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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 why the world's largest hotel company lowered it's estimate for sales growth this year.
Plus we'll discuss why the automaker Ward announced it will be suspending its full year guidance for twenty twenty five.
But first we begin with earnings from the media and entertainment giant Walt Disney.
This week, Disney reported second quarter results that beat Wall Street's expectations. The company also raised its outlook for the full year.
This comes as Disney said it saw increased visitors and guest spending at its parks and and uptick in streaming subscribers.
Disney also announced plans for its first theme park in the Middle East, a resort property in the Emirate of Abu Dhabi.
For more, we were enjoyed Mike Githa Ranganathan Bloomberg Intelligence Senior media analyst.
We first asked Etha for her key takeaway from Disney's earnings and whether the company has turned a corner.
This turnaround story has now been in the works ever since Bob Aiger came back more than two years ago, and it looks like, you know, everything that he's kind of put in place along with the CFO Hugh Johnston, is really working. So they did raise a guidance, you know, for the full year. But it's not just that, it's just the conviction in the outlook as you kind of
look out and build out the earnings model. I mean, we are basically looking at them doubling their EPs from close to almost six dollars this year to well over ten eleven dollars in the next four to five years. So just a lot of conviction I think now in their long term growth trajectory, with those new parks, with the added capacity, with the sixty billion dollar investment, with you know, the Abu Dhabi Park, new cruise ships, everything seems to be finally kind of coming together.
Last quarter, though, the question was about their theme parks prices are too high. The consumers pinched there was a competitor opening up a park in Florida and everyone was kind of worried. What changed in three months.
Yeah, so they did say at that point that you know, summer bookings were strong. Of course, nobody really believed them. But you know, when they kind of reported the numbers and you saw that thirteen percent increase in operating income in the domestic parks, domestic parks are really the bread and butter of you know, the Disney theme park business
makes up seventy percent of revenue. You know, then that has really managed to I think a lay fears and they you know, it's not just what they reported, Alex, it's what they said for the remainder of the year. So they said bookings are up this quarter four percent. They said bookings advanced bookings are up for the fiscal fourth quarter seven percent, and that is with that new Epic Universe coming on board. So still demand seems to be really resilient. It seems to be strong, even though
there's a little bit of softness internationally. Domestically, they seem to be in very good shape.
So Geitha talk to us about the profitability of their streaming businesses writ large here, how profitable are they? Do you think they can approach the profitability of say.
Netflix, I think they can over time. They definitely can. So this year, Paul, we're looking at just over a billion dollars in operating income on a twenty five billion in revenue. That's about four or five percent margins. But really what we're looking to the north star here is definitely Netflix. As you just pointed out, Netflix should get to thirty percent operating margins this year. So that's really
what what Disney is working towards. So even as we kind of build out, you know, or we look at the earnings trajectory for that streaming unit over the next couple of years, I mean, we look at them getting to you know, fifteen sixteen percent margins over the next two to three years, and then of course a lot more upside with you know, the pricing power, with subscription growth, with password sharing, with you know, their advertising buildout, so they have a lot of different levers that they can
pull as well.
Is the goal to catch up with Netflix in terms of streamer subscribers? Is it about profitability? Like? What's the goal there? Because Netflix is so far ahead just in basic.
Numbers, Netflix is absolutely far ahead, and there's no doubt about that, Alex. They have well over three hundred million subscribers just in terms of scale, Disney has about one hundred and twenty five. So there's one hundred and twenty five million. So there's a lot of cashing up to do. But there is one area where Disney's far ahead of Netflix, and that's advertising. They have a very very good advertising infrastructure and this is an area that Netflix is kind
of really struggling with. And then remember, Disney has a big weapon that they can use with that ESPN. It's not going to be called flagship, I know, but with that ESPN streaming launch coming a little bit later, this year they have. You know, they're spending something like eleven to twelve billion dollars in sports rights that they are
going to monetize from a streaming perspective. So that is where you know, they're going to have an unrivaled streaming product even when you compare it to Netflix, because they're going to offer you entertainment, they're going to offer you sports. You know, there's going to be something for everybody. So it's going to be you know, I think they can.
You know, I'm not sure if they're going to completely be able to match Netflix in terms of subscriptions, but they're going to be able to get to that profit number, I think pretty quickly.
Keith, if I'm an investor in Disney, do I just kind of write off what used to be the core business, which is the cable network business and to say it's in secular decline, I'm focusing more on the growing streaming business. Is that kind of the play that.
Is the playball across and that's across majority of the space, So you know, yes, it's it's just kind of you know, coming along if you will. Advertising is a big concern. Their affiliate fees, again as in secular decline. We know other companies are actually trying to separate out their cable networks business just because it's been struggling and the outlook doesn't look good. Comcast actually is, you know, separating out its cable networks a little bit later this year. They
even have a new name for that new business. And you know, we kind of expect WBD, Warner Brothers, Discovery will do something similar, But yeah, I think it's pretty much at this point, it's pretty much written off. Paul. The billinear networks business is dying.
Our thanks to Githa Wronganathan, Bloomberg Intelligence Senior media analyst.
We move next to corporate earnings from Tyson Foods. This week, shares of Tyson Foods some the most since twenty twenty three. Is investors shrugged off stronger than expecting quarterly earnings.
Investors were focused mainly on deepening losses at the company's beef business. This business has lost money for six straight quarters due to a severe cattle shortage in the US.
For more, we are joined by Jim Martash's Bloomberg Intelligence senior analysts retail staples and packaged foods, and we first asked Jen if there was demand concern at Tyson.
On the beef side, it's an input concern. And actually there's a piece to that puzzle that Tyson touched on, but they didn't really go into detail, and that's that they talk about how consumers have really still had a lot of demand for beef, which is true, except that when you look at the consumer they're trading down into
like ground beef. Now when you have a shortage of cows, you know, the problem that Tyson has is that they have to put higher quality parts of the animal into grind in order to sell it, which means that their profit per animal is coming down. And that's a concern over the long term if those changes in behavior patterns don't alter in the near future.
All right, you know, during our little egg shortage, my scientific analysis was basically, just make more chickens. Tyson's are the chicken people, I think, what are they saying about the chicken population these days and eggs and all that kind of stuff, because they're the folks that know.
Yeah, so the chicken supply is actually pretty healthy from a standpoint of the chickens that are used for consumption, they really weren't impacted all that much. By avian influenza, and so that was the good news. The bad news is that the mortality rates on the type of chicken
that they're currently using is still pretty high. So that means that they're not getting as many chickens into the processing plants that they normally would given the number of eggs that are being laid, and so that is an inherent top or cap to supply. So supply is robust. It's going to grow about one percent this year, but there are some constraints there with how much more they could actually grow supply overall.
What's the tariff impact, if any, on Tyson on both sides the demand and supply.
For Tyson, Actually, they have very limited exposure for tariffs they set on their callts. About ninety five percent of their revenue comes from product that's sold in the United States. Their export is relatively small, and they've had some time to work on contingency plans, so finding different end markets that they can send some of the parts of animals that US consumers just don't eat. So right now, it doesn't appear to be a very large risk for Tyson at all.
You mentioned maybe some issue with the cow herd. I mean I watch Yosemite. I know all about the.
Ranching business to see it.
Yeah, so I mean, can't we make more cows? What's going on there?
We can make more cows. The problem is that for ranchers it's a tough environment to decide to actually build up herds. Interest rates are still relatively high, there's still high cost to expand operations. We've had drought that's only just reversing in a lot of the key areas where we raise cattle, and so that decision has been coming. But the problem is that once you even start, you know, it takes eighteen months to get a cattle for birth
to market. So even if they start, we're not going to see an influxus supply for quite some time.
I feel like just a few years ago it was all about alternative protein. I remember, particularly with Cargil for example, they're making a really big push into that. Has that trend for these guys shifted now?
It has. When we look at the consumer consumption data, the luster around plant based has really fallen off. And so you know, right now there's a core demographic that will always be interested in that product, but at the moment it's not growing. The sales are continuing to contract. Part of that is that the cost of regular meat has come down, and we had food inflation which pushed the cost of special ingredients for alternative meat way up.
So the price gap between alternative proteins and conventional proteins got a lot wider in the last couple of years, and it still hasn't completely collapsed again, and so until that gets a little bit closer, it's going to be harder to get consumers to get interested again in alternative proteins.
So what is it the Tysons of the world. What are they saying about their consumer these days?
So, you know, they talk about the demand for protein, and this is something where at the Bloomberg Intelligence Farm Food Fuel Conference we had a whole lot of panelists on protein, and the demand for protein is really strong, whether you're talking about animal protein, whether you're talking about dairy.
Current diet trends are high protein based, and so that really bodes well for producers like Tyson as the consumer is willing to still spend on protein and it's in the majority of their purchases when they're going to the grocery store.
Our thanks to Jennifer Bartash, is Bloomberg Intelligence Senior Animals covering in the retail, staples and packaged foods coman.
We're going to break down why the German drug maker at BioNTech reported lower than expected quarterly sales.
You're listening to Bloomberg Intelligence on Bloomberg Radio, providing in depth research and data on two thousand companies in one hundred and thirty industries. You can access Bloomberg Intelligence via b I go on the terminal AM Paul Sweeney.
An am Alex Steel, and this is Bloomberg.
You're listening to the Bloomberg Intelligence podcast. Catch us live weekdays at ten am Eastern on Apple, Cocklay and Android Auto with the Bloomberg Business App. Listen on demand wherever you get your podcasts, or watch us live on YouTube.
We move next to the hospitality industry.
Marriott followed its rivals Hilton, Hyatt and Wyndham and learning it's four year guidance setting macroeconomic uncertainty.
But Marriott did cut its outlook by less and its peers, indicating that affluent travelers are less affected by economic uncertainty.
For more on this, we were joined by Brian Egger, Bloomberg Intelligence Senior Gaming and lodging analysts.
We first asked Brian for his key takeaways from Marion's first quarter results.
Yeah.
I think the big surpriser was that the rev par guidance reduction was actually more modest than some of the other hotel companies like Hilton and Hyatt, So I think that was a bit of a sigh of relief. They did acknowledge there's some US softness for certain customer segments, but at the same time they're seeing kind of pretty consistent international so I think it was just the relative magnitude of the reduction that probably was viewed as being somewhat favorable.
So across Marriott and Hilton and Huyatt and all those other companies that you cover, BRIME, are they seeing it to the extent they're seeing any softening? Is it from the leisure travel the business traveler both?
Yeah, good question. It's really from i'd say three primary customer categories, independent leisure travelers, extended stay kind of the lower tier, limited service customers, and then government employees, which are a customer base of some importance for Marriott, and offsetting that is somewhat greater strength in things like group bookings. So there's a bit of divergence across segments.
What about geographically, what's holding up? Because one can make an argument if you're tied on budgets, you're not going to go to Europe, but maybe you'll travel within the United States.
Yeah, So to the extent that Marriott did trim guidance, all of their guidance cut was related to US in particular, particularly those segments I mentioned. Internationally, they have not changed expectations at all. You know, there's been some concern about inbound travel from international markets to the US, but within those non US markets, Asia, Europe, et cetera, they have not changed or in any way trim their expectations.
Just in terms of expansion plans. Are there hotel companies still planning on maybe developing new hotels or building new hotels or are they kind of put their growth plans on hold.
Yeah, so the.
Unit growth expectations of the rooms are unchanged. There's still as they were that they have not really observed and I'm speaking particularly about Marryout. They haven't really observed any changes in terms of construction starts. So there's really not been a material change. Obviously, in an uncertain economic environment, it's something that we're watchful of. But to the extent that we're looking at that, there's been no change in terms of their room expansion pipeline or development plan.
If we wind up getting more calm and more in decision is thrown by the wayside, right, and we get clarity which hotel lodging is best set up for that right.
So that's a good question. I think, to the extent that we're talking about the big wild card being independent leisure travel extends fairly broadly across the companies. You know, to the extent that we look at the degree of let's say cuts, Windom probably cut the most, and they're deeply in the extended stay segment, maybe you would see a little bit more bounce back there to the degree
that they have reduced expectitions more. But you know, I think across the board they all have some degree of exposure to the segments that have been a little weaker, which is independent leisure travel, certain types of extended state customer segments, particularly for Windom and things like government employees, which I mentioned for Marriott.
We've seen a lot of soft data suggesting that inbound international travel is down, and this is a short term data maybe not any long term trends. What are your companies saying about that.
Yeah, that's been a concern of hours for a while that you would see a reduction, particularly from inbound travel from Canada and Europe, and I think to some extent we've seen that. Mariot did say that their Canadian bookings for US stay room nights were down about five percent year of the year. However, they did observe that that
was offset by strower inbound travel from other markets. And also Hilton mentioned that Canada represented only about one and a half percent of their total company revenues in terms of Canadian customer stays at US hotels, right, so the exposure to some of those inbound markets is relatively small, but there does seem to be some put and takes
where they're getting summer leaf from other markets. Even though across the board Canada inbound tourism to the US is down, it's just not a particularly material percentage of the overall customer base.
So that's sort of the lodging side. What about the gaming side, What have we noticed in terms of an earnings or forecast or just any sort of read through there.
You know, not really much of a change in terms of markets like Las Vegas, which is really principally a domestic audience. Really not any material change in terms of expectations there, although those companies guidance metrics are a little
bit less specific. In the case of the Las Vegas companies, we were watchful of the sector because at least one company, Churchill Downs, delayed a capital spending plan at the Churchill Downs racetrack, and there were plenty on fairly large expansion project there which they've delayed amid economic and trade uncertainty. But that does not seem to have extended to other companies. So no major changes in terms of capital spending plans or bookings trends for some of the major gaming operators.
So by and large, here what are the stocks telling you, Brian? Here across the lodging space, have they been selling off for underperforming the market? What are they telling us?
I think there's been certainly some expectation of an economic impact from both the traded in the economic uncertainties, and we did see, you know, for some of the recent sell offs of the market, lodging companies were certainly hit.
And so by the time he got to the companies like Hyatt and Hilton actually reducing guidance, you know, the reduction follow on Stockbrice behavior was not particularly pronounced because I think there's been some anticipation that we'll see a little bit of a slowdown and amid the uncertain economic environment.
Our thanks to Brian Egger, Bloomberg Intelligence, Senior Gaming and Lodging analysts.
We move next to the biotech space.
This week, the German drugmaker BioNTech reported lower than expected quarterly sales on weaker demand for its COVID nineteen vaccine developed with Pfizer.
This comes as the company's now seeking to evolve into a broader biotech company focused on cancer treatments.
For more on this and the latest news in the drug space, we were joined by Sam Fazzelli, Bloomberg Intelligence, Director of Research for Global Industries and senior pharmaceuticals analysts.
The first asked Sam for his take on Biontechs results.
I can remember BioNTech is the originator of the Pfizer COVID shot, so they're one of the two mRNA shots out there. And what was again good to see is that despite all the uncertainties that we're hearing about with regards to attitude, CMRNA, vaccines, et cetera. Neither of the companies have reduced their guidance for the air, but the guidance have got really really wide margins in terms of
where they're going. And they both need it because they're both spending a large amount of money on R and D, which is what companies should be doing to discover new drugs, and a lot of those drugs are at least in the biontic case in cancer in general. And we have some interesting mechanisms that are going to read out, so that it's going to be interesting to see how this all pans out over the next few months with regards
to vaccine attitudes, et cetera. So as crossed that people would take those shots.
Yeah, Historically, sam have healthcare stocks broadly defined. I'm thinking that the big cap pharma companies, So, are there are places to hide out in times of uncertainty?
Yeah? Absolutely, They are probably the most defensive of the defensives along with utilities. Along with utilities, et cetera. But the problem I think Farma got right now is that, as we just saw, President Trump apparently has said that he might come back again in the next two weeks with some tariffs for pharmaceutical companies. Most of them have said that they're ready to manage it and be able
to absorb it. Some have already given us some numbers as we spoke about last time and with regards to how they've been hit in the first quarter. But they you know, that is the one thing that maybe takes a little bit of the shine off from that defensive field.
How do they mitigate it? Like, I mean, you make it sound like it's no big deal. They can manage it, But how does a company mitigate issues like that?
Right, So a whole bunch of them, I think, have shipped a ton of drug to the US already.
Just to stop piling, right, that's their solution stockpiling.
They can't just switch manufacturing overnight so that that can't happen. So they're just putting a whole bunch of drug in the US and also hoping that the telefst doon't come and if they come, there the numbers that they can manage. And let's not forget these are companies that have got pretty good margins, so maybe they'll manage the margin impact
within their capabilities of the guidance that they give. But frankly, I think that, as they keep saying, the better way to try and get these companies to move manufacturing too the US is to just give them some time and say, look, you've got instead of a ninety today thing, you've got a year two years to show that you genuinely are opening and moving manufacturing here. If not, then I'll hit you.
All right, I'm going to preface this question with a statement. Here, Sam, I've been found in the healthcare industry for I don't know forty years. I had zero knowledge of the economics of the healthcare industry. I don't know who sets what price where, who gets paid. I have no idea. I just write a check every once in a while. If in fact they wanted to push through price increases, can they do it with all the insurance and the governments and all that kind of stuff they do?
They do every year in January pretty much every farmer company, and I can't say one hundred percent of drugs take it a price rise on the list price, let's not forget, and then some of them do another one in midiear so, and but of course the majority of that price rise
they give back in discounts. To the to the middlemen as they call them, so the pharmacy benefit managers and the insurers in the middle so it discounts and rebates, and so the end price that gets to the consumer is never really up by that much as much as what you can see on the list price. So that's how that works. And you know, some of the companies that are in a very competitive position, So as we've seen with these GP one drugs, some of them are
beginning to discount a little bit. So Nova noticed they just announced last week they've got this done this deal with Hymns, They've done this deal with CVS, and the CVS deal is at a lower price. It's the cheapest that you can get for this listed type of dr you know, the.
We go v.
It also raises the question for me, like what how sticky our customers it comes to drugs, Like in general, it's like, is it the cheapest one?
Is it?
Once you start a regimen you don't want to ever change it?
Is that?
Like how high is that barrier to entry? I mean, we've seen that be a little confusing when it comes to the GLP ones.
Yeah, yeah, so Alex, some of that isn't up to the consumer. So a lot of that is up to the insurance companies. So if your group insurance suddenly decides to switch provider and say, okay, from now on, we're going to push you to take we Go Vi versus Z bound, you're either going to have to go back, go out in the market and bly it out of
the pocket, or you accept that switch. So that switch does happen, it is harder in diseases where you're actually maintaining a response or like in a even in those diabetes, for instance, you're under control very well, why switch, Well, the cities, I don't think it's going to work like that, and I think you can see probably more price competition, but also I think the best drug will get the you know, the one with the lowest side effects of the best sweight loss, we'll get the And as you
can see that Bounds doing a lot better than we Go Vi on our prescription data that we have on the terminal.
Our Thanks to Sam Fazzelli, Bloomberg Intelligence Director of Research for Global Industries and senior pharmaceuticals analyst.
Coming up on the program will break down how the clean energy build out in the US is being impacted by the Trump administration.
You're listening to Bloomberg Intelligence on Bloomberg Radio, providing in depth research and data on two thousand companies and one hundred and thirty industries. You can access Bloomberg Intelligence via b I go on the terminal.
I'm Paul Sweeney and I'm Alex Steele, and this is Bloomberg.
You're listening to the Bloomberg Intelligence podcast. Catch us live weekdays at ten am easterne on Apple, Cocklay and Android Auto with the Bloomberg Business App. Listen on demand wherever you get your podcasts, or watch us live on YouTube.
This week, the automaker Ford announced it'll be suspending it's full year guidance for twenty twenty five. The company cited uncertainly surrounding President Donald Trump's auto tariffs.
For more.
We were joined by Steve Mann, Bloomberg Intelligence Global Autos and Industrials research analyst. We first asked you for his take on why Ford's halting its guidance.
It's normal for these companies to, you know, to to kind of remove their full year guidance. There's a lot of confusion. We still really don't know what the full impact and what is the impact of these tariffs. There is still hope that you know, some of these will go away. No, President Trump did give some reprieve for the automakers, but at the end of the day, it's
still a big number. We estimate it's going to be an eighty five billion dollar impact on the US auto industry alone, just you know, in the next twelve months from these tariffs. So well, we'll have to see you know, full yer guidance pulling them. It's it's it's it's it's seems like the norm.
Now, what are the companies, I mean, realistically, are the companies saying, hey, we can I don't know, go to kind of change our sourcing, change our supply chain, or we're going to we're committed to trying to pass these along to customers, or we're going to take it in the margin. Any kind of guidelines here just in terms of broad strokes.
Yeah, there's been a lot of question on how they're going to approach this, and there's a number of ways. You know, there's a lot of production vehicle full fieldal productions in Mexico as well as Canada. Now, a lot of these automakers do have some spare capacity that they they can shift back into the US, but it's going to cost them and some of these costs eighty five billion I just mentioned earlier really doesn't include some of these costs on shifting that production back themselves as well
as supply chain. So for example, you know, if you move a plant either from Mexico to Canada back into the US, it could cost an upwards of four billion dollars, you know, if they have to build a greenfield site. So it's it's it's gonna be a lot of money, uh to to actually you know, reshift the supply chain that's been built.
Which company, now that we've sort of gotten through a lot of this is best equipped to handle this uncertainty.
Well, I think it's gonna be Uh, it's gonna be really tough for for automakers. I don't think they really have a good handle onto what the what the costs are, and what they need to do. You know, there's price increases that they can apply to the consumer, and I think that's a very viable option.
Uh.
The other one is moving capacity. Uh, then it's going to be a huge costs. We actually think among the legacy automakers, like if you look at ST. Lentist, GM, and four UH. We think Ford has the biggest will have the biggest impact from the UH tariffs because of their more global strategy around supply.
Chain Steve, Are we gonna see layoffs in the auto industry? Are we can see plants cutting shifts, maybe shutting down for they can't get parts or the demand might not be there.
Yeah, it's very possible. I think initially we'll see that type of reaction in the market because if prices do go up, you know, sales will actually dwindow or decrease, and we've already seen that earlier in the year before tariffs. This is gonna you know, exacerbate the slowdown in the in the auto industry. So we probably will see some
layoffs and production pep back. We're hearing from the auto suppliers, a lot of them, most of them saying that, you know, they expect auto production to come off from their already reduced forecast for this year.
When we take a look broadly at autocard sales demand here in the US, how is that holding up, especially as we can consider are the rising price of potential cars and being imported like a rush to buy now that kind of thing.
Yeah, I think we have seen some rush to buy now UH before April. First quarter sales is actually pretty good, but a lot of that is pull for demand, you know, prices. You know, we we actually do see inventory coming down, supply being cut UH and UH prices will will come up as a result the result of the tariff costs. You know, there's there's news out there that some of the automakers that import cars in the US are actually
not releasing those vehicles into the dealer lots. For example, we're seeing increase you know, vehicle inventory at the Baltimore Ports from Volkswagen and and Aldi. We'll probably see the same thing for some of the Japanese and Korean automakers UH inventory at the ports UH out on the West Coast.
Thanks to the man Bloomberg Intelligence Global Autos and Industrials research channels.
Each week we take a look at research from Bloomberg NF previously known as New Energy Finance.
Through the team of Bloomberg that tracks and analyzes the energy transition from commodities to power, transport, industries, buildings, and agricultural sectors. This week we looked at the clean energy build out in the US.
Research from Bloomberg NEEF says the clean energy will continue to grow, and that's despite ongoing tear off threats, President Trump's hostility toward clean energy and risks of possible cuts in tax credits.
For more on this, we were joined by Paul Lescano, Bloomberg BNF Senior Associate. Were first to ask Paul about how the Trump administration is currently impacting clean energy.
We have to look at every industry separately and in conjunction. We have to align to understand what are the common threats and then what are the individual characteristics of each of those industries. So so far we've seen obviously, offshore wind has been badly hit, mostly because offshore wind is heavily heavily reliant on federal agencies and federal authority, whereas solar has been pretty much unstoppable. There's very little thing that Trump and the administration can do to really slow
down growth. And then battery storage with this nation technology that's coming to support both solar and wind generation has also been i would say somewhere in the middle, not as badly head as offshore wind, but tariffs have had much a much bigger impact because the US still imports a lot of the batteries from China because the battery supply chain is not as diversified as a solar or the wind supply chain.
So you guys have a no doubt that talks about how US clean power build will caudruple by twenty thirty five despite all of these risks. That's a big number. So you mentioned that solar is unstoppable, battery and energy storage potentially, also, can you walk us through your outlook for solar in particular.
Yeah, the reality is the US and pretty much everywhere in the world.
Will need power.
What's the fastest, cheapest new source of power generation. It's older like, hands down, it's easier, quicker to build. If you can get the permits and the great connection on time, which are really the only bottlenecks to get to getting new solar built, then it's very very hard to stop.
And we've seen that all over the world, especially now the US gas nuclear there's a you know, there's talks about a renaissance for both of these technologies, but the reality is is that physical there's physical limitations to building gas into building nuclear that probably most of the audience is very familiar with.
With soul.
You don't need pipelines. You don't need to build new pipelines, you don't need to improve new pipelines. You just grap panels, You install them, you connect them to the grid, and that's it. And then you have new source and new source of generation. And the reality is that despite the efforts from the from the administration to revitalize false fossil fuels and nuclear, the easiest thing to build to solar, and it's going to continue to be to be like that for a long time.
Well, talk to us about the towers here, Like, if there's one hundred and forty percent tariff on a battery coming in from China, doesn't that make a lot of projects just unfeasible economically.
Yeah, that's a great question. And there's certainly some battery projects, big battery projects in parts of the US there are going to be delayed. There's going to be probably delayed by twelve to eighteen months as everyone figures out what the final tariff on China will be. But the reality is, if we look at what happened to the solar sector and the global solar supply chain back in the day when Obama started introducing high tariffs on solar panels, supply
chains re route very very quickly. So we do expect eventually with the next couple of years, if tariffs in China continue to be pretty high and the risk of using Chinese batteries remains pretty high, irrespective of what the tariff level is, we do expect some new capacity coming online in South Korea and Southeast Asia as well as in in the US.
What about battery storage and energy storage.
So, battery storage is as I said, it's it's what it's more mower hit for by tariffs and solar because of its reliance on China. So we had to we had to re assuming a slowdown in new additions because right now the ramp up has been pretty quickly. But the role of battery storage for power markets has been very very critical over the past couple of years. It has probably arguably saved Texas from blackouts in the past twelve eighteen months because the ability of batteries to ramp
up quickly and meat peak demand. It's it's it's really it's fascinating and and it's really quick to dispatch, and and we think it's going to play a bigger, bigger role in markets outside of Texas too in the US?
How hard How hard is it to get connected to the grid? If I build a wind farm in the middle of West Texas like I saw on land Man, they're off the grid. How do you get stuff to the grid.
It's very very difficult. Some of the difficulties are obvious when there's a very very long distance between where you're building the farm and where you want to deliver the power. So you need to get transmission built, which means you need to get everyone along the way who owns the land where that transmission where those transmission lines are going to be, to approve to allow you to build it, which, as I'm sure you can imagine, is a very very
tedious process. You need different regulatory approvals, and then to get connected to the grid, you have to undergo years and years of different system studies where they have to assess what's going to happen if your wind farm now connects to the grid, what's going to happen to all the power flows going in all directions. Imagine just doing that study for one farm, and they do this for pretty much everyone who's applying for the grid at the
same time or the same grid connection point. So the engineering is really really complicated, and it's been by far the biggest bottle knight of getting any new source of power generation.
And yeah, is it easier to do that or build a pipeline?
Easier to do that than build a pipeline, I would say, except if you're in Texas or Louisiana.
All right, Thanks to Paul Ascano, Bloomberg Leanni app Senior Associate.
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