Microsoft and Chevron Sign 20-Year Power Deal For Texas Data Center

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1:01The thing about AI for business, it may not automatically fit the way your business works. At IBM, we've seen this firsthand. But by embedding AI across HR, IT, and procurement processes, we've reduced costs by millions, slash repetitive tasks, and freed thousands of hours for strategic work. Now we're helping companies get smarter by putting AI where it actually pays off, deep in the work that moves the business. Let's create smarter business. IBM.

1:33Scarlet Fu:Bloomberg Audio Studios. Podcasts. Radio. News. You're listening to the Bloomberg Intelligence Podcast. Catch us live weekdays at 10 a.m. Eastern on Apple CarPlay and Android Auto with the Bloomberg Business App. Listen on demand wherever you get your podcasts or watch us live on YouTube. Pretty interesting deal out there in the world of energies as we think about AI. That's been one of the gating issues we've all come to learn that, okay, you can build all these data centers, but you got to figure out how to power them. You can't, you know, you're going to have to need new and flexible energy sources.

2:09So here's a piece of news today. Chevron signed a 20-year deal with Microsoft to provide natural gas-fired power for a proposed West Texas data center. So that's pretty cool there. Let's get talk to the reporter from Bloomberg News on that story. Kevin Crowley, Bloomberg News, a big oil reporter. Talk to us about this deal here, Kevin. It seems like we've seen we're starting to see more and more of these. And is this kind of the blueprint for the future? It could be. Yeah, Chevron, Chevron are calling this a platform for the future. I mean, really, it's a new business for them. I mean, as you know, they're a big oil and gas company.

2:44They're not in the power industry until now. And it's really to take advantage of the very, very cheap and abundant natural gas that exists in West Texas. This data center is being built right in the heart of the Permian Basin, which you probably know is the biggest oil field in the country. But with that oil comes a lot of natural gas as a byproduct. And there's actually so much natural gas out there at the moment that it can't be taken away. It overwhelms the pipeline capacity. And so it's either burned off as waste or companies have to actually pay people to take it away. So Chevron and Microsoft think, well, this is a good competitive advantage here.

3:33We can use this gas to build a big power plant that will then power a data center. I mean, the disadvantage is the location here is very, very remote. It's about 400 miles west of the Dallas-Fort Worth area. But the cheap power is definitely a competitive advantage of this project.

4:02Scarlet Fu:OK, so it sounds like, you know, it's getting some value out of something that would be disposed of anyway. That sounds great. Does does that mean that there's no risk, no concern about locals to the extent that there are any locals living near the Permian Basin or any nearby communities facing higher utility bills? No. So Chevron say this is 100 percent behind the meter. So there is no utility even connected with this project. So this is purely Chevron taking their gas, building the power station, and then using that power for the data center. I mean, it's a very remote, sparsely populated area anyway, but they insist that there's absolutely no impact on the local ratepayers at all, which I think makes this, which they claim anyway, makes this project unique.

5:04It's rare for a data center of this scale to not utilize grid power or have the involvement of a utility.

5:13Scarlet Fu:If that's the case, how come we didn't get something like this sooner? Why did it take so long? these are big projects they cost they cost a lot of money um and and it's and it's new i mean chevron is not is not a utility is not a is not a power producer um the other thing i think is is is is uh so far uh big tech companies have preferred to build data centers near to uh to larger population centers um the other thing is is as well as is early on you know these companies did prefer to use renewables and to lower the emissions of those data centers. But now there does seem to be a movement towards natural gas given the scale that we now see ahead of us.

5:59Kevin, you got 30 seconds left. Tell us why this is a new business for Chevron. Chevron's in the oil and gas business. They're not in the power business really until now, but they think this can diversify their revenue streams provides a bit more of a reliable – it won't be as cyclical as the oil and gas business, but also takes advantage of some of their key competitive advantages. Chevron's already in the Permian. They know how to build big projects and they have the gas. So they think it's within their skill sets, you know, unlike some other companies like BP and Shell, which got into power about five or six years ago unsuccessfully.

6:44Scarlet Fu:Stay with us. More from Bloomberg Intelligence coming up after this. At Brookfield, we invest in the thing behind the thing behind the next big thing. Our focus across infrastructure, energy, real estate, private equity and credit is helping build the backbone of the global economy. We combine deep operational expertise with disciplined long-term investing, uncovering value and partnering alongside clients to shape tomorrow's economy today. Brookfield. Own what's next. Learn more at brookfield.com. This is not an offer to sell or investment advice. Investing involves risks, including loss of capital.

7:22So there's a lot of noise about AI, but time's too tight for more promises. So let's talk about results. At IBM, we work with our employees to integrate technology right into the systems they need. Now, a global workforce of 300 ,000 can use AI to fill their HR questions, resolving 94 % of common questions. Not noise. Proof of how we can help companies get smarter by putting AI where it actually pays off, deep in the work that moves the business. Let's create smarter business. IBM. Support for the show comes from Public. Public is an investing platform that offers access to stocks, options, bonds, and crypto.

8:00And they've also integrated AI with tools that can assist investors in building customized portfolios. One of these tools is called Generated Assets. It allows you to turn your ideas into investable indexes. So let's say you're interested in something specific like biotech companies with high R &D spend, small cap stocks with improving operating margins, or the S &P 500 minus high debt companies. Chances are there isn't an ETF that fits your exact criteria. But on public, you just type in a prompt and their AI screens thousands of stocks and build a one-of-a-kind index. You can even backtest it against the S &P 500.

8:36Then you can invest in a few clicks. Go to public.com slash market and earn an uncapped 1 % bonus when you transfer your portfolio. That's public.com slash market. Ad paid for by Public Holdings. Brokered services by Public Investing, member FINRA SIPC. Advisory services by Public Advisors, SEC Registered Advisor, crypto services by ZeroHash. Sample prompts are for illustrative purposes only, not investment advice. All investing involves risk of loss. See complete disclosures at public.com slash disclosures.

9:06Scarlet Fu:You're listening to the Bloomberg Intelligence Podcast. Catch us live weekdays at 10 a.m. Eastern on Apple CarPlay and Android Auto with the Bloomberg Business App. Listen on demand wherever you get your podcasts or watch us live on YouTube. It is Monday, which means it's oftentimes merger Monday, and it often involves the healthcare industry. And that is exactly what happened today. Abby V agreed to buy Apogee Therapeutics for$10.9 billion in cash, by the way, to bolster its anti-inflammatory drug portfolio. If you can't make it in the lab, go buy it. That's what I know about the pharma business.

9:41Sam Fazzelli joins us here. Give us a little bit more detail. He's Director of Research for Global Industries. I don't think that title exists anymore, Sam. We have to update that. Senior Pharmaceuticals Analyst over there at Bloomberg Intelligence. What's ABV doing here? Sam, talk to us about this deal. Sure. Title-wise, make up whatever you like. You know, I'm easy with titles.

10:01Scarlet Fu:Come on, he's Drug Boss. Yes, Drug Boss. Drug Boss. There you go, Drug Boss. Yes, yes. What they're doing here is that they're already probably the biggest player in the space of immunology and inflammation. First, they started with hemorrhagia, became the biggest drug. And now they've got Skyrisi and Reinvoke, which are both for either psoriasis or rheumatoid arthritis, pretty much similar kind of immune-related diseases. Now, we keep talking about obesity,$100 billion, blah, blah, blah. If you add up the numbers that AbbVie is going to have out of these two drugs, we're approaching well over$50 billion.

10:40So you don't need to be in obesity to make these kind of revenues because there's so many people who suffer from these things. Here they're buying another drug that adds to the portfolio that gives them access to the eczema market, otherwise known as atopic dermatitis. And it's a pretty good fit. Lots of questions as opposed to whether it's the right drug to have had. Is there another better competitor? But AbbVie has spoken. They're putting up their cash.

11:05Scarlet Fu:I mean, Paul might have answered my question here. But the fact that it's all cash, does this mean that AbbVie is making this acquisition from a position of strength? It's on the offensive in the same way that we talk about Eli Lilly making acquisitions from a position of strength. Yeah, I mean, Scarlett, most pharma companies right now, if I look through the list, I can't pick one that is having trouble generating cash. Even Pfizer. I mean, I'm not having a go at Pfizer specifically, but even Pfizer, where the share price has halved since the peaks of the pandemic, we are ending up with a company that's still generating a lot of cash, and their leverages are relatively low.

11:43So they can go and do these things without too much trouble. Remembering that these guys have 30 % operating margins. So these are very cash-rich companies and the cash speaks volumes. So what's the next new thing in your world, Sam, that we need to be focusing on? I mean, do we still have room to grow in the obesity front? Is there breakthroughs in cancer? I know you go to all these conferences. What's the next thing that you think global wall sheets you'd be looking at in your space? Yeah, I mean, Paul, I keep talking about biology is evolving at a breakneck speed. And it's not just a cliche thing to say.

12:22At the end of the day, science is really, really cracking into some of the minutiae of how these diseases are slightly different from each other. So the next big thing is, are all obese patients suffering from the same reason or biology that's making the movies? Is there some subgroups that need to be treated differently? So that's one area. Neuroscience is one. Can I plug a podcast that we have on BI called Vanguards of Healthcare? Vanguards of Healthcare. A couple, I think it's this week or no, it was last week that the conversation with the head of development at Bristol Myers, where we talked about this.

13:01And neuroscience is a big one because the brain has been a black box until, I mean, it still is a bit of a black box compared to immunology, for instance. But there's a lot more science and biology that's being understood. And therefore, that's a frontier that I think we're going to see quite a lot of evolution and new drugs and ideas coming up.

13:19Scarlet Fu:Sam, one area that I'm really interested in is women's health. And we've seen menopause become a very big industry. Now that the FDA has removed the black box warning on hormone replacement therapy in the U.S., we've seen demand for these estrogen products, estrogen patches, creams, gels skyrocket. That's in the U.S. What does it look like elsewhere in Europe, for instance, or in Asia? I think ex-U.S., it hasn't been as much of a contentious issue here. estrogen replacement therapy of course everybody worries about taking a hormone for life or for an extended period of time and these are active uh agents right so they're not they're not just passive so you do need to be careful with using them and making sure you have enough information that suggests that the benefit outweighs the risk and i think in this case in hrt case in the majority of cases it does.

14:13So Europe has been less problematic for this. And certainly, instead of taking supplements, people should be taking well-tested and tried pharmaceuticals. And I think, but Scarlett, to your point, women's health has been one area where I don't think there's been enough attention paid to it. Some people blame the fact that the majority of pharma executives are male, therefore they don't think about it. I don't think you should think like that. I think the removal of a black box warning here does enable you to start thinking, ah, well, maybe we could do something more now going forward.

14:48Scarlet Fu:Stay with us. More from Bloomberg Intelligence coming up after this. Support for the show comes from Public. Public is an investing platform that offers access to stocks, options, bonds, and crypto. And they've also integrated AI with tools that can assist investors in building customized portfolios. One of these tools is called Generated Assets. It allows you to turn your ideas into investable indexes. So let's say you're interested in something specific like biotech companies with high R &D spend, small cap stocks with improving operating margins, or the S &P 500 minus high debt companies. Chances are there isn't an ETF that fits your exact criteria.

15:27But on public, you just type in a prompt and their AI screens thousands of stocks and build a one-of-a-kind index. You can even backtest it against the S &P 500. it. Then you can invest in a few clicks. Go to public.com slash market and earn an uncapped 1 % bonus when you transfer your portfolio. That's public.com slash market. Add paid for by Public Holdings. Brokered services by Public Investing, member FINRA SIPC. Advisory services by Public Advisors, SEC registered advisor. Crypto services by ZeroHash. Sample prompts are for illustrative purposes only, not investment advice. All investing involves risk of loss.

16:02See complete disclosures at public.com slash disclosures.

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17:27Scarlet Fu:You're listening to the Bloomberg Intelligence Podcast. Catch us live weekdays at 10 a.m. Eastern on Apple CarPlay and Android Auto with the Bloomberg Business app. Listen on demand wherever you get your podcasts or watch us live on YouTube. M &A Monday, we had a big deal in the construction business, the building material business. So we're going to get right to that. James Wilcock, Bloomberg UK politics reporter. CRH to buy rival Arcosa in a building material firm's biggest deal ever. So big deal. Spencer, talk to us about this transaction. I don't think many people know of these two companies.

18:06Talk to us about these companies and what they're trying to do with this deal. Yeah, yeah. Thank you for having me on. So CRH, one of the largest global materials producers, they make aggregates, cement, concrete, different presence here in the U.S. as well as in Europe. They were listed in London, have moved to a U.S. primary listing only, increasing their U.S. exposure. Like you said, our COSA, our U.S. competitor, large in the aggregates business, and then while on the structural solution side, so making a variety of infrastructure items, light poles, traffic signs, large equipment that goes kind of over highways, roads, bridges, things like that, as well as wind turbines.

18:44So very large combination here this morning. We'll really kind of deepen CRHS's tie to the U.S. as well as our aggregates portfolio. So now the largest U.S. aggregates producer, about 265 million tons per year. A very large deal here, the largest in their history, very acquisitive, about 38 acquisitions last year alone, but mainly bolt-ons. That was about 4 billion total. So we're not used to seeing these large deals by CRH, but it's not too surprising given that they like to kind of build their portfolio through acquisitions and they're not scared of kind of dipping their toes into different alleys.

19:15Very large, wide variety of a portfolio they have.

19:19Scarlet Fu:So given all this, Spencer, how does this fit in with the outlook that you and your team have published on global building materials for the second half of this year how does this bigger crh fit into it yeah so crh the largest obviously producer but really the aggregates is kind of where we see the most strength aggregates are very durable material really used in highways roads bridges and then construction because they are the primary ingredient for concrete so this bolsters their portfolio we've seen a lot of competitors move to the u.s move into the u.s a lot of competition on the aggregate side you see vulcan mart marietta really changed their portfolios to be very aggregates focused you have competitors in mexico like cemex even cementos argos talking about you know getting their foot in the door with aggregates in the u.s so acquisitions are becoming very competitive and this is crh kind of leaning into that we have a good outlook for the aggregates as well a lot of this can be infrastructure driven so the u.s obviously spending on roads bridges and highways near record highs from the infrastructure bill in 2021.

20:16There's a new bill right now coming through that could pass next year for even more funding. So CRH really leaning into that. And then you have kind of the solution side, the structural side, which is infrastructure. So you've like the data center build out, things like that, and the energy infrastructure around that. CRH is now a player in that as well. So they've said before, they're working on over 100 data center projects currently. That's a small part of the portfolio still, but that's growing and that's a high demand. And those are quick turns. So those projects turn into shovels in the ground, as you would say very quickly so it's a good growth avenue for them but leaning into aggregates not surprising but given the size of acquisition historically bolt-on acquisitions just a very large one for them u.s construction services business here um as you mentioned there's a lot going on out there um is it a fragmented industry is it consolidated industry what are we going to see more deals like this do you think yeah the construction services is very fragmented and crh is a large player in that most like i've mentioned earlier most of the other players are really on the material side.

21:13CRH has accepted that they want to be the vertically integrated player, the largest in the space. So you can contract them for your asphalt paving. They will provide the asphalt for that as well, the equipment. So they want to be the one-stop shop for their customers. Other producers have moved away from that model. They've sold off those businesses. They've moved away from the concrete. They really want to focus on aggregates. And that's where we see some of the strongest pricing power, strongest demand trends, very durable, even in down cycles, aggregates can still get pricing growth while concrete, cement, asphalt can see pricing declines or flat pricing for years.

21:47So leaning into that and then what the service is offering kind of their vertical integration really separates them. Still traded at a discount to their peers on a multiple basis when you look at some of the pure play aggregates names just because the demand and the pricing is there. And then CRH does not have that, but they are now the largest producer of aggregates in the US and then they're bolstering their portfolio and they'll continue to acquire, it looks like.

22:11Scarlet Fu:Stay with us. More from Bloomberg Intelligence coming up after this. Support for the show comes from Public. Lately, it feels like there are two types of investing platforms. Some are traditional brokerages that haven't changed much in decades, and others feel less like investing and more like a game. Public is positioned differently. It's an investing platform for people who are serious about building their wealth. On Public, you can build a portfolio of stocks, options, bonds, crypto without all the bugs or the confetti. Retirement accounts? Yep. High-yield cash? Yes, again. They even have direct indexing.