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Speaker 1: Bloomberg Audio Studios.
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Speaker 2: Podcasts.
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Speaker 4: News.
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Speaker 5: You're listening to the Bloomberg Intelligence Podcast. Catch us live weekdays at 10 a.m. Eastern on Apple CarPlay and Android Auto with the Bloomberg Business App. Listen on demand wherever you get your podcasts or watch us live on YouTube.
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Speaker 3: We want to get to one of the big company news stories this morning, and that is Paramount Skydance reaching a settlement, according to people familiar with the matter. with California and other states sowing to block its proposed acquisition of Warner Brothers Discovery. That means we need to bring in Geetha Ranganathan, our media analyst here at Bloomberg Intelligence, to cover this. She's been covering this story from the beginning. Geetha, this sounds like this was the one thing we're waiting for.
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Speaker 1: What are you hearing in terms.
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Speaker 3: Of how solid this potential compromise is?
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Speaker 4: Hey, Scarlett. Yeah, I think it's pretty solid just from, you know, whatever we've been hearing over the weekend. So we've kind of gone from, you know, is this deal ever going to close to kind of broader promises to now some concessions that seem really, really reasonable from a paramount standpoint. And I say that because one of the things that, you know, I think investors were really fearful about with this merger and the potential settlement was, was whether they would have to divest assets, especially whether they would have to divest the cable networks, which would have been really problematic because it would directly have affected their synergy target. And they have a really ambitious synergy target of $ 6 billion. So it looks like they don't have to do anything on that front. They do, however, have to promise to theatrically release 30 films from both studios every year, failing which there will be a penalty. They also have to make an investment in the California production and also maintain the two studio operations so they can't dispose off any of the studios.
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Speaker 2: But all of.
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Speaker 4: That seems to be something that David Ellison will be, I think, happy to live with as long as he can get this deal closed by that September 30th date and avoid those very, very expensive ticking fees.
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Speaker 2: Paramount stock is up about 8.5% today. Warner Brothers Discovery up about 10%, so the market's happy about that. All right, Geetha, I think this is a little bit of be careful what you wish for. They're going to get their deal done. Now they've got to operate this thing. What are the key challenges, do you think, for this combined company going forward?
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Speaker 4: Yeah, the biggest challenge there, Paul, is definitely going to be the leverage, the debt. So we're looking at about $ 80 billion of debt. It's going to be about six and a half times levered. So it's really, really going to come down, as you just pointed out, to execution about getting those synergies and trying to drive this to three times leverage within a few years after closing. That's a tall order. Given that you have two businesses that are in secular decline, which are the TV businesses. Yes, they can extract some synergies, but you're doing that at the cost of those businesses bleeding further. And then remember, the studios is really a very, very up and down business. And you've always said this, Paul, it's like it's such a hit and hit or miss business. It's not predictable at all. So you just look at the two combined studios last year. They had about a 30 percent share of the domestic box office this year. Year to date, they're only at about 10 percent. So, you know, it's it's again, it's going to be a tough slog on that on that front. streaming is definitely a bright spot for both companies. But again, we're seeing even streaming leaders really struggle. You look at the likes of Netflix and, you know, every day we see some engagement data that comes out that doesn't look so optimistic, really struggling against the likes of YouTube and some of the other social media platforms. So whichever way you kind of slice or dice it, this is really going to be a tough road ahead for Paramount Skydance.
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Speaker 3: Yeah, the company, Paramount, has promised merger synergies of $ 6 billion. So that means a lot of cost cuts, probably job eliminations. And you mentioned all the challenges operationally. If they're going to grow their way out of this debt, what part of the business has the best prospects for growth?
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Speaker 4: Yeah, definitely. Streaming, I think, has the best prospects. Remember, this is at its heart, David Ellison and the whole Oracle backing at its heart is a technology operation. So I think one of the things that the market and investors are kind of banking on is the use of technology in the media operations, whether that's for content creation, content production, eliminating a lot of those post-production costs. I mean, they do have a seat at the table when it comes to AI. And so it's going to come down how well they can kind of leverage some of the edge that they have there and implement those across their media operations. But I think definitely one of the business units that everybody is going to be looking at very closely is going to be the streaming side and how fast they can go profitability. Even though 70% Scarlett off the combined company, 70% of EBITDA will still be from the secularly challenged TV businesses.
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Speaker 6: Yeah.
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Speaker 2: 30 seconds left here, Geetha. What's the Wall Street's view of David Ellison? He's kind of a new entity to Wall Street. Has there been enough time for the street to get a sense of, is this the management and management team that can execute this deal?
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Speaker 4: I think they can, Paul. And actually, whatever we've seen so far, he's actually been pretty impressive because he's more than delivered on the synergy targets for the Skydance acquisition. Remember, this is Paramount Skydance. They just executed that transaction. And so far, he's actually more than delivered what he had promised. So let's see.
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Speaker 1: Stay with us.
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Speaker 5: More from Bloomberg Intelligence coming up after this. You're listening to the Bloomberg Intelligence Podcast. Catch us live weekdays at 10 a.m. Eastern on Apple CarPlay and Android Auto with the Bloomberg Business app. Listen on demand wherever you get your podcasts or watch us live on YouTube.
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Speaker 2: Edward Price joins us here, non-resident senior fellow at NYU joining us here in studio. Ed, I've been getting the sneaky feeling that with President Trump in New York for a couple of days, with the United Nations General Assembly here this week, We've got leaders from Iran coming, which is very rare. They were granted some visas. We've got President Zelensky here. For some reason, it's just me. I'm getting this feeling that we might have some announcements this week on maybe Ukraine, maybe Iran, maybe President Trump is feeling the pressure with midterms coming up, with diesel at $ 6.
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Speaker 6: 50.
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Speaker 2: Am I just kind of whistling in the dark here, or do you think there's possibly some movement here on some of these key global issues?
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Speaker 7: I don't think you're whistling in the dark. There might be some rhetorical movement, and I definitely think that Trump is desperate. I mean, diesel at 650 at my local gas station is wild. I mean, that's fritzing everybody's brain that voted for him. But I use the word rhetorical because I'm not sure that he is in control of events anymore. Zelensky seems more in control of his war than does Trump. Likewise, Xi seems like he's in a good position versus Putin. So I think Trump and Putin, both of them are desperate. And whatever the announcements, I mean, who knows what they're worth.
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Speaker 3: So if you say Trump is desperate, he's heading into this summit with Xi Jinping in a more desperate position than China. What kind of prepackaged announcement do you think we'll get versus what actually will be happening between these two gentlemen?
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Speaker 7: Well, what's actually happening between these two gentlemen is great power politics. And Xi Jinping is on the rise. And Donald Trump represents a, I hate to say it, it's painful, declining power. If we look at measures such as the dollar in the next 20 years. So what's actually happening between them is that Xi Jinping is telling Trump what's what, frankly. I imagine that happens with Putin and Trump behind closed doors. What we'll see, you know, for the likes of us will be some handshaking, the usual stuff, right? Everyone will be smiling and there'll be maybe an agreement on X, Y, Z soybean site. But it's all nonsense, right? So we are in a period of undeclared great power war. Russia is losing its war. I think we're just about winning our wars, albeit that's a controversial opinion. And China's watching and waiting to see when it gets involved.
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Speaker 3: We're winning our wars?
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Speaker 1: You mean the Iran war?
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Speaker 7: I'm not sure that we're winning the Iran war that we described we wanted to fight. But I think, as I say before, and I get in trouble for this. In a counterfactual where we didn't fight Iran and where we didn't back Israel, and in a counterfactual where Ukraine lost its war to Russia, that universe, I think, is the universe that we would have lost World War III right off the bat. So I think we're somewhere in the middle because we are reacting to these undeclared, we sometimes call it hybrid war. The West is doing things. It's just a shame that we are led by someone who doesn't really know what they're doing.
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Speaker 2: So given that midterms, how do you think these are going to play out here? Do you think President Trump cares about the midterms? Because one could argue some of his key policies are not supportive of the Republican Party, that being tariffs, that being starting a war in the middle of the oil, you know, global oil patch. Those things aren't they generally don't pull very well.
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Speaker 7: Well, President Trump has never had policies, per se. He's never had a thought-out, programmatic piece of paper where you can, as a consumer of politics, as a voter, go and look at it and say yes or no. What he's done is systematically attacked our constitutional government, systematically attacked our alliances. and try to undermine his own country on the world stage. And I think that the voters are beginning to realize this. It's a shame that it took diesel, of all things, to really get through to people, because there were any number of clues that President Trump was not a conventional politician offering us what we wanted. But no, I don't think there's anything that he can say at this point that are going to bring people back on board if they're losing their farms, literally losing the farm.
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Speaker 3: Meantime, our allies are looking the other way and trying to form alliances with other countries. I'm thinking about Canada and the overtures it's made to the European Union.
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Speaker 1: Is that a good thing?
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Speaker 7: I think the European Union made the overture to Canada now. I think they saw the opportunity to maybe checkmate Trump.
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Speaker 1: The associate member.
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Speaker 7: Yes, yes, which makes me as a British rather jealous because I used to have an Italian passport, you know, de jure. Look, I think that's a good development. I think Mark Carney is an absolute player. He's really giving the world an example of what democratic leadership looks like in contrast to Trump. The European Union itself doesn't have a presidency, right? So my interpretation is they've been looking around for an executive function. Germany doesn't want to do it for obvious reasons. And now they're like, oh, there's this very interesting Canadian guy that seems to be able to address large groups of people. So maybe we'll make him the honorary president of the European Union.
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Speaker 2: Do you think the European Union, other than Germany, is prepared to make the investments that they initially talked about, whether it's in defense or in infrastructure? Again, people feel pretty confident that Germany is moving in the right direction. How about the rest of Europe?
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Speaker 7: Well, I'm not sure that places like Spain or Italy ever had much of a military tradition. And I don't think it matters. I'm not being rude. I just don't think that they... maybe since the 16th century, Spain hasn't really been a military player. It doesn't really matter. If Poland and Germany rearm properly, and if France extends its nuclear umbrella, and if my country, the UK, gets back to proper defense spending, and a bit more of a bullish attitude in the world, we could roll Russia in a conventional war. I don't worry about that at all. So if Germany does the right thing, which it is, we'll be solid. I think the problem is the window, because it takes time to rearm, And Germany's talking about 2039, I think, at the point they'll be ready. I mean, guys, let's, you know, let's much know.
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Speaker 1: Yeah, exactly. In that time, what does Putin do here?
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Speaker 2: I mean, is he is he bogged down in Ukraine?
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Speaker 1: Is he what do you think the next moves are there? Because I don't think people feel. very good about what he could do going forward.
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Speaker 7: So Putin likes to think of himself as like a wolf, right? As this kind of lone wolf, like stalking the European plane. I think of him as a rabid groundhog at this point. I'm serious. Like he is cornered. He's unwell. He's clearly losing that war with Ukraine. And Zelensky, if anything, is holding back. I mean, Zelensky must have more cards to play, right, to return to that phrase. And Putin must realize, even in his delusions, that that war is lost. So if he wants to fight a new war called me versus NATO, maybe a sprinkling of tactical nukes or something, I mean, let's bring a military expert into your show and ask him if that's possible. This war, he's losing.
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Speaker 1: Stay with us.
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Speaker 3: More from Bloomberg Intelligence coming up after this.
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Speaker 5: You're listening to the Bloomberg Intelligence Podcast. Catch us live weekdays at 10 a.m. Eastern on Apple CarPlay and Android Auto with the Bloomberg Business App. Listen on demand wherever you get your podcasts or watch us live on YouTube.
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Speaker 2: Nat gas is where you've got to spend a lot of time as well, because if you're going to have all these data centers all over the country, you've got to power these things up and electrify them, and you do it.
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Speaker 1: A lot with nat gas. And we have a lot of it, too. We have a lot of nat gas, because we frack it down in the oil patch.
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Speaker 3: That's your second gig, I know.
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Speaker 7: Exactly.
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Speaker 1: I'm thinking about it. Henry Eaton, he does this stuff for a living.
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Speaker 6: U.S.
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Speaker 2: Natural gas market analyst for BNEF. The BNEF folks are... The folks here at Bloomberg, they analyze the energy evolution taking place.
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Speaker 1: They have all the data.
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Speaker 2: I mean, the best data out there as it relates to the global energy business.
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Speaker 1: They've got smart analysts up on us to make sense of it. Henry, thanks for joining us here.
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Speaker 2: Talk to us about the demand for natural gas these days. The good news is we have supply of it, but talk to us about the demand.
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Speaker 6: Yeah, so the demand side is super interesting.
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Speaker 8: There are two key drivers that we see through the next five to ten years. That is data centers, as you mentioned, are expected to consume a lot of natural gas, as well as LNG exports. We export a lot of our energy overseas, and that has only ramped up over the past few years and will continue to ramp up over the next five to 10.
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Speaker 1: So it's a long-term bullish story.
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Speaker 3: When it comes to data centers, how difficult or easy is it to get that nat gas to where these data centers are?
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Speaker 6: Yeah, the gas story in the U.S.
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Speaker 8: Is a very regional one, so it depends where the data centers are being deployed. As you mentioned, we have plentiful natural gas reserves here in the U.S. A lot of that is in Texas, in the Permian, in West Texas. There's also production in the Northeast, in Appalachia. One of the major problems that we see or challenges, I should say, is building the pipeline capacity to get that gas to where it is.
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Speaker 6: We have it under the ground. It's a question of getting there.
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Speaker 8: Building pipeline capacity in the northeast, for example, is extremely difficult, much more difficult than in, say, West Texas. The other option is to use price as a balancing mechanism and have that price unlock more expensive supply that we see in.
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Speaker 6: The Hainesville Basin, which is in eastern Texas and western Louisiana.
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Speaker 2: So on the demand side, data centers, we need more energy. Isn't that gas enough to fuel these things, do you think? Or is it just one source of energy that you think that the that will be needed.
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Speaker 1: To fund these data centers or fuel up these data centers?
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Speaker 8: I think you'll see a combination of a lot of different fuels. I think the characteristics of NatGas make it advantageous to do so.
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Speaker 6: A gas plant can ramp up and down quickly like a data center needs.
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Speaker 8: And I'd say one of the challenges to powering all this natural gas is getting the gas turbine capacity.
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Speaker 6: We've seen that that has been a challenge.
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Speaker 8: Order books at a lot of the large manufacturers are full. And a gas turbine ordered today, we don't see coming online by 2031 at the earliest.
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Speaker 6: So it's about five to six years to secure new capacity.
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Speaker 8: All right.
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Speaker 6: So that'll be a challenge.
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Speaker 3: All things to come. When we talk about LNG exports, how quickly is that growing? What's the growth rate compared to demand for data centers?
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Speaker 8: So on a relative scale, I believe our growth rate for data centers is quicker. On an absolute basis for gas demand, LNG is going to be the largest contributor to new natural gas demand over the next five to 10 years. Our latest outlook for data centers, however, has pushed that power sector much closer to LNG. And so we see these two major demand sectors colliding essentially at the same time. And so essentially something needs to give. We see an undersupplied market over the next five to ten years from what we can see today.
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Speaker 6: Now we're not saying the U.S. is going to run out of gas. We're saying something has to give.
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Speaker 8: And there's a lot of uncertainty on both the LNG and the data center side. For LNG, we see a global LNG oversupply, meaning that there's a lot of liquefaction capacity coming online, particularly here in the U.S. And so if you see those global LNG prices potentially come down in the next five years, we could see essentially curtailments at U.S.
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Speaker 6: Facilities.
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Speaker 8: So that would reduce the demand impact that LNG has. On the data center side, a lot of the data centers that we're looking at are fairly speculative. meaning that they're just announcements rather than committed facilities. And so there's a lot that could happen there to sort of move that, shift those numbers around and bring the market back into balance.
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Speaker 1: I mean, I can not guess.
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Speaker 6: $ 2.
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Speaker 1: 85 per million? BTU, which I think is British Thermal Unit. Have I got that right? I think so.
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Speaker 4: See?
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Speaker 1: Land man, I'm telling you. I know what's going on out there.
00:18:06
Speaker 5: This is the Bloomberg Intelligence Podcast, available on Apple, Spotify, and anywhere else you get your podcasts. Listen live each weekday, 10 a.m. to noon Eastern, on Bloomberg.com, the iHeartRadio app, TuneIn, and the Bloomberg Business app. You can also watch us live every weekday on YouTube, and always on the Bloomberg Terminal.
Speaker 1: Bloomberg Audio Studios.
00:00:04
Speaker 2: Podcasts.
00:00:05
Speaker 3: Radio.
00:00:06
Speaker 4: News.
00:00:09
Speaker 5: You're listening to the Bloomberg Intelligence Podcast. Catch us live weekdays at 10 a.m. Eastern on Apple CarPlay and Android Auto with the Bloomberg Business App. Listen on demand wherever you get your podcasts or watch us live on YouTube.
00:00:23
Speaker 3: We want to get to one of the big company news stories this morning, and that is Paramount Skydance reaching a settlement, according to people familiar with the matter. with California and other states sowing to block its proposed acquisition of Warner Brothers Discovery. That means we need to bring in Geetha Ranganathan, our media analyst here at Bloomberg Intelligence, to cover this. She's been covering this story from the beginning. Geetha, this sounds like this was the one thing we're waiting for.
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Speaker 1: What are you hearing in terms.
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Speaker 3: Of how solid this potential compromise is?
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Speaker 4: Hey, Scarlett. Yeah, I think it's pretty solid just from, you know, whatever we've been hearing over the weekend. So we've kind of gone from, you know, is this deal ever going to close to kind of broader promises to now some concessions that seem really, really reasonable from a paramount standpoint. And I say that because one of the things that, you know, I think investors were really fearful about with this merger and the potential settlement was, was whether they would have to divest assets, especially whether they would have to divest the cable networks, which would have been really problematic because it would directly have affected their synergy target. And they have a really ambitious synergy target of $ 6 billion. So it looks like they don't have to do anything on that front. They do, however, have to promise to theatrically release 30 films from both studios every year, failing which there will be a penalty. They also have to make an investment in the California production and also maintain the two studio operations so they can't dispose off any of the studios.
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Speaker 2: But all of.
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Speaker 4: That seems to be something that David Ellison will be, I think, happy to live with as long as he can get this deal closed by that September 30th date and avoid those very, very expensive ticking fees.
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Speaker 2: Paramount stock is up about 8.5% today. Warner Brothers Discovery up about 10%, so the market's happy about that. All right, Geetha, I think this is a little bit of be careful what you wish for. They're going to get their deal done. Now they've got to operate this thing. What are the key challenges, do you think, for this combined company going forward?
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Speaker 4: Yeah, the biggest challenge there, Paul, is definitely going to be the leverage, the debt. So we're looking at about $ 80 billion of debt. It's going to be about six and a half times levered. So it's really, really going to come down, as you just pointed out, to execution about getting those synergies and trying to drive this to three times leverage within a few years after closing. That's a tall order. Given that you have two businesses that are in secular decline, which are the TV businesses. Yes, they can extract some synergies, but you're doing that at the cost of those businesses bleeding further. And then remember, the studios is really a very, very up and down business. And you've always said this, Paul, it's like it's such a hit and hit or miss business. It's not predictable at all. So you just look at the two combined studios last year. They had about a 30 percent share of the domestic box office this year. Year to date, they're only at about 10 percent. So, you know, it's it's again, it's going to be a tough slog on that on that front. streaming is definitely a bright spot for both companies. But again, we're seeing even streaming leaders really struggle. You look at the likes of Netflix and, you know, every day we see some engagement data that comes out that doesn't look so optimistic, really struggling against the likes of YouTube and some of the other social media platforms. So whichever way you kind of slice or dice it, this is really going to be a tough road ahead for Paramount Skydance.
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Speaker 3: Yeah, the company, Paramount, has promised merger synergies of $ 6 billion. So that means a lot of cost cuts, probably job eliminations. And you mentioned all the challenges operationally. If they're going to grow their way out of this debt, what part of the business has the best prospects for growth?
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Speaker 4: Yeah, definitely. Streaming, I think, has the best prospects. Remember, this is at its heart, David Ellison and the whole Oracle backing at its heart is a technology operation. So I think one of the things that the market and investors are kind of banking on is the use of technology in the media operations, whether that's for content creation, content production, eliminating a lot of those post-production costs. I mean, they do have a seat at the table when it comes to AI. And so it's going to come down how well they can kind of leverage some of the edge that they have there and implement those across their media operations. But I think definitely one of the business units that everybody is going to be looking at very closely is going to be the streaming side and how fast they can go profitability. Even though 70% Scarlett off the combined company, 70% of EBITDA will still be from the secularly challenged TV businesses.
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Speaker 6: Yeah.
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Speaker 2: 30 seconds left here, Geetha. What's the Wall Street's view of David Ellison? He's kind of a new entity to Wall Street. Has there been enough time for the street to get a sense of, is this the management and management team that can execute this deal?
00:05:20
Speaker 4: I think they can, Paul. And actually, whatever we've seen so far, he's actually been pretty impressive because he's more than delivered on the synergy targets for the Skydance acquisition. Remember, this is Paramount Skydance. They just executed that transaction. And so far, he's actually more than delivered what he had promised. So let's see.
00:05:42
Speaker 1: Stay with us.
00:05:43
Speaker 5: More from Bloomberg Intelligence coming up after this. You're listening to the Bloomberg Intelligence Podcast. Catch us live weekdays at 10 a.m. Eastern on Apple CarPlay and Android Auto with the Bloomberg Business app. Listen on demand wherever you get your podcasts or watch us live on YouTube.
00:06:03
Speaker 2: Edward Price joins us here, non-resident senior fellow at NYU joining us here in studio. Ed, I've been getting the sneaky feeling that with President Trump in New York for a couple of days, with the United Nations General Assembly here this week, We've got leaders from Iran coming, which is very rare. They were granted some visas. We've got President Zelensky here. For some reason, it's just me. I'm getting this feeling that we might have some announcements this week on maybe Ukraine, maybe Iran, maybe President Trump is feeling the pressure with midterms coming up, with diesel at $ 6.
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Speaker 6: 50.
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Speaker 2: Am I just kind of whistling in the dark here, or do you think there's possibly some movement here on some of these key global issues?
00:06:44
Speaker 7: I don't think you're whistling in the dark. There might be some rhetorical movement, and I definitely think that Trump is desperate. I mean, diesel at 650 at my local gas station is wild. I mean, that's fritzing everybody's brain that voted for him. But I use the word rhetorical because I'm not sure that he is in control of events anymore. Zelensky seems more in control of his war than does Trump. Likewise, Xi seems like he's in a good position versus Putin. So I think Trump and Putin, both of them are desperate. And whatever the announcements, I mean, who knows what they're worth.
00:07:16
Speaker 3: So if you say Trump is desperate, he's heading into this summit with Xi Jinping in a more desperate position than China. What kind of prepackaged announcement do you think we'll get versus what actually will be happening between these two gentlemen?
00:07:32
Speaker 7: Well, what's actually happening between these two gentlemen is great power politics. And Xi Jinping is on the rise. And Donald Trump represents a, I hate to say it, it's painful, declining power. If we look at measures such as the dollar in the next 20 years. So what's actually happening between them is that Xi Jinping is telling Trump what's what, frankly. I imagine that happens with Putin and Trump behind closed doors. What we'll see, you know, for the likes of us will be some handshaking, the usual stuff, right? Everyone will be smiling and there'll be maybe an agreement on X, Y, Z soybean site. But it's all nonsense, right? So we are in a period of undeclared great power war. Russia is losing its war. I think we're just about winning our wars, albeit that's a controversial opinion. And China's watching and waiting to see when it gets involved.
00:08:18
Speaker 3: We're winning our wars?
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Speaker 1: You mean the Iran war?
00:08:19
Speaker 7: I'm not sure that we're winning the Iran war that we described we wanted to fight. But I think, as I say before, and I get in trouble for this. In a counterfactual where we didn't fight Iran and where we didn't back Israel, and in a counterfactual where Ukraine lost its war to Russia, that universe, I think, is the universe that we would have lost World War III right off the bat. So I think we're somewhere in the middle because we are reacting to these undeclared, we sometimes call it hybrid war. The West is doing things. It's just a shame that we are led by someone who doesn't really know what they're doing.
00:08:51
Speaker 2: So given that midterms, how do you think these are going to play out here? Do you think President Trump cares about the midterms? Because one could argue some of his key policies are not supportive of the Republican Party, that being tariffs, that being starting a war in the middle of the oil, you know, global oil patch. Those things aren't they generally don't pull very well.
00:09:12
Speaker 7: Well, President Trump has never had policies, per se. He's never had a thought-out, programmatic piece of paper where you can, as a consumer of politics, as a voter, go and look at it and say yes or no. What he's done is systematically attacked our constitutional government, systematically attacked our alliances. and try to undermine his own country on the world stage. And I think that the voters are beginning to realize this. It's a shame that it took diesel, of all things, to really get through to people, because there were any number of clues that President Trump was not a conventional politician offering us what we wanted. But no, I don't think there's anything that he can say at this point that are going to bring people back on board if they're losing their farms, literally losing the farm.
00:09:55
Speaker 3: Meantime, our allies are looking the other way and trying to form alliances with other countries. I'm thinking about Canada and the overtures it's made to the European Union.
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Speaker 1: Is that a good thing?
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Speaker 7: I think the European Union made the overture to Canada now. I think they saw the opportunity to maybe checkmate Trump.
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Speaker 1: The associate member.
00:10:13
Speaker 7: Yes, yes, which makes me as a British rather jealous because I used to have an Italian passport, you know, de jure. Look, I think that's a good development. I think Mark Carney is an absolute player. He's really giving the world an example of what democratic leadership looks like in contrast to Trump. The European Union itself doesn't have a presidency, right? So my interpretation is they've been looking around for an executive function. Germany doesn't want to do it for obvious reasons. And now they're like, oh, there's this very interesting Canadian guy that seems to be able to address large groups of people. So maybe we'll make him the honorary president of the European Union.
00:10:50
Speaker 2: Do you think the European Union, other than Germany, is prepared to make the investments that they initially talked about, whether it's in defense or in infrastructure? Again, people feel pretty confident that Germany is moving in the right direction. How about the rest of Europe?
00:11:05
Speaker 7: Well, I'm not sure that places like Spain or Italy ever had much of a military tradition. And I don't think it matters. I'm not being rude. I just don't think that they... maybe since the 16th century, Spain hasn't really been a military player. It doesn't really matter. If Poland and Germany rearm properly, and if France extends its nuclear umbrella, and if my country, the UK, gets back to proper defense spending, and a bit more of a bullish attitude in the world, we could roll Russia in a conventional war. I don't worry about that at all. So if Germany does the right thing, which it is, we'll be solid. I think the problem is the window, because it takes time to rearm, And Germany's talking about 2039, I think, at the point they'll be ready. I mean, guys, let's, you know, let's much know.
00:11:50
Speaker 1: Yeah, exactly. In that time, what does Putin do here?
00:11:55
Speaker 2: I mean, is he is he bogged down in Ukraine?
00:11:58
Speaker 1: Is he what do you think the next moves are there? Because I don't think people feel. very good about what he could do going forward.
00:12:05
Speaker 7: So Putin likes to think of himself as like a wolf, right? As this kind of lone wolf, like stalking the European plane. I think of him as a rabid groundhog at this point. I'm serious. Like he is cornered. He's unwell. He's clearly losing that war with Ukraine. And Zelensky, if anything, is holding back. I mean, Zelensky must have more cards to play, right, to return to that phrase. And Putin must realize, even in his delusions, that that war is lost. So if he wants to fight a new war called me versus NATO, maybe a sprinkling of tactical nukes or something, I mean, let's bring a military expert into your show and ask him if that's possible. This war, he's losing.
00:12:45
Speaker 1: Stay with us.
00:12:46
Speaker 3: More from Bloomberg Intelligence coming up after this.
00:12:52
Speaker 5: You're listening to the Bloomberg Intelligence Podcast. Catch us live weekdays at 10 a.m. Eastern on Apple CarPlay and Android Auto with the Bloomberg Business App. Listen on demand wherever you get your podcasts or watch us live on YouTube.
00:13:07
Speaker 2: Nat gas is where you've got to spend a lot of time as well, because if you're going to have all these data centers all over the country, you've got to power these things up and electrify them, and you do it.
00:13:15
Speaker 1: A lot with nat gas. And we have a lot of it, too. We have a lot of nat gas, because we frack it down in the oil patch.
00:13:21
Speaker 3: That's your second gig, I know.
00:13:23
Speaker 7: Exactly.
00:13:24
Speaker 1: I'm thinking about it. Henry Eaton, he does this stuff for a living.
00:13:27
Speaker 6: U.S.
00:13:27
Speaker 2: Natural gas market analyst for BNEF. The BNEF folks are... The folks here at Bloomberg, they analyze the energy evolution taking place.
00:13:35
Speaker 1: They have all the data.
00:13:36
Speaker 2: I mean, the best data out there as it relates to the global energy business.
00:13:40
Speaker 1: They've got smart analysts up on us to make sense of it. Henry, thanks for joining us here.
00:13:44
Speaker 2: Talk to us about the demand for natural gas these days. The good news is we have supply of it, but talk to us about the demand.
00:13:52
Speaker 6: Yeah, so the demand side is super interesting.
00:13:55
Speaker 8: There are two key drivers that we see through the next five to ten years. That is data centers, as you mentioned, are expected to consume a lot of natural gas, as well as LNG exports. We export a lot of our energy overseas, and that has only ramped up over the past few years and will continue to ramp up over the next five to 10.
00:14:18
Speaker 1: So it's a long-term bullish story.
00:14:20
Speaker 3: When it comes to data centers, how difficult or easy is it to get that nat gas to where these data centers are?
00:14:29
Speaker 6: Yeah, the gas story in the U.S.
00:14:31
Speaker 8: Is a very regional one, so it depends where the data centers are being deployed. As you mentioned, we have plentiful natural gas reserves here in the U.S. A lot of that is in Texas, in the Permian, in West Texas. There's also production in the Northeast, in Appalachia. One of the major problems that we see or challenges, I should say, is building the pipeline capacity to get that gas to where it is.
00:15:02
Speaker 6: We have it under the ground. It's a question of getting there.
00:15:05
Speaker 8: Building pipeline capacity in the northeast, for example, is extremely difficult, much more difficult than in, say, West Texas. The other option is to use price as a balancing mechanism and have that price unlock more expensive supply that we see in.
00:15:23
Speaker 6: The Hainesville Basin, which is in eastern Texas and western Louisiana.
00:15:27
Speaker 2: So on the demand side, data centers, we need more energy. Isn't that gas enough to fuel these things, do you think? Or is it just one source of energy that you think that the that will be needed.
00:15:39
Speaker 1: To fund these data centers or fuel up these data centers?
00:15:42
Speaker 8: I think you'll see a combination of a lot of different fuels. I think the characteristics of NatGas make it advantageous to do so.
00:15:51
Speaker 6: A gas plant can ramp up and down quickly like a data center needs.
00:15:56
Speaker 8: And I'd say one of the challenges to powering all this natural gas is getting the gas turbine capacity.
00:16:03
Speaker 6: We've seen that that has been a challenge.
00:16:06
Speaker 8: Order books at a lot of the large manufacturers are full. And a gas turbine ordered today, we don't see coming online by 2031 at the earliest.
00:16:17
Speaker 6: So it's about five to six years to secure new capacity.
00:16:21
Speaker 8: All right.
00:16:21
Speaker 6: So that'll be a challenge.
00:16:22
Speaker 3: All things to come. When we talk about LNG exports, how quickly is that growing? What's the growth rate compared to demand for data centers?
00:16:33
Speaker 8: So on a relative scale, I believe our growth rate for data centers is quicker. On an absolute basis for gas demand, LNG is going to be the largest contributor to new natural gas demand over the next five to 10 years. Our latest outlook for data centers, however, has pushed that power sector much closer to LNG. And so we see these two major demand sectors colliding essentially at the same time. And so essentially something needs to give. We see an undersupplied market over the next five to ten years from what we can see today.
00:17:09
Speaker 6: Now we're not saying the U.S. is going to run out of gas. We're saying something has to give.
00:17:13
Speaker 8: And there's a lot of uncertainty on both the LNG and the data center side. For LNG, we see a global LNG oversupply, meaning that there's a lot of liquefaction capacity coming online, particularly here in the U.S. And so if you see those global LNG prices potentially come down in the next five years, we could see essentially curtailments at U.S.
00:17:36
Speaker 6: Facilities.
00:17:36
Speaker 8: So that would reduce the demand impact that LNG has. On the data center side, a lot of the data centers that we're looking at are fairly speculative. meaning that they're just announcements rather than committed facilities. And so there's a lot that could happen there to sort of move that, shift those numbers around and bring the market back into balance.
00:17:55
Speaker 1: I mean, I can not guess.
00:17:57
Speaker 6: $ 2.
00:17:57
Speaker 1: 85 per million? BTU, which I think is British Thermal Unit. Have I got that right? I think so.
00:18:04
Speaker 4: See?
00:18:04
Speaker 1: Land man, I'm telling you. I know what's going on out there.
00:18:06
Speaker 5: This is the Bloomberg Intelligence Podcast, available on Apple, Spotify, and anywhere else you get your podcasts. Listen live each weekday, 10 a.m. to noon Eastern, on Bloomberg.com, the iHeartRadio app, TuneIn, and the Bloomberg Business app. You can also watch us live every weekday on YouTube, and always on the Bloomberg Terminal.
