00:00First of all, thanks so much for being with us. We appreciate your time. It's great to be on.
00:03Obviously, a big topic of discussion here right now is the war with Iran. Curious how it is
00:08affecting Constellation. You know, not much directly right now. You know, as a domestic
00:13electricity producer, natural gas pricing in the U.S. isn't really dramatically affected. We're
00:20already shipping every molecule we can of LNG, so there's not going to be an uptick of natural gas
00:26leaving the country until new facilities are built. So the price of natural gas has been
00:31relatively stable. We don't use oil to make electricity except during the dead of winter,
00:37and we're already past that period of time. So we're seeing some stability. In the long term,
00:42we're worried about what everybody else is worried about. Supply chain issues, different things,
00:46as we think about the implications to Asia, which will be, of course, more significant.
00:51So right now, the long term is more of a bigger problem.
00:54Yeah, I think that's right. It's both a problem and an opportunity, I would say.
00:59How is it an opportunity?
01:00Well, look, I think, you know, before, when we were thinking about the data economy, where
01:04all the data centers are going to go, there was a pretty good debate that a lot of the data
01:10centers
01:10were going to go to the Middle East. We had already seen agreements to transfer the chips to the
01:15Middle East for the construction of data centers there. Unless we end up with, you know, really a solid
01:23peace in the Middle East, which seems, you know, unlikely, at least based on the history we've
01:28all lived together. I think people are going to start to have second thoughts about citing major
01:34new infrastructure projects in the Middle East. I don't think Europe is in the game for these data
01:40centers. So that means more data centers in the U.S. as the data economy builds out.
01:46As an electricity producer, that means more customers that we're going to deal with.
01:50I think the same is true for industrial customers that already were moving from Europe to the United
01:56States. These pressures on international energy prices are all going to drive people to North
02:02America.
02:02And you just touched on this, but also nuclear power, extremely popular right now because of
02:07data centers and AI. So what are the different ways you can capitalize on that?
02:10Well, the first thing we got to do is lock down the existing fleet and make sure that we could
02:16operate it safely for as long as we can. That requires a good deal of investment. Having these
02:22agreements and having this social acceptance of nuclear and this kind of passion around nuclear
02:27means that we can make billions of dollars of investment to keep the fleet the way it is
02:31operating for a much longer period of time. Also increasing the output of the fleet. We think we
02:38could get as much as six or seven brand new nuclear plants worth of energy just by operating the
02:44existing fleet. We're busy underway doing those things at Constellation. And then the last piece
02:50of it is actual new nuclear, whether that be small modular reactors or large machines. So, I mean, in all
02:56three areas, securing the existing fleet and the capital investments needed, increasing the output of
03:02those units and building new units alongside of those, we're very active.
03:06When you power data centers, you also have consumer bills. So how do you balance that need for data
03:12centers and its effect on pricing while keeping reliable and affordable power? You know, we hear
03:17a lot of people say, not in my backyard.
03:19Yeah. And look, I think this is involving conversation. I think the early days are data centers are takers
03:26and they're driving up the cost of energy. And that is driven by this peak demand, which is a handful
03:34of
03:34hours, call it 40 of the 8000 hours we have in a year are constrained. And we're seeing higher prices
03:42in
03:42those hours as data center demand has come on. The president is addressing that through executive order
03:48and the data economy customers have agreed to be flexible at that peak or bring their own capacity
03:55resources at the peak. If we manage the peak, we want the data centers on the grid. Why is that?
04:01Because think about it. All the wires we've built all the way down your streets, all the big transmission
04:07lines you all see are dramatically underutilized with the exception of those 40 hours. If we could get
04:14more electricity running through those wires during these periods where the system isn't being utilized,
04:20that means we could collect rent or tolls on those lines through these customers and we could actually
04:26reduce costs. Coming into this CIRA session, very different than last year, our big think tank reports
04:33that are saying, hey, if you do this right, data centers actually drive down the cost of electricity.
04:40But if you do them right and data centers drive them down, what do you do in the meantime? Because
04:45it's not going to be immediate. In the meantime, you have to use other tools. So in the meantime,
04:51here's what we're thinking about. We've been working with some of our other industrial customers
04:55to voluntarily reduce demand during these peak hours. So we're able to curtail certain customers,
05:02have the data economy customers pay them to do that so that we get that same flexibility on peak.
05:08The next up in terms of available generation are the backup generators at the data centers,
05:14how to use them more effectively as a grid resource, how to use batteries as a resource.
05:19And then as you look at three or four years out, that's when you're thinking about new gas fire generation.
05:25There's a lot of concern about a possible crash or at least some type of correction in the AI market
05:30and
05:30data centers. What's Constellation Reid on this? You know what? I think people think because we're
05:37there are major customers that we have some independent forecast. The reality is this. I am looking at what
05:44they are spending. They know their business. They know the demand. So as long as the capital expenditures
05:50on data centers is continuing to climb as it has, that is the best signpost for me to gauge the
05:57growth
05:57of my own business. We're not kind of separately going out there and evaluating AI and whether we
06:03have a bubble. What the data economy customers are telling us is that demand is increasing because
06:08they're building more and more. Speaking of growth, any specific M&A plans right now? Well, if there were,
06:13I wouldn't be able to tell you. All right. We appreciate your time. Thanks for being with us. All
06:18right. Thank you.
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