A gargantuan energy deal for the AI age

{"text":[[{"start":5.7,"text":"Welcome to Moral Money, I’m Jennifer Hughes from the Lex team, standing in for Simon this week. Here’s a topic dear to the interests of both MM and Lex readers: AI, and how to power it, where already enormous numbers just seem to keep growing. This week that was writ large in the proposed $420bn merger of utilities giants NextEra and Dominion Energy. Ostensibly, the deal is all about gearing up to power more AI. But underneath, it shows a US pragmatism about the future mix of energy sources not always reflected in headline-grabbing caricatures of a fossil fuel and “woke” green debate. "}],[{"start":44.400000000000006,"text":"Join 370+ senior leaders in London on June 17-18 for the FT Climate & Impact Summit, exploring political volatility, adaptation finance, nature, clean tech and AI’s energy demands. Use code FTS10 for 10 per cent off your in-person or digital pass."}],[{"start":62.75000000000001,"text":"A bigger dominion"}],[{"start":64.25,"text":"NextEra is offering almost $76 a share for Dominion, a 23 per cent premium to its undisturbed price. The all-paper transaction, if approved by multiple regulators, values the Florida-to-Virginia combination at $420bn and will rank as the fourth-largest deal ever. "}],[{"start":82.3,"text":"The financial argument for the deal is straightforward enough: bigger means more power to negotiate with lenders and with suppliers, both of which are critical when new infrastructure is needed. "}],[{"start":93.3,"text":"“Demand is coming from all sectors of the US economy, meaning this moment requires a company to buy, build, finance and operate more efficiently. It’s easier said than done,” said NextEra boss John Ketchum on a call with analysts after the deal was announced. "}],[{"start":110.6,"text":"The two have to tread particularly carefully with customers, not least those in Virginia already concerned they’re bearing the cost of powering the state’s rapidly growing “data centre alley”. Analysts at S&P have found no evidence nationally yet that data centre needs are pushing up retail power prices, but with mom-and-pop consumers facing energy costs that have risen by almost two-fifths over the past five years, AI’s high profile may yet drag it into cost of living debates. "}],[{"start":140.79999999999998,"text":"Supplying power across swaths of Virginia, North Carolina, South Carolina and Florida will place NextEra-Dominion squarely in the crosshairs of regulators and politicians, so the lower its costs, the more wriggle room it may have with any watchdog pushing back against rising prices. As befits companies preparing for regulatory scrutiny, “customers” were mentioned 56 times in the analyst call following the deal announcement and “profit” not at all.  "}],[{"start":169.29999999999998,"text":"NextEra, which owns Florida Power & Light, one of the biggest electricity utilities in the US, has long been a working example of a pragmatic approach to energy generation, combining gas and nuclear alongside renewables and battery storage. "}],[{"start":184.14999999999998,"text":"Ketchum signed a gas deal with Donald Trump’s administration in March but by combining with Dominion, it will also be growing in wind capacity — a form of power that is particularly disliked by the president who has variously described it as a con job and a graveyard for birds."}],[{"start":201.29999999999998,"text":"Dominion’s 2.6 gigawatt offshore wind project — Coastal Virginia Offshore Wind (CVOW) — was one of five temporarily halted by Trump’s government late last year on national security grounds. It won an injunction in January allowing it to resume development. "}],[{"start":218.24999999999997,"text":"Asked by analysts on Monday about the project, Ketchum said his team felt “very good” about it. “Given the investment that’s been made there, it’s the right thing to do to finish it,” he added. "}],[{"start":229.09999999999997,"text":"NextEra and Dominion are only the latest in a line of deals showing energy producers banding together to meet the challenges of a demand surge not seen in executives’ lifetimes. Last year Constellation Energy merged its nuclear capabilities with Calpine’s natural gas expertise in another example of meshing clean and fossil fuels to get bigger and meet demand. "}],[{"start":253.24999999999997,"text":"Ketchum told a conference last year: “We’re going to need it all. We’re going to need renewables. We’re going to need gas. We’re going to need nuclear.”"}],[{"start":261.75,"text":"If NextEra’s latest big move is approved, then Ketchum will be well on his way to having more of each, while the US political debate risks drifting ever further from the pragmatism of its energy providers. "}],[{"start":274.3,"text":"Smart reads"}],[{"start":275.8,"text":"How the world has avoided an oil catastrophe so far, as The Economist sees it (subscription required)."}],[{"start":283.25,"text":"Bloomberg’s Dave Lee reckons OpenAI’s Sam Altman may have won his trial against Musk, but he could have lost Wall Street (subscribers only)"}],[{"start":291.7,"text":"Can geoengineering avert a climate catastrophe? Anjana Ahuja looks at a proposal to dam the Bering Strait."}],[{"start":null,"text":""}],[{"start":305.65,"text":""}]],"url":"https://audio.ftcn.net.cn/album/a_1779515961_1781.mp3"}