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On Today's Bloomberg Intelligence Show, we dig inside the big business stories impacting Wall Street and the global markets.
Each and every week we provide in depth research and data on some of the two thousand companies and one hundred and thirty industries our analysts cover worldwide.
Today, we'll look at a new joint venture to fund artificial intelligence infrastructure in the US.
Plus we'll discuss how the energy say will be impacted under the new Donald Trump administration.
But first we begin with a streaming space.
Netflix shares swored to a record high this week after streaming Giant reported its biggest quarterly subscriber gain in history.
For more, we were joined by Keitha Rong Andathen Bloomberg, intelligence analyst on US Media.
We first asked Etha what stood out most in Netflix's earnings?
Everything, Alex So, I mean, you know, it was not just I mean, we knew they were going to have a strong quarter, It was just the magnitude of outperformance, which was simply stunning. I mean, they added forty one million subscribers throughout the year. Just for some context, that's more than the total number of subscribers that some of the streaming services even have out their peak for instance, has less than forty million subscribers. So, I mean, just
the scale of the business is absolutely astounding. And it's that scale which is now on display in every possible area, right, whether it's revenue growth, whether it's you know, content cost growth and you know cost per subscriber, which is going to be significantly less than you know, the revenue growth per subscriber. All of that is just you know, execution at the highest level.
So, Keitha, this kind of raises the question to me, yet again, how do you think this industry is going to shake out? It just seems like there's Netflix. I'll give you Disney because it's Disney, but everybody else. Is there any room left for any of these other traditional media players that are trying to get into the streaming business?
I mean, Paul, it's going to become more and more difficult. I mean, with Netflix getting to that three hundred million subscriber milestone, I would say very much built an insurmountable lead in in streaming. There's absolutely no doubt about it. They are expecting twenty nine percent operating margins. I mean we have always you've always posed this question, I mean, can Netflix get to that thirty thirty five percent operating margin? And it looks like they're going to be able to
do that very very comfortably. That, you know, leaves us to the all important question, can anybody else replicate this playbook? Maybe they can, but it's going to take a very long time, and I think by that time, Netflix is going to be far ahead of you know, rivals, with probably you know, forty percent operating margins, tons of free cash flow, and maybe even like five hundred million subscribers.
So what is your question now? So say, we have to be discerning and we have to say okay, well, well if it's at a record, but you know, it's not all amazing and flowers and sunshine and stuff.
What's that question.
Except it is all amazing?
You know, you'll help me, yeah, I mean you It is so hard to find something wrong with this report.
I mean, if you were looking for Okay, is subscriber growth going to slow down? Yeah, probably it's going to slow down a little bit. But again they've said that subscriber growth is going to be the main driver of revenue growth in twenty twenty five. Is operating income momentum slowing down?
No, it's not. Are we getting double digit revenue growth? Yes we are. Is free cash flow there?
Oh?
Yes it is?
So I mean, okay, yes, I guess the big question is what are going to be twenty twenty five is all set because you do have that subscriber momentum, you do have those price increases that are going to feed that revenue growth. So the big question then is, okay, but what about twenty twenty six? What about twenty twenty seven?
So twenty twenty six and twenty twenty seven, I think the levers are really going to be the ad growth story, and they're putting everything in place this year so that advertising becomes a really big, bigger part of the revenue equation starting in twenty twenty six, and they have everything set to do that. So yes, they did raise their prices on the ad tier a little bit just to smidge, but again, remember it's only costing you eight dollars a month.
That's the same as Disney Plus. So again they have a lot more I think, cushion to raise prices and then to also increase their ad targeting capabilities and to really be able to charge advertisers a premium. So I think there's just so many different catalysts out there on the Horizon Alyx. It's really hard to find any fault with their report here.
Because now, Paul, I feel like it's not about can you get streaming stuff for cheaper than you went on cable. It's about the contents more interesting and better. And I feel like that's a different thing than when I cut the cord and say whatever.
Yeah, And it's what Ethan her research calls virtuous circle. The more subscribers you have, the more money you can spend on content, which then gets you more subscribers, and it goes and goes and goes, so Gith, I think the last big area for them to conquer from my perspective, and it goes to your point about advertising being longer
term growth driver is live sports. When are they going to step up and jump into the deep end of the pool and take a big NFL package, not just a couple of days on Christmas, but a season package from the NFL, from the NBA, from English Premier soccer. There's really no area they can't go. When do you think they're going to do that?
I think that's still a couple of years out, Paul.
So they obviously know that the live sports strategy is working for them, there's no doubt about it. They had the two of their biggest events with which were live sports events, and you had those records subscriber gains, So obviously sports can be a big subscriber acquisition tool. It can also turn into a big subscriber attention tool.
They do have a.
Couple of things that they've signed up for, so you know, WWE is something that they already have for the next five years or so. But the next time huge NFL package or an NBA package is really going to become available it's probably going to be only in another four or five years time. In the meantime, you do have, you know, a couple of the smaller rights packages. You do have UFC, which is coming up for renewal by
the end of this year. You do have you know, Formula one, which is something that they already have a pretty deep relationship with kind of given their success with Drive to Survive. So again they could go after that. They have the Women's World Cup. They already have got the rights to that, So it's going to be smaller investments, I would think before they really go after that big, splashy package, which and by that time they're advertising what they all said sorry.
Which no, I was gonna say. It's interesting. I was talking to somebody that were like, I've never watched wrestling in my entire life, but or boxing, but I did when Mike Tyson was doing it because it was on Netflix. Why not? So I also wonder if you're bringing in like a whole ye, you're gonna want the really sexy NFL package, but do you actually need that in order to continue to grow that momentum. It's kind of amazing. So just record high after record high, here is that what I'm looking at.
Pre much definitely a very very strong growth trajectory. Obviously, we don't have a lot of visibility now going into the subscriber numbers because that was the last time that they disclosed that, but I think we're still going to continue to see. I think what what's going to be really interesting is when they start disclosing more advertising related metrics,
right that is where we need some visibility now. So whether they give us a more updated monthly active user number the last number that they disclosed was seventy million, or whether they actually give us an actual, you know, advertising revenue number, those are going to become the goalposts I think in the near term our.
Thanks to KEITHA. Roungnathan, Bloomberg Intelligence analyst on US media.
We move next to some news in the banking industry. We heard the Goldman Sacks is promoting a slate of star executives to run its biggest Wall Street business lines as part of the firm's revamp.
For more, we were joined by Todd Gillespie, Bloomberg Finance reporter.
We first asked taba Goldman Sachs revamp actually means and who is.
Involved to MA see what they weren't necessarily know the names outside of the finance industry either. But these are big people rising stuff up and comers, many of whom have held senior posts at Goldman Sacks for a long time already. But the idea of this is creating a new layer of management basically and promoting a lot more people. Fifteen new names are going to be sitting on Goldman
Sacks's management committee. That's up from twenty four, so in totally talking about a thirty nine person management committee, which which is quite an expansion here and now equities will have three of its own heads, fixed income business will have three of its own heads, and the banking business at Goldman Sachs will also have three heads as well. And those people will report into heads of each of the overarching umbrellas at Goldman Sacks, who then obviously report
into the c suite there. So you know, it's quite a big shift.
I don't like it. It just layers on another layer of management. Where is the value added here is this? I read this story which is a great story about by the way, and I feel like they're just rewarding people with titles.
That is certainly one of the concerns. But right here, you've got to look at the context of the industry, right, what is Goldman trying to do with doing this? They're trying to rest off, you know, competition from the alternative asset management industry there. You know who's already been trying to poach top executives from Goldman Sachs. We've had John Woldron just last week handed an eighty million dollar retention bonus to stay on for another five years, alongside David Solomon,
who's looking very comfortable in his seat as CEO. So you know, the bank is trying to fend off this kind of competition from across the street. We all know right now that banks are not in as lucrative shape right now as private equity firms like Carlisle, like Apollo for instance, who have been reported to have approached people like Waldron already. So the bank is trying to you know, this is a defensive move as much as a promotional move for the people inside.
Does it work, like, does it say shade people enough when they're promoted and stuff like it? Find out eighty million in Waldron's a different story. But like this class coming up, Yeah.
I mean this is certainly. I mean, this has been in the works for a long time. I mean, this is a result of a year long or so set of discussions right where people know, you know, that they're as a restless, very talented, up and coming group of executives who want to be recognized. They want to see a path forward, and they hope, obviously the Bank hopes by doing this they're going to give them that path forward.
It certainly doesn't end the internal politics, if anything, also creates you know, the potential for new tensions and you know, new fiefdoms. But we'll see later down the road how this plays out.
What's interesting for a positive for Goldman Sachs is, you know, I think early in his tenure CEO Solomon some shaky ground, some missteps, and people were, you know, even suggesting maybe he's not the right person for the job. The boys, he turned that narrative around. He seems he seems from the outside very secure in his position.
Certainly. Paul, Yeah, I mean the past two years have been a real turn around for him. I mean we've you know, there was a lot of criticism from early on for you know, missteps in the you know, the retail adventure that Goldman Sachs was was going on with Marcus with you know, with this you know JV with with Apple. It now has this cards business that it's trying to sell off. Now there's a lot of you know, speculation about what's going to happen to that. Now, who's
going to pick up that portfolio? But certainly David Solomon, thanks to you know, a bumper cropper earning his results that have come out the past year or so, the bank is looking on much steadier ground and he's kind of consolidated his grip you could say, perhaps over this bank, and you know, and he's but he's also you know, he's aware that him being in the seat for longer will make other people unsettled, you know this, and the
board is aware of that as well. And that's partly the reason for the John Walter in eighty million dollar attention bonus that we saw last week, and it could explain some of the moves that we're seeing as well.
All right, thanks to Todd Gillespie, Bloomberg Finance reporter.
Coming up, we'll discuss Donald Trump's second term as US president and what it may end up meaning for his legacy.
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We move now to some big news in the tech space.
This week, President Donald Trump announced SoftBank, Open Ai and Oracle performing a joint venture to fund artificial intelligence infrastructure.
This includes an initial investment of one hundred million dollars and the goal is to speed up the development of AI technology for more.
We're joined by An rag Rana, Bloomberg Intelligence technology analysts.
We started off by asking the aniog what this announcement means for building AI infrastructure in the US.
We know the funding is going to come, and there's a lot of funding coming into AI data centers. Now. It has the blessing of the US government. It's going to be funded by private equity or private investors. Oracle's going to be the biggest cloud provider here, and open the I models are going to run on it or train on it. So it's a good thing for all three of them obviously, but it's also good for AI advancements. The interesting part is Oracle is not even the top
three cloud providers that's out there. You know, it's led by Amazon Web Services and then Microsoft and then Google. So you know, them getting a piece of this spy is a very big deal for them because it's a very small business for them right now compared to what AWS generates in revenue.
So how about the other big cloud players, what are they thinking not being.
Yeah, I think the I think if you see the when the rumor first came out that this is happening, you saw that Microsoft started to you know, trickle down a little bit. Because right now, Microsoft is the exclusive partner for open AI. Microsoft has outsourced some work to
Oracle because they can't take care of the whole capacity. Then, after the announcement was made, open Ai and Microsoft issued a joint press release saying that you know, they're renegotiating their own contracts in between and currently their joint venture or partnership will be extended into till twenty thirty. Now, there are two parts of why open ai uses Microsoft Cloud. One is to train their models. Now that's the expensive that really where a lot of the capex is going
in that area. Microsoft will give, you know, allow other cloud providers, but they have the right of first refusals, which means they will figure out whether they are okay with Oracle doing it or not. It seems to me that they are doing they're okay with Oracle because they've already outsourced some work to Oracle. I don't know if it's going to happen or if they're going to share
that with AWS. We'll see that. But the biggest piece of it, the revenue sharing, is if you use open ai technology to develop an enterprise application, what we call as inferencing revenue from APIs, Microsoft still controls that that's going to run on Microsoft Cloud. So Microsoft also got the best of it, which is the reason why Microsoft is up three percent also in this game today.
So here's my really dumb question. What are some hurdles here? Aka power and permits?
Yeah, but that's where the government is saying they will help you out or help these companies out and taking care of it. You know, that is that's not entailed.
That means like speeding up a permit process, or like allowing coal plants to run, Like what does that really entail?
I think coal plants must be tough because frankly speaking, it is very difficult for a cloud provider not to use renewable energy. I think there's going to be a lot more talk about nuclear. For example, what we heard with Microsoft going through, they will build they may build their own smaller you know, you could say capacity to run some of these things. They have the money to
fund it obviously. So you know, if it's one hundred billion spending, we think maybe twenty twenty five percent of that goes towards you know, more tech oriented stuff, whether it's chip, whether it's servers, whether it's you know, pipeline I mean connecting networking devices and or cloud computing, and the rest of that is probably going to go to more the building of the data center and you know, the cooling units, all that stuff that goes with it.
So on our When I think of the electric vehicle business, I think of a business that China is actually leading the way. They are ahead of the US and European automakers for AI, which is arguably a much bigger business opportunity in a longer term one. Perhaps where is the US in terms of a leadership position. It feels like we're putting the resources behind it.
Well, we have in video chips, so that really makes a very big difference at this point. One of the things we don't know about China is what are they doing on the AI side and the government. That's not publicly available anywhere, So it's a difficult guess for somebody. But one thing is for sure. If you have a lot of private money coming in and we have the capacity. I mean, as I said, Microsoft itself this year is
going to spend eighty billion dollars in CAPEX. You know, we think it's going to be closer to eighty five. So if you look at all these large companies with a trillion plus or two three trillion dollar market gap, they can raise funds and you know, get a lot more AI investments. And now the government is getting involved
in it. So I mean it's I would say, in all directions, seems that US will not let this one slip, and it's going to make sure that, you know, we remain the dominant force out there.
Well then speaking of in terms of say Microsoft and their capax, maybe hitting eighty five billion, is this it was this money that everyone was already planning to spend. It was just now packaging a nice little wrapper to everybody.
Not from Microsoft point of view, because Microsoft is not part of this you know, spending ecosystem. So Microsoft is going to spend this, but now good part is going to be Microsoft may not have to spend this much going forward because, as I said, the biggest bulk of that spending was going towards helping some of these large
language model providers train their models on it. Now, if that's done with external money, the likes of private equity or SoftBank, then Microsoft is not going to take that margin head or investors are not going to ask them, you know, you're spending eighty billion dollars whereas the corresponding eighty billion revenue in it. So I think it really helps Microsoft also down the road.
And to come back a little bit for SoftBank's Masasan here, he's back on the think state.
Yeah, it's been you know, missing hits for him for some time. But one thing is for sure. You know, the addressable market of everything AI related is going to be so large. They specifically mentioned a lot of healthcare initiative.
If you remember when you look at Larry Allison's acquisition of Serner, you know he's spending a lot of his personal time trying to fix that healthcare system, which, to be very honest, is probably the biggest burden on us GDP right now because of the high amount of healthcare spending we do as a country.
Our thanks to Anna rog Rana, Bloomberg Intelligence senior technology analysts.
This week, we also focus on a Bloomberg Big Take story titled Trump Shows he is on competing quests for legacy and revenge. You can find this on the Bloomberg terminal as well as Bloomberg dot com.
The story looks at how President Donald Trump's attention is divided between policy victories and exacting revenge on those he considers his enemies.
For more, we spoke to the stories author and Nancy Cook, Bloomberg Senior national political correspondent. We first asked her to walk us through what that story is.
Well, it's really about sort of these two impulses that he has and that his aids are really thinking about as he you know, begins his second term in the White House, and the first impulse is really to you know, govern well, leave a legacy. You know, some of his aids for the last few months have been talking about sort of wanting him to have as big of a legacy as Ronald Reagan.
You know.
They want him to preside over a booming economy, energy exploration, you know, getting what they see is immigration under control, and they really want, you know, his success to be built around governing. But there's a whole other crew of Trump Maga people who really also want retribution and revenge
to be a part of that. They want people to pay for the investigations that they say Trump endured, They want people to pay for, you know, coming after him with legal challenges, the Jack Smith investigation, the New York hush money case. They want people to pay, and also just critics, you know, career government official who maybe raise questions about Trump's first term. This crew wants Trump to pay.
And so the story just really talks about how the competing impulses of Trump's first term is going to be between sort of wanting to govern well but also wanting to get revenge. And I think that a central theme of his presidency the second time around will be what the balance of that looks like.
Nancy, do we have any idea who President Trump really listens to in the second administration? Seemed like in the first administration he had Jared Kushner and Ivanka there. Who's got his ear these days?
Do you think, well, it's a different crew than last time. I would say Susie Wiles, who is his chief of staff and the first female chief of staff at the White House ever, really is hugely respected. You know, he really listens to her and really takes her counsel. She's worked for him, you know, on and off since twenty sixteen.
She ran his Florida political operations about the twenty sixteen campaign and twenty twenty and then joined him, you know, his campaign full time when he, you know, decided to run for a third time. They are very close and she he does listen to her, and then she has a group of very loyal aids around her who worked
on the campaign. And I feel like, you know, it's a pretty well oiled machine, and a lot of those people were Florida based, and I would say, it's a really different staff than it was for his first administration.
What kind of legacy do you think President Trump is after right now?
I think right now he's feeling good and he's not feeling under attack, and so I think right now he you know, is probably a little bit more drawn to the Ronald Reagan model. But you have to remember he also pardoned fifteen hundred January sixth people, including people who violently assaulted police officers that day, and that is also part of the revenge. And so I think, you know, it's going to vacillate between one and the other. I do think that he thinks that he could be a
better president than people give him credit for. Biden thought the same thing, and so we'll have to see what, you know, happens over the next four years. He and his team are riding high right now. You know, they
feel like they won all seven battleground states. They put together a new coalition, brought some new people into the Republican Party, and so I will be curious to see, you know, what happens a year from now or two years from now when they're not riding as high, or when he feels under attack, and what that looks like at that point.
Nancy, what do you think are kind of the to do list for the first hundred days. Is this a president that views these first hundred days, as other presidents do, as a time to really get stuff done.
He signed a ton of executive orders, everything related to immigration, energy, the federal workforce. He's really hitting the ground running. Susie Wiles's chief of staff, has told people that she views the first one hundred days as kind of an artificial metric. They are really looking at the first two years as the key time to get things done. That's when we know that Republicans will control both the House and Senate.
You know, the Republicans have total control right now in Washington, and I think that they view the two years as the key time to get things done.
Right, So, I was wondering, like, it's really until the midterms, right when women things may change. Also, any leverage that President Trump may have over individual members that are up for reelection that might change as well.
Yeah, that's absolutely right. And you have to remember he's a lame duck president too, you know, he can't serve again, and so I think that they view that too as part of this calculus of the first two years of being very important. But we were already seeing them move at a very dizzying pace. And I think that that's going to continue immigration deportation.
How aggressive do you think the president can be here?
Well, he's already trying. I mean, he's signed executive orders to change the asylum process to you know, shut down the border via se via you know, national emergency. They were canceling immigration appointments that people had already that were you know, legal immigration people trying to come here legally. And so I think that, you know, Stephen Miller, who is sort of the architect of his immigration policy, is
a deputy chief of Staff in the White House. He has a huge amount of power, just like last time, and I think that you know, he is telling both members of Congress, but also he's telling Trump himself that you know, you need to move quickly on immigration. This is a quote unquote quick win for US. And so I think that they are going to spend a lot of time in the first six weeks to two months on immigration.
Our thanks to Nancy Cook, Bloomberg's senior national political correspondent.
Coming up on the program, a look at corporate earnings in the aerospace industry.
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We moved next to the aerospace industry this week. We got earnings from American Airlines and GE Aerospace.
American Airlines forecast at a surprise first quarter loss as a carrier works to win back corporate travel after a strategic blunder last year.
Meantime, Genmal Electric Aerospace GE Aerospace exceeded Wallstreet expectations for profit and sales in the fourth quarter.
This comes as the jet engine maker works through supply chain limitations and capitalized on a strong maintenance backlog.
For more We are joined by George Ferguson Bloomberg Intelligence senior Aerospace, Defense and Airlines analyst.
We first asked George for his take on results from American Airlines.
Yeah, so, I mean on an adjusted basis, though, American fine and four Q is all about their one Q guide and that was guided at a loss compared to their peers United in Delta. So I mean, American looks like they're just going to add less capacity in the first quarter and that's going to make it more difficult to manage expenses. Expenses will be higher than peers, and so their performance just won't be as good.
But I guess what I.
Would say though, is Americans four Q earnings, you know, their their revenue growth in all markets looked better than their peers on par or better.
You know.
So, American a couple of years ago decided on a new strategy where they were going to try to do less agency ticketing, you know, through travel agencies and such, and more direct That kind of backfired. They've they've turned that around and they're going back towards a more traditional distribution of tickets, and I think it's starting to show
up in the financials now again. I think four Q looked pretty good from a revenue performance, and so I would expect that one Q is probably a bit of a glitch, as they're just not going to put as much capacity in the marketplace manage a little bit higher expenses. But I really think that they're closing the gap, and we'll get to close the gap with the United and Delta as they roll through twenty twenty five.
So when do they expect them to catch up and sort of reverse the mistake that they made, Like when does that resolve itself completely?
So, I mean I was looking, you know, to some of the differential and yields, price paid per mile flown at the carriers. Delta is still the top dog, but Americans only sort of three percent behind. It's always hard to figure out exactly when the catchup's.
Going to occur.
Is it going to occur in the next couple of quarters. Probably not. I think it'll take a while, But I bet you they make a lot of progress during twenty twenty five. I mean, it's a pretty competitive marketplace.
There's a fair.
Amount of overlap. I don't think, you know, Americans hubs probably aren't as great as Deltas and United, but I would expect they're going to close a good portion of that gap this year.
You know, I'm just looking an evaluation on a pe basis. American you know, got an eight handle, United's around ten times, Delta is the premium at eleven twelve times. What drives the differential evaluation for these three companies. I kind of think of them as kind of all kind of the same. But the market doesn't, does it?
It doesn't look I think Delta does have you know, as you just pointed out, has the best reputation in the group. Again there you know, they're the market leader in revenue per mile flown. I think they've done a really good job on their loyalty program. I think that's probably generating the most revenue of those big three as well, and that's really nice, high powered revenue, right, A lot of it flows to the bottom line. So Delta is clearly the market leader. And again I think it's that loyalty.
I think there's a real desire to fly Delta. There's sort of this Delta cult out there. United has been kind of closing that ground. The United has a very strong international network and I think we've really seen that recently with you know there's very good demand, very strong demand to go transatlantic right now Americans. The dollars strong. Americans apparently want to go there in the depths of winter now, even because we just can't get enough Europe
after the pandemic. I don't know how long this lasts, maybe as long as the dollar is this strong. But I think that's been really shining through and United and helping them close some of the gap. They still have work to do on the loyalty side, and I think the domestic side of their network, and America has kind
of been the laggard. And again I think you know, their internationals, especially international indo Europe isn't as good I think, and into Asia is much less than those two carriers, And America just doesn't have the loyalty program as strong. So I think they've been more highly levered than the other two because they have gone through fleet refreshes earlier. So that's sort of why they're the laggard. But again,
they all operate in the same marketplace. There are some nuances to their hubs, but it's hard to see any one of them walking away too far from the others, and I think that's why we're seeing this convergence in the full service.
We'll see it.
George, we have a little over a minute, luck, but I didn't want to let you go before we talked about GE and what that read through A and their aerospace division men for Boeing so strong.
GE's got, you know, the maintenance business really powering cash flow and margins. They guided to next year they show cash flow and profit not growing as fast as revenue. Story there is. I think you're going to see more deliveries out of Boeing and Airbus. We're calling for that. New engines are diluted to margins and so that'll take
a little bit of the shine off that business. But everybody's flying everything as long as they can because it's hard to get new airplanes because of the supply chain problems. And that's really helping to boost that margin income at GE, which is you know, well into double digits kind of stuff.
It's great stuff, all right.
Thanks to George Ferguson, Bloomberg Intelligence, Senior Aerospace, Defense and Airlines analyst. Each week we take a look at research from Bloomberg n EF previously known as New Energy Finance.
They're the team at Bloomberg that tracks and analyzes the energy transition from commodities to power, transport, industries, buildings, and agricultural sects.
This week we took a look at what a Trump administration means for the energy transition from where we are joined by Derek Flackole Bloomberg bn EF's lead US policy analyst.
We first asked Derek, what's the substance of Trump's recent executive orders on energy and if we're in need of an energy emergency?
From a sort of market perspective, the answer would arguably be no. Certainly from a supply amount, the US is the world's largest producer of oil and gas, there is an argument to be made about price, which is certainly the basis of the Trump administration's order. But more to the point, declaring an emergency doesn't have a sort of clear legal basis of restriction. It's a thing that's more or less the discretion of the president, so he does
have the power to declare this. The substantive implications, of course, might be somewhat different. There's not a lot of precedent for a national energy emergency to close would be the nineteen seventies, where there was a large amount of regional emergencies declared, there might be some ability to ignore or look past normal environmental rules or restrictions that could slow
the construction of energy project. But of course this would require a lot of cooperation with perhaps state and local authorities and certainly the private sector to really build anything out, and the implications on prices remained to be seen. It takes a long time to build anything, and that means a long time to have an impact on prices.
Hey, Derek, just from at that thirty thousand foot level, what does a Prince president Trump presidency meet for just alternative energy in general, maybe wind in particular.
Sure, so zooming in on wind there's a bit more vulnerability than a lot of other energy sectors because in offshore wind there's reliance on federal permits. Everything is basically on the federally owned seabed as well as federal leases. So those are two different areas where the president has a lot of leverage to halt leasing or new construction. Trump has already done that with one specific executive order.
Onshore wind is a little bit different. Unless it's on federal land or impacts certain federally regulated waters or endangered species, you're not going to need a federal permit for that, so that's a bit more limited there. And then when you're looking at solar and storage and other factors like that, it's not really as affected by Trump's orders. He did pause certain forms of funding from the Inflation Reduction Act, the Infrastructure Investment and Jobs Act. Those are the sort
of Biden era signature clean energy subsidy laws. But by my understanding, that shouldn't really be affecting the tax credits, which are driving a lot of deployment, and state level regulation in the power sector, which is a major driver continues.
You're still going to see demands for clean power for utilities in California, Michigan, a wide variety of states, and in places that don't have those standards, like Texas, there's still a really substantial amount of solar and storage build not because of not because of regulations, because of market demand, because it's quick to build and provides meets load growth pretty quickly. So he can't really stop it, but he can slow or complicate it in various ways.
And I hear you on the tax credits that has to take an Act of Congress, but that would be pivotal for a lot of these companies. Part though, has to do with the deployment of cash. So the Department of Loans issued a boatload of money right before. I mean, they've been trying to get rid of this money like crazy for the last four years. Where is that money now, Like, is it just like dry up and go away? Can Trump recall any of these loans?
So recalling that will be pretty tricky. A large amount of those loans have now been committed from the Department Energy's Loan Program's office. Both an active loan and a conditional commitment are considered obligated as I as far as my research told me, which means it's basically contractually assigned to a private company. That means that it's pretty difficult
to claw that back. The active loans, of course, are even more difficult because once a business is actually enjoying the benefits of that you're building a factory or opening a mine, it becomes both legally and politically trickier to pull that away.
So when we sit back, Derek, what's the reality here? You know you mentioned when where there is some some opportunity for the federal government to slow things down, But how about other areas of alternatives. Is that going to need cooperation of Congress, private sector. How do you think that might play out?
Well, It definitely requires a lot of cooperation on both ends. Firstly, from the sort of utility scale deployment side of things, again, you're still looking at a lot of state driven demand for a build out, either regulatory or market. Secondly, if you're trying to really cut the tax credits or slow deployment that way, you do need Congress's approval to really
substantially change the rates. Over the longer term, maybe two to three years, you could see Trump reversing some of the finalized Biden administration regulations in a way that might make these credits harder to access, but that's going to take time. And on top of that, in terms of other parts of things like you know, oil and gas access, things like that, that's going to be driven heavily by
private sector decision making. Right, lower a bunch of barriers, But you can't really say to energy producers, Okay, we're going to make you produce at an amount that basically reduces your profitability. And one last point, I'll make something that ties into all this fossil and non fossil infrastructure is permitting reform, and that is mostly going to take an Act of Congress. In particular, it's probably going to take a sixty votes in the Senate, which means seven
Democrats coming alongside. You can't really easily fit that into a reconciliation bill, which is primarily about tax and spending, and it can get you a fifty votes passage in the Senate.
All right.
Thanks to Derek Flackhole, Bloomberg b Any Apps, Lead US policy analyst.
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