Speaker 1Hi everyone, and welcome back to our Friday wrap-up. I'm Stille Martinsgaard, and I'm
Speaker 2Nikolaj Tangen, and today from New York.
Speaker 1So 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 U.S. 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?
Speaker 2It'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, 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 U.S., so super interesting to have him on.
Speaker 1It'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 chip this year. And of course, a lot of money needs also power. How do you think about like, kind of like a buildup that big?
Speaker 2Well, the demand and the buildup is huge. And this company is spending a billion dollars. Billion dollars a week on building the infrastructure here. It is also interesting because it was an important, a really important factor in the in the midterm election that we that we had this week. There's been a lot of protest against the data center buildouts because people don't want to have them in the neighborhoods. 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 of the election campaigns in in many places. And now we'll see what's going to happen with the licensing and and permissions on the on the back of the election result. It's a 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.
Speaker 1Yeah, 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.
Speaker 2Absolutely. So you need a you need a you just need different, different supply. And it means that nuclear is going to be more important because you have the base load, 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 have 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 MBM made our first investment into a battery platform also this week, actually. So we took a 10 percent stake in in a venture with with Brookfield and really, really interesting. We think that could be the the biggest. Battery platform in the US. And so we are very pleased to be an investor here.
Speaker 1Yeah. OK, so let's use that as a bridge into the next segment and to talk about what's going on in the fund and the markets. 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.
Speaker 2Why? Well, we got we got it into a 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 can 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 Bursola. So we went really, really slowly. And then we had a backlash against this, partly because of, you know, a change in the US politics. And so then green investments became less popular. There was less competition and they suddenly became a lot more interesting and profitable. So then we accelerated and we made some, you know, 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, you know, the biggest grid operator in Germany. And 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. And so, you know, we built up the team, we just are, you know, getting to know more partners, we are making more deals. And I think this is super interesting.
Speaker 1Yeah. 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.
Speaker 2Yeah. Just when we have made the full commitments into the already done deals, it's 1% of the fund. And, you know, 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. So moving on
Speaker 1to talk about what you're doing in New York, because you're actually spending a full month there and I guess it's kind of been a it's a traditional Nikolai, because it's the third year you're doing this.
Speaker 2It'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 U.S. 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. Everybody in the firm, we also, you know, social events, but I'm also seeing some 50 U.S. 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 some fun podcasts. So really busy program. I'm very happy to be here with the great colleagues in New York.
Speaker 1What are you hoping to get out of it?
Speaker 2Well, we learn what's on 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, you know, 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, you know, increased credit risk. They are concerned about the speed of AI build out on the back of the of the election. So just lots of things. So very interesting to be here.
Speaker 1For sure. But after a week with election earnings, how do you avoid being pulled into this short term noise?
Speaker 2Well, 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, you know, long term picture and look at the long term trends. But it is unbelievably interesting these days to wake up, you know, 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 to orientate myself about what's going on. I mean, so fun, you know.
Speaker 1Totally 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?
Speaker 2Well, tomorrow on Saturday, I'm spending the day with ANSA. That's the Association of Norwegian Students Abroad. Together with many of my 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 fund to Norwegian students. And it's one of my favorite days in New York is to meet all these great, all these great young people. So I think that's going to be a lot of fun.
Speaker 1Great. Do you have a routine when you get up in the morning in New York? Is it slightly different from also?
Speaker 2Well, when I wake up, it's dark outside. I do my 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, pester my colleagues around the world. So pretty much the same thing.
Speaker 1Okay. Thank you, Nikolaj.
Speaker 2Happy weekend. Happy weekend. Happy weekend. Happy weekend. Thank you. Thank you.
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