wind and solar resources. We've actually announced a joint development agreement with NextEra to continue to build wind and solar and battery resources to serve data centers across our eight states. They called us as they were engaging in this transaction.

32:43They've committed to our joint development agreement not changing in its structure or stature. So I'm excited for them and their journey, but it's not going to affect our journey in our partnerships with NextEra.

32:53Alexis Christoforous:All right, we have to leave it there. Bob Frenzel, the chairman, CEO and president of Xcel Energy. Thank you so much for joining us here on Bloomberg Television and Radio. Stay with us. More from Bloomberg Businessweek Daily coming up after this.

33:32Carol Massar:the power of Oppenheimer thinking to work for you. Wealth management, capital markets, investment banking.

33:40Alexis Christoforous:The Bloomberg Sustainable Business Summit returns to Singapore on July 22nd. Our fifth annual Asia Pacific Summit will explore how business and finance leaders are shaping the next phase of globalization by strengthening resilience, advancing climate adaptation, and driving a multi-speed energy transition across Asia's diverse markets. Join us for solutions-driven discussions, interactive workshops, and networking opportunities. Learn more at bloomberglive.com slash SBS dash Singapore.

34:11Carol Massar:You're listening to the Bloomberg Business Week Daily Podcast. Catch us live weekday afternoons from 2 to 5 Eastern. Listen on Apple CarPlay and Android Auto with the Bloomberg Business App. Or watch us live on YouTube.

34:25Alexis Christoforous:I want to get to a big interview now. We've got Bloomberg's Danny Berger with Bank of America CEO Brian Moynihan. They are live from the Forbes Iconoclast Summit, just a little southwest of where we are here in New York City. Dani.

34:40Alexis Christoforous:Thank you very much. That's right. I am here with Brian Moynihan of Bank of America. Brian, thank you so much for sitting down with me. It's great to be here, Dani. I just want to start. One of the things you've been very consistent on so far this year, whether it be conferences or in your earnings, just the strength of the consumer and the strength on your platform. Spending on credit and debt up 6 % year over year. And yet gasoline prices are high. Consumer confidence is at rock bottom. If those types of things can't break the consumer, then what, if anything, can at this point? So I think just to give the stats, about$2 trillion goes from our consumers in the economy every year.

35:16A year, excuse me, about$5 trillion. Year date's$2 trillion plus, growing up 5 % in the aggregate, debit card to card a little faster. And it's going everywhere. Now, when you watch within that, you start to see your point about what consumers do. They're going to the gas station more times and spending a lower amount because they, from a budgetary basis, they don't want to spend that much. But they're still buying more in entertainment. It's up 13 % year over year in the month of May. And so it's a little bit of conundrum. And why is that true? Go back to your question. What would break them?

35:47Unemployment, 4.3%. Job formation, not as strong as theoretical numbers. But for the population growth, it's actually pretty strong at 60 ,000, 70 ,000 jobs a month. And so our team thinks we'll grow at 2.1 % this year. And people say, well, you're optimistic. I'm saying, I'm telling you what the consumer is doing today. But what they say they're going to do will come true if job cuts really come through to lower levels of employment. Right now, a lot of these job cuts are open positions and attrition and things like that. They're not necessarily huge layoffs that are actually affecting because job numbers are going up.

36:19Alexis Christoforous:Well, I know in your earnings, you also noted, I think, spending on gasoline was something up like 16%. Like 27%. Okay, 27%. Is that something you're keeping an eye on? Well, keep an eye on it. If you sort it by low, medium, and high-income earning households, it obviously has about twice the impact of a lower third of income households than it does, the medium or the higher. And so that's where you have to watch and make sure that they are able to carry that. And that's the people who go on the gas station more often still spending the$40. So they don't get as much gas for it, but they go more often and they ration how they spend it.

36:52they go to the places where gas is cheaper, let's just say that. And you can see people changing, micro-changing. They're going a little bit more to big box retailers, a little more second-hand stores. And all that adjustment is part of the K economy we talk about. But the reality is incomes are growing for all those income segments. And so affordability is a real issue. But to fundamentally change affordability, we're going to have to build more housing so there's supply pressure to bring the prices down. affordability gas prices at$4.50 or above. We've been there before. So it is affordable.

37:25It's just not pleasant.

37:26Alexis Christoforous:Someone once made the comment to me, Meredith Whitney, as a matter of fact, basically said a lot of people are leaving the banking system that are especially on the lower income scale. They're turning to things like payday loans. She brought up the term shadow banking. I wonder if there is, or if you are concerned that maybe there is unseen stress in the system that has left the likes of a Bank of America. When you look at the recent Fed data on consumer credit. The reality is that there are pockets of delinquencies that are a little higher for subprime credit. We as a company don't do that business and our credits as good as it's been in 50 years and consumer sightings getting a little better.

38:00The flip of that though is we offer a set of products. A no overdraft account where you can't overdraft because you don't have checks frankly and what you do is all automated payments. We have a five dollar a month account. We have a five hundred dollar loan where you pay no interest, no fees. You just have to pay it back. You can borrow it a couple times a year. So we're always working on affordability of our products. And our overdraft fees are$10 versus a market of$35 for those that choose to have overdrafts. So we have an affordability package in banking that's second to none. And if you look at our consumers from the spending side, they look like everyone else.

38:32From the borrowing side, we tend to be more of a prime lender. So you'll see some pockets. But even those pockets, if you look at some of our peer companies that are in those businesses, the delinquencies are fine right now. Everybody's worried about what happens next, but it all comes down to unemployment and people being employed and earning money.

38:47Alexis Christoforous:Well, the other side of the economy that's going absolutely gangbusters is everything in AI. And it's really impacting capital markets. And Bank of America is very involved in a lot of these deals, whether it be blockbuster IPOs, Alphabet looking at raising equity, upping their amount from$80 to$85 billion. I wonder what impact you think that happens on the market just because of the sheer amount of capital and things that are being issued. Is this something that the market can absorb and can absorb smoothly? Well, it's absorbed smoothly so far. And the debate will be whether at some point the revenue and the earnings multiples and the cash flow multiples all have to come in sync.

39:25And right now you're in that phase where there's a mass amount of capacity building anticipated of demand. And so when you look at it, one of the ways that we think about is we are a buyer of these services and a big buyer,$13 billion in technology a year. It was$250 million this year in 2016 on AI-related spending. And so the question is, what's the affordability of that? That would be the interesting question, how all this comes together. But right now, it's a heck of a stimulus in the economy, that going on. But the other part of the economy that we see is the small and medium-sized businesses.

39:54And it's interesting. As you think about them over the last year, last year we had Liberation Day, and that was confusing for people. And then we had the tax law finally got done, that subtle confusion. Then you had immigration policy, that confused people. deregulation they look for that as you watched in the fall they're pretty sanguine they said look i can see how this all plays out and then it got a lot of it got put back on the table and so i think what you see in the small medium-sized businesses there's a lot of uncork potential there they can borrow on the lines of credit they're borrowing a little bit more the loan growth solid solid they're mid double digits and things like that which is good loan growth but they have so much capacity if they just have a little more certainty and that's why they really want the war to end And so their input prices will come back down because we see the gas pump.

40:37What really happens longer term is the products made with petroleum products come through.

40:41Alexis Christoforous:So kind of like at the gates, ready to go once they open. They're ready to go. And they just want certainty because if you're a big company of ours with 200 ,000 people, you have lots of people pay attention to all this and tell you what's going on. Our research team, the best in the world. If you and I owned a business and we were doing something, you have to do all that work yourself. And the easier to do that work, the more time you can spend on creating the revenue. So I think there's a little bit of a pop left out there beyond the AI, which is an unbelievable amount of spending and et cetera.

41:08There's another pop when general business gets more confident about the future path.

41:11Alexis Christoforous:I'd love to talk about your business a little bit as it relates to AI. I think there was a lot of excitement that you came out with this announcement that your intern and your college hiring class look incredibly robust. At the same time, I know you're speaking at Bernstein saying something like 14 ,000 employees internally would also be basically reorganized, re-looked at thanks to AI. not let go. What are the mechanics of that? What does it look like to sort of remake, not let folks go, but remake a firm that's equipped with AI? So if you think this has been going on for years. So when you think about your employee base, you have a group of employees a day, you have the attrition that goes on because people take jobs, they retire, etc.

41:49So you have that, that's in our firms about 8%. So if you think about that, flip that 8 % times the 200 ,000 people means we have to hire more than 1000 people every month to stay even in headcount. So that gives you a choice. Am I going to hire replacements or not? The second thing you have then is the 14 ,000 people in 25, we took from one job in a company and put another job through skills training. That's our own internal skills training. We hear about that in the public side, but we actually do it inside the company. And even in the technology, we have people that did product X and coding system X.

42:19They have now moved to code system Y and using these new techniques. So that all is about repositioning people. And so in the end of the day, we are moving mass amounts of people around. And the key was we need young people. So we just we have 2 ,000 smart, brilliant kids coming in to be summer interns next week. And then four weeks later, we have 2 ,000 permanent hires around numbers coming in to be permanent hires. We've agreed to hire 8 ,000 kids from a community college in addition out of the next five years. We agreed to hire 10 ,000 veterans in the next five years. So we're always hiring people into this company, trying to create opportunity for people from a community college come to our company, finish their degree, and have a better...

42:57Alexis Christoforous:Mark, can I just ask very quickly, because I'm about out of time, this stuff is also really expensive. Have you started to think about just the inference costs of all this AI stuff? Are you asking people to pull back and keep track of it? We're not at that stage yet, because frankly, at our scale, the number's not that big. We have$70 billion expenses. I can see where people run into this, but we have all 200 ,000 people have it to use. We want them to learn from it. That's just general usage, but the very specific applications, like in the coding area and stuff. Yeah, that's costly, but it's paying for itself.

43:29And we're pretty confident of the business trade. We wouldn't do it unless we saw the business outcome we wanted, i.e. that the revenue or growth will exceed the cost we put in. But that will be a gaining factor till people can really, really identify that. You have to say, wait, if I get all these costs and it doesn't come true, what happens? So we're measurably putting in 100 projects. We've got another 1 ,000 we're looking at and all this stuff. But we're always gaining those. Are they going to produce the revenue or are they going to produce the cost savings that we're supposed to have?

43:54Alexis Christoforous:Ryan, thank you so much for joining. And by the way, I'm also looking forward to more World Cup announcements. I know you're giving away some tickets to veterans. Yes, we just announced today we gave$2 million to buy$2 million worth tickets to get a thing called VetTix for veterans and first responders. And that will I'm sure everybody's looking for that comes live fairly soon. VetTix is a group that does other kinds of tickets that is owned by veterans. So it's very exciting. Ryan, thank you again. Really appreciate your time. That, of course, Ryan Moynihan, the CEO of Bank of America.

44:23Carol Massar:This is the Bloomberg Business Week Daily podcast, available on Apple, Spotify, and anywhere else you get your podcasts. Listen live weekday afternoons from 2 to 5 p.m. Eastern on Bloomberg.com, the iHeartRadio app, TuneIn, and the Bloomberg Business app. You can also watch us live every weekday on YouTube and always on the Bloomberg Terminal.

44:54Carol Massar:On June 10th, Bloomberg Invest is back in Hong Kong. We look at the role Hong Kong plays between China and the world as major powers compete and markets realign. As global investors rethink risk, we'll explore the forces driving Asian demand and the future of private capital. Catch exclusive interviews with top newsmakers, plus a live recording of Bloomberg's OddLots podcast. Visit bloomberglive.com forward slash invest Hong Kong to learn more. Supporting sponsor Deutsche Bank.