The Utilities Analyst Who Says the Data Center Demand Story Doesn't Add Up

SPEAKER_2 (0:02)

Bloomberg Audio Studios, podcasts, radio, news.

Tracy Alloway (0:18)

Hello, and welcome to another episode of the Odd Lots Podcast. I'm Tracy Alloway.

Joe Weisenthal (0:22)

And I'm Joe Weisenthal.

Tracy Alloway (0:23)

Joe, imagine you are a utilities analyst.

Joe Weisenthal (0:27)

Yeah, fun.

Tracy Alloway (0:28)

And for years, you are laboring in the utility analysis minds. And you know, we like talking about utilities, we like talking about energy. We find pretty much anything interesting.

Joe Weisenthal (0:39)

That's right.

Tracy Alloway (0:39)

Equal opportunity interest people we are, but you got to say utilities for a while, some people would say it was a little boring.

Joe Weisenthal (0:47)

No, that's right. I mean, for most of our careers, I think if you were a utilities analyst, a really big part of your job, and maybe I'm wrong, but I just didn't the popular discourse was like talking about yield relative to treasuries, right? They were seen as sort of bond-like instruments, et cetera, maybe a little bit of growth, but roughly-

Tracy Alloway (1:08)

Liable, safe haven-ish dividend plays, I guess.

Joe Weisenthal (1:12)

Totally. Since I know where we're going with this conversation, one of the themes of the last few years has been what I would say is the old industries that were either stable or cyclical becoming secular in the way they grow.

Tracy Alloway (1:27)

I think that's right. What is happening now is if you were, I don't want to say a lowly utilities analyst, but maybe a forgotten utilities analyst outside of your sector, suddenly, you are very in demand, right? Because all you hear about nowadays is the AI build out and energy constraints on that. And so obviously, a lot of people want to look at it from a utilities perspective.

Joe Weisenthal (1:50)

Totally. I always think like, what a great luck that some people have in their careers. You can be an analyst and learn modeling skills and all kinds of stuff, and then you get allocated and someone gets allocated to, I don't know, farm equipment, and another person gets allocated to, they wind up in utilities in 2022 And it's like, man, they're on TV all the time. My old boss at Business Insider, Henry Blodgett, it's like he was there as an internet analyst in the late 90s. What an amazing timing and luck.

Tracy Alloway (2:20)

But it's like journalism in the late-earth sign, right?

Joe Weisenthal (2:23)

It's the exact same thing.

Tracy Alloway (2:24)

I started out covering airlines, of all things, but those were interesting. Anyway, I'm glad to say we do in fact have the perfect guest. So we're going to be speaking to a utilities analyst, someone who happens to have a very contrarian take on the data center build out and how much energy is actually required. We've been hearing a lot from people who are very, very bullish on the data center build out. So this will be a useful counterpoint.

Joe Weisenthal (2:49)

I love it.

Tracy Alloway (2:49)

Okay. So without further ado, Andy DeVries, Head of Investment Grade Credit and Head of Utilities and Power over at CreditSights. Thank you so much for coming on Odd Lots.

Andy DeVries (2:59)

Thank you. The pleasure is mine.

Tracy Alloway (3:00)

So is it great to be a utilities analyst right now? Even better?

Andy DeVries (3:04)

Well, your Bloomberg News reporter, Josh Schall wrote an article about how much it's changed to be a utilities analyst now that data centers are here. But to push back, we did have the largest bankruptcy of all time in Enron. The largest LBO of all time in TXU, which then went bankrupt and the largest private equity return ever in Calpine, $25 billion, which exceeds Apollo's Lionel trade and Blackstone's Hilton trade. So we have had a lot of fun along the way.

Tracy Alloway (3:29)

Have you been a utilities analyst throughout that entire timeline? How long have you been doing it?

Andy DeVries (3:33)

I started with the first pack gas bankruptcy and then went to the second and here we are with data centers. 25 years.

Joe Weisenthal (3:39)

Wow. So you really have seen it all. It is fair to say, so you're absolutely right, there have been some disasters and home runs and utilities, you know, they do get central in the news, obviously, with the fires that we saw, for example, in California several years ago and the court trials about allocation of risk in those situations. You mentioned Enron, et cetera. But it is also fair to say that much of the discourse in day to day has been like these are sort of bond like instruments.