Speed to Power
Yesterday the Wall St news tape started to ding off new announcements on grid improvements. It was each public company providing their press release on the US Department of Energy’s Office of Electricity announcing its intention to help fund 31 grid improvement projects in 26 states. This is part of the Department’s catchy acronym SPARK (Speed to Power through Accelerated Reconductoring and other Key Advanced Transmission Technology Upgrades). The projects are to receive $5.25 billion in total funding with $1.9 billion coming from the DOE and the balance coming from “cost-share funding”.
The high level of the project is massive upgrades to the grid using existing right-of-ways through new technologies which should eliminate the lengthy permitting that comes with new transmission lines. DOE expects roughly 23 GW of capacity to be added through the projects. We have long stated that generation gets the headline, but transmission capacity was going to be the key to the grid given the age and old technology. Aside from the obligatory comments about funding data centers, the reaction has been fairly non partisan as it appears there is some understanding this is a needed step in grid resiliency.
Here is a list of projects if further reading is of interest.
Oh Oh Oracle part 3, or is it 4?
So about a year ago when we kicked off the Cocktail Corner part of the WPO, we did it with something titled The Bond Market Always Knows. Our example was Oracle (ORCL) as it had come to our attention that something was amiss in the credit default swaps (CDS) of some of their bonds. For a quick refresh, CDS is basically an option on a bond that can be purchased as a hedge or insurance. Shortly after that writing, news hit of a potential problem with funding for their big data center project outside Ann Arbor MI. We got some slaps on the back for our astute market sense, which we happily accepted, but truth be told, as the title said the bond market gave us the heads up.
Since that writing, we’ve had a few more ORCL hiccups to report on. We’ve actually lost count, and while it seems we might be some sort of short seller writing content, the fact is the company has given us plenty as sort of the poster child of the AI data center cautionary tale. Well this week, ORCL gave us their best “uh-what?” moment to date. By the way, the other player in this story, Blue Owl, has given us a few moments too.
Yesterday, Bloomberg announced that Oracle sent a force majeure notice to a unit of Blue Owl who is constructing their $165B Project Jupiter in New Mexico stating their intent not to pay if the project isn’t up and running on the expected date in 2028. The project is slated to be a 2.45 GW data center supplied by natural gas. At issue, is a 17-mile natural gas pipeline that will deliver the gas. As it stands, the permit for the pipeline has been denied twice and is facing regulatory and public scrutiny. Stepping into the shoes or Oracle, this seems like a totally legit argument as payment should be tied to the projects ability to deliver. But, in a very Lee Corso “not so fast my friend”, Blue Owl is countering with a legal term we didn’t even know existed, that is in the contract….Hell or High Water!
Late yesterday and into today, Blue Owl and Oracle are saying all is well, but this has all the makings of the latest and grandest edition of some sort of made for TV legal drama. I guess stay tuned.
As a final thought, if you are asking the question of how a $165B project can be moving along without firm gas being check box number one, consider us right there with you.
Natural Gas Market Commentary
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Our pals at Pinebrook decided to take a vacation week so we are going to step in. Given the front month run from roughly $2.80 to $3.30 yesterday, a movie reference comes to mind for our boys, “I hope you had a hell of a pxxx, Arnold!”.
So, what happened? Storage report, domestic production (chart below), El Nino forecasts, a pipeline shut down through West Virginia. In a given week, any one of these headlines might be enough to move the market a bit, but throw in all three or four, and you get a 15% weekly move. While there has been some pullback, the front month continues to trade well above $3 this morning and should have some headline support.
The pros should be back next week to provide a clear picture of the news!
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RT Thoughts….Stubs’ Americana
This week, after a heat filled trip to Texas, we returned to Minnesota where we got our real first welcome taste of fall with clouds and a chilly rain. Obviously, this joyous time of year means it’s time to check in with RT for one of his Coop Magazine soup recipes. To our astonishment, RT asked us to delay as he’s working on some new concoctions, and to be fair, in his neck of the US it hardly feels like fall yet.
Knowing some of our readers, like us, are longing for some RT fall recipes and festivities, we turned to another member of our team….let’s just call him Stubs. With RT sidelined, we asked Stubs if he had any good fall festivities he could share. Oh boy did we hit the jackpot! Apparently there is a place in this country where you can pull a camper, plug in and enjoy this itinerary for a weekend day. We recognize this is beyond the idiom “strains credulity”, but we’ve been assured it’s real…..
Just reading that should put a smile on your face and know you live in the best damn country in the world! That said, we are aware we need a soup recipe so we asked Stubs if he’d share his recipe for entry to the chili contest. Stubs made us blush with his apparent impression of our vast readership. In a concern we might leak something, he asked if it would be ok to give the recipe at a later date, not wanting to jeopardize his secret into this weekend. While we lamented being 0 for 2 on soup recipes, the thought of a fall festival dripping with Americana will keep us warm. Enjoy Stubs!