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

0:00Marthe Skaar: Hi everyone, and welcome back to our Friday wrap-up. I'm still Marthe Skaar.

0:04John Ketchum: And I'm Nikola Tangen, and today from New York.

0:17Marthe Skaar: So this week you spoke to John Ketchum, CEO of NextEra Energy, which you call the world's most valuable power company. So for years, power demand in the US was flat. And now John expected to grow sixfold by mid-2040s, driven by AI. NextEra is one of those companies who has profited greatly from this, right?

0:39John Ketchum: It's very interesting because the whole energy space was really a boring space in the past, you know, flat as a pancake. And now, certainly because of increased demand for electricity and energy worldwide, these companies are growing really, really fast. And it's the grid, but it's also the energy generation. And Nextera is really one of the world leaders and a very, very strong company in the US. So super interesting to have him on.

1:06Marthe Skaar: It's very fascinating. And also when you look at the biggest tech companies, they alone plan to spend more than$600 billion of data centers and chips this year. And of course, a lot of money needs also power. How do you think about a build-up that big?

1:21John Ketchum: The demand and the build-up is huge. And this company is spending a billion dollars a week on building the infrastructure here. It is also interesting because it was a really important factor in the midterm election that we had this week. There's been a lot of protest against the data center build-outs because people don't want to have them in the neighborhoods. goods, they lead to higher electricity prices for most people. And of course, people also fear unemployment on the back of higher AI penetration. So it's really been an important part of the election campaigns in many places. And now we'll see what's going to happen with licensing and permissions on the back of the election result.

2:08John Ketchum: It's a very interesting space. What we have seen is that some of the hyperscalers, 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. So the landscape here is really being redrawn.

2:28Marthe Skaar: Yeah, it's super interesting. And also when you look at data centers, they need power on the clock, right? Yeah. So we need to think about how to produce electricity in a different way.

2:38John Ketchum: Absolutely. So you just need different supply. And it means that nuclear is going to be more important because you have the baseload. The small modular nuclear stations, you will see a buildup of that. 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. And so batteries are important. And we at MBIM made our first investment into a battery platform also this week, actually. So we took a 10 % stake in a venture with Brookfield and really, really interesting. We think that could be the biggest battery platform in the US.

3:26John Ketchum: And so we are very pleased to be an investor here.

3:31Marthe Skaar: yeah okay so let's use that as a bridge into the next segment and to talk about the what's going on in the fund and the market so you mentioned this direct investment in in battery storage or first but we got this interim mandate back in 2019 that is unlisted renewable energy infrastructure and then we did our first investment back in 2021 but we have been going in quite a slow pace until recently. Why?

4:00John Ketchum: Well, we got it into our mandate, but at that stage, it was just a very, very hot segment. So everybody had been told by the board that, hey, you need to make investments in the green space. Competition for these projects were very, very strong. And therefore, the potential returns or the kind of money you could make on these projects was pretty limited. And so we went really slowly in the beginning, just because prices were so high. We did one deal called Bursala. So we went really, really slowly. And then we had a backlash against this, partly because of a change in the US politics. And so then green investments became less popular.

4:39John Ketchum: There was less competition and they suddenly became a lot more interesting and profitable. So then we accelerated and we made a lot more investments in Spain, Portugal. We made investments in the States. And last year, we made a very big investment in the German grid. We bought 25 % of a company called Tenant, which is the biggest grid operator in Germany. And we just thought that was a really, really interesting deal. So now we are seeing great opportunities. Also, becoming more important on the back of what we have seen in the Middle East. People just want to have more different sources of supply.

5:17John Ketchum: And so, you know, we built up the team. We just are getting to know more partners. We are making more deals. And I think this is super interesting.

5:27Marthe Skaar: Yeah. So as of now, it's just 0.5 % of the fund. But this is for sure an asset class that we will continue to grow in.

5:35John Ketchum: Yeah. Just when we have made the full commitments into the already done deals, it's 1 % of the fund. And just the deals we've done is equivalent to 10 % of the whole Norwegian energy generation capacity. So this is becoming really, really meaningful. It's great.

5:55Marthe Skaar: So moving on to talk about what you're doing in New York, because you're actually spending a full month there. Yeah. And I guess it's kind of been a traditional Nikolai, because it's the third year you're doing this.

6:09John Ketchum: It's the fourth. It's actually the fourth year. And, you know, we have close to 60 % of the capital of the fund in the US. we have 100 people in New York and it's just great to spend some quality time here so lots of internal meetings I'm sitting down with everybody in the firm also social events but I'm also seeing some 50 US CEOs during this month we are seeing the head of the big banks we are seeing a lot of the other big investors I'm participating in seeing various IPOs so for instance next week we are seeing Entropic and also we are recording some fun podcasts. So really busy program. I'm very happy to be here with the great colleagues in New York.

6:51Marthe Skaar: What are you hoping to get out of it?

6:53John Ketchum: Well, we learn what's on people's mind and I would say so far we are seeing increased... Well, people are really worried about cyber even more than before and it seems like in October we had a big ramp up in cyber attacks around the world so they call it Dark October and it's really, really worrisome. We are seeing a lot of people talk about inflation and inflation being worse than what most people are taking on board. A lot of focus, of course, on geopolitics. Of course, also this week it's been the election, so people are worried about that. But they talk about increased credit risk. They are concerned about the speed of AI build-out on the back of the election.

7:38John Ketchum: So just lots of things. So very interesting to be here.

7:41Marthe Skaar: For sure. But after a week with election earnings, how do you avoid being pulled into this short-term noise?

7:50John Ketchum: Well, that's the same as every week. I mean, there is always a lot of noise. And so you have to keep the eye on the long-term picture and look at the long-term trends. But it is unbelievably interesting these days to wake up. I kind of wake up nearly European time in New York. So I got a little time in the morning, read the papers and just orientate myself about what's going on. I mean, so fun, you know.

8:15Marthe Skaar: Totally agree. What a fun time to be alive. Moving into the last section here, let's talk about the weekend. How will you spend your weekend in New York?

8:24John Ketchum: Well, tomorrow on Saturday, I'm spending the day with ANSA. That's the Association of Norwegian Students Abroad. Together with many of my young colleagues here, We are meeting a whole range of Norwegian students together with also some other great Norwegian companies who are presenting. But we are showcasing just what we do in the fun to Norwegian students. And it's one of my favorite days in New York is to meet all these great young people. So I think that's going to be a lot of fun.

8:52Marthe Skaar: Great. Do you have a routine when you get up in the morning in New York? Is it slightly different from also?

8:59John Ketchum: Well, when I wake up, it's still dark outside. I do my daily gratitude meditation and then I get a cup of coffee and hit the papers and then start to shoot out emails and, you know, pesto my colleagues around the world. So pretty much the same thing.

9:18Marthe Skaar: Okay. Thank you, Nikolai. Happy weekend.

9:21John Ketchum: Happy weekend.

9:32Thank you.