00:00 Speaker A
The US and the United Kingdom unveiling an agreement focused on the development of nuclear power. The key focused of the so-called Atlantic partnership for advanced nuclear energy is to make it quicker for companies to build new nuclear power stations in both the UK and the US. This is the latest sign of momentum in the nuclear power space and growing amid growing energy needs.
00:23 Speaker A
For today’s investor playbook, we’re digging into the name set to outperform in clean energy and utilities. Joining us now, Paul Zimbardo, Jeffrey’s managing Director for US Power, utilities and clean Energy research. Uh thanks for being here, Paul. Appreciate it.
00:37 Paul Zimbardo
You know, thank you for having me on.
00:39 Speaker A
So you recently wrote about um utilities underperformance, you and and your team. and it’s curious that given um that utilities were sort of an AI adjacent bell of the ball, uh really last year. What do you think accounts for some of that more recent weakness that we have seen even when we keep seeing headlines like this US UK agreement today?
01:14 Paul Zimbardo
Sure, sure. And I I think your prior segment described it well, the market is thinking that there’ll be these fed insurance cuts. So utilities are a very interest rate sensitive sector, but they typically perform better when there’s real downturn when people are fearful about the broad economy and that’s not what’s driving the interest rate cuts at least right now.
01:39 Paul Zimbardo
So the utilities performed quite well last year, one of their best years in the past 10 years, but right now people are looking for a little bit more of the the growth, growthy sectors like technology and others.
01:51 Speaker A
Now, utilities hadn’t traditionally been thought of as a growthy sector in that category, but as I mentioned, they’ve sort of caught this AI wave to some extent because of the increased energy demands because of the build out of AI data centers. So where are we in that cycle, if you will, and you know, is there still good opportunity for growth for some of these companies who are who are capitalizing on that?
02:21 Paul Zimbardo
Yes, absolutely. So it feels like we’ve been talking about AI for a long time, but it’s really just the past year and a half, at least in our world.
02:31 Paul Zimbardo
Uh so we really like these mid-sized vertically integrated utilities uh that can see accelerating growth to support the data center. So this means the utilities that can own power plants as opposed to just the the transmission distribution wires.
02:44 Paul Zimbardo
Uh and here the regular utilities are the the picks and shovels of that AI gold rush. They’re building the new power plants for the hyper scalars like meta, Google and others. and they’re seeing their earnings per share growth guidance really accelerate as you look into the 2030 time frames.
03:04 Speaker A
So, I know one of your top picks is Entergy, which we were just showing. That stock hasn’t really underperformed. The stock is up about 19% uh this year. So, it’s an example, I guess, of one of these vertically integrated companies that you’re talking about. Um, I think it’s mostly what in the Southeast. So, what is it about its profile in particular that’s attractive?
03:31 Paul Zimbardo
Yes, no, you’re exactly right. So they’re uh the Gulf coast and really they have some of the strongest relationships with the hyper scalars.
03:41 Paul Zimbardo
Uh so they have they’re building for meta in Louisiana. You probably heard about that one. It’s meta’s largest data center. Uh they have Amazon and Mississippi, Google and Arkansas. So they have these deep relationships, they have sophistication with energy customers in the past and they’re working hand in hand with them and well as the the governors, the legislators to really move quickly to secure the power they need. So, uh we see them as the largest builder of new natural gas power plants in the United States.
04:12 Paul Zimbardo
And they have experience building through the challenging times during COVID. So we hear a lot about supply chain, other constraints, but we’re pretty confident that they can execute.