C.O.B. Tuesday

Today we had the honor of hosting Pablo Vegas, President and CEO of the Electric Reliability Council of Texas (ERCOT). Pablo was appointed as CEO by Governor Abbott in October 2022, after previously serving as Executive Vice President of NiSource and Group President of NiSource Utilities. His previous management roles included senior positions with both American Electric Power and IBM. Pablo also serves on the Global Advisory Board for the Harvard Business School and is a member of the Texas Advanced Nuclear Working Group. ERCOT manages the flow of electricity to over 27 million Texas customers and oversees one of the most unique power grids in the US. We were thrilled to hear Pablo’s unique insights on the latest power developments in Texas and across the US. In our conversation, we explore ERCOT’s collaboration with international and domestic grid operators to share best practices for managing intermittent resources and ensuring resource adequacy, ERCOT’s unique operational advantages, and Texas’s projected electricity demand growth by 2030, which equates to adding Germany’s current electricity demand. We discuss the reliability risks associated with renewable energy integration, insights into the current state of battery storage capacity, and the need for Texas market design changes to better incentivize the building of more dispatchable power plants. Pablo shares details about the Texas Energy Fund’s $5 billion allocation aimed at incentivizing up to 10 gigawatts of dispatchable power, economic hurdles for coal plants as well as combined-cycle gas plants under EPA regulations requiring carbon capture by the end of 2031, opportunities for nuclear energy development, and the lack of clear market pricing signals in ERCOT compared to capacity market spikes in PJM and MISO. We touch on how the new administration might approach power policy, how current federal regulations hinder power sector growth despite incentives for broader economic expansion, and more. We ended by asking Pablo for his predictions for what Texas’s generation mix might look like in five years and for the future of ERCOT’s connectivity with other grids. We covered a great deal of territory and can’t thank Pablo enough for his insights into all these critical topics. Mike Bradley kicked off the show by highlighting that markets remain in “digestion” mode as they continue to react to Trump’s Cabinet picks. Over the weekend, Trump nominated Scott Bessent for Secretary of Treasury and markets responded favorably (bond yields dropped) on Monday as many investors believe he’ll be more balanced on the tariff front. However, Trump surprised markets a day later by vowing that he’ll levy additional tariffs on China (10%) and new import tariffs (25%) on all Canadian & Mexican goods. On the crude oil market front, WTI traded sideways/slightly down over the past week (~$69/bbl) due to a potential ceasefire deal in the Middle East. He noted that the December 1st OPEC meeting will now be virtual. OPEC’s leadership will likely look to extend current production curtailments for another three months to get them through the seasonally weak Q1 period. On the natural gas front, U.S. natural gas price in recent weeks has spiked from ~$3.00/MMBtu to ~$3.40/MMBtu due to a colder 6-10-day weather outlook. The real gas story is in Europe where natural gas price in recent weeks has spiked to ~$15/MMBtu due to an early spell of cold weather, lower LNG shipments and extremely low wind generation. On the broader equity market front, the S&P 500 and Nasdaq were up just over 1.5% over the last week as they continue to digest Trump Cabinet picks and what policy priorities might be enacted on early in his Presidency. On the energy equity front, the Energy sector was one of the few S&P sectors down last week (~1.5%). He also noted a handful of Energy & Materials sector deals this past week and ended by discussing that the COP29 Conference in Baku c

Today we were honored to host Mayor Lori Blong of Midland. Lori is a proud Midland native and previously served on the Midland City Council and as Mayor Pro Tempore before being elected Mayor in 2022. In addition to her duties as Mayor, Lori is a Founder and Partner of Octane Energy. She began her career as an educator in the Permian Basin and has deep ties to the community. We were thrilled to hear her insights on the Midland energy sector and broader community. In our discussion, Lori shares data on Midland’s demographics and consistent population growth, highlighting that the city’s largest age groups are 0-10 and 30-40 years old. We touch on the influx of workers and families from across the US and the world, growing demand for retail and lifestyle amenities, and recent commercial and national defense developments at the Midland Air and Space Port, including the development of a high-speed corridor for supersonic and hypersonic testing. Lori shares how Midland is addressing worker shortages through partnerships with local universities, the city’s pro-development attitude, her inspiration to run for Mayor, priorities in improving community education and healthcare, and navigating the complexities of political campaigning. We discuss Lori’s working partnerships with Congressman Pfluger and Senator Sparks to secure federal and state support, major infrastructure and transportation projects in Midland and the Permian Basin, and the critical support that the Permian Strategic Partnership (website linked here) and private investments have provided to bolster infrastructure and community services. We also cover Midland’s long-term water planning, the importance of reinvesting in Midland, the city’s high GDP relative to its population, opportunities to leverage excess natural gas for power generation, the city’s confidence in its economic resilience, and much more. We ended by asking Lori for her vision of Midland in ten years. As you will hear, Lori is incredibly passionate about helping her community and we greatly enjoyed the discussion. Mike Bradley kicked us off by highlighting that the key word to describe market action right now is "digestion" as Trump begins nominating his Cabinet picks and investors begin to ponder how they might affect future policy. On the crude oil market front, WTI has traded sideways to slightly lower (~$69/bbl) this past week due to a surge in the U.S. dollar which is creating a short-term headwind for dollar denominated commodities. WTI prompt spread has moved into contango, signaling a loosening oil market. OPEC recently lowered its 2025 oil growth assumptions (again) which likely forces them at their December OPEC meeting to delay unwinding current production curtailments until sometime in Q1. On the broader equity market front, the S&P 500 was down a couple percent as markets were oversold prior to the election, jumped by ~4-5% post-election, and are now pulling back as Trump's equity market euphoria looks to be fading. He noted that broader equity markets will be laser focused on NVIDIA’s results after the close on Wednesday, so expect pent-up market volatility as investors are hoping that Blackwell revenues are exceeding expectations and that the AI momentum trade is still intact. On the energy equity front, it was one of the few S&P sectors up last week (~1.5%) and energy investors seem to be very enthusiastic with Trump's picks for the Department of Interior (Doug Burgum) and the Department of Energy (Chris Wright). He ended by noting that a handful of SMR (nuclear equities) rallied 15-20% on expectations that the new Administration would be favorable to this technology. Jeff Tillery added his perspective and questions to the discussion. We hope you enjoy the conversation with Lori as much as we did. She was fabulous! Thanks to you all!

Today we had the pleasure of hosting Michelle Manook, CEO of FutureCoal, for an insightful discussion on coal from a global perspective – an important yet often overlooked topic. Michelle joined FutureCoal in 2019 and previously held senior roles at Orica, Archer Energy, Brockman Mining, and Woodside. As CEO, she leads FutureCoal’s mission to support key players across the coal value chain and advocates for balanced and inclusive international energy policies that respect the sovereign rights of coal-producing and coal-consuming nations. We were delighted to visit with Michelle. We covered a lot of ground in our conversation, beginning with an overview of FutureCoal, the significance of their rebrand from the “World Coal Association,” and Michelle’s path to the coal industry, driven by a commitment to the humanitarian aspects of energy access and poverty alleviation as well as a keen drive for a challenge. We discuss technological advancements in coal, including the improved efficiency and emissions control in modern coal plants compared to older facilities, coal’s multifaceted role beyond power generation, and the need for balanced energy policies that give coal fair access to technology investment and funding. We explore potential outcomes from COP 29 for coal, the need to expand the definition of abatement to include any emissions reduction efforts, and the impact of High-Efficiency Low-Emissions (HELE) technology and improved energy efficiency as significant contributors to emissions reductions. We cover investment trends in coal, global coal dynamics, Michelle’s views on coal’s importance for national security and international competitiveness, and the investment case for sustainable coal technologies. Michelle also emphasizes the needs and aspirations of developing nations for equitable energy access. It was a wide-ranging discussion and we can’t thank Michelle enough for sharing her time and insights with us. As you’ll hear, Michelle references data from a few reports in our conversation. FutureCoal’s report entitled “Clean Coal Technology in ASEAN: Balancing Equity, Security & Sustainability” is linked here and FutureCoal’s report entitled “Addressing UN Sustainable Development Goals in the ASEAN Coal Value Chain” is linked here. Mike Bradley opened the conversation by noting that many markets have rallied since Trump’s election as the 47th President of the United States. Since the election, the 10-year bond yield rose from ~4.25% to ~4.45% driven by concerns that Wednesday’s CPI report could print hotter than expected and cause the FED to head towards a temporary rate cut pause. Interest rates and the US dollar look to be moving higher on a belief that Trump’s trade policies (higher tariffs) and a push towards less regulations will lead to higher real growth and higher US deficits. On the crude oil market front, since the election, WTI has fallen roughly $4/bbl to ~$68/bbl due to optimism that Trump could quickly move towards peace negotiations in the Middle East & Ukraine. He noted that while Trump’s slogan of “Drill Baby Drill” proved to be a good campaign slogan, the reality is that US producers are laser focused on capital discipline and shareholder returns and that’s unlikely to change.  Mike further noted that some believe Trump could move to implement Iranian oil sanctions early in his term, which would be offset by ample OPEC spare capacity. On the broader equity market front, since the election the DJIA, S&P 500 & Nasdaq are all up ~4-5%, the Russell 2000 is up ~7% and Bitcoin is up ~30%. Broader equity markets are technical

In this discussion, energy leaders Anne Bradbury, CEO of AXPC; Bill Flores, Vice Chairman of ERCOT; and Maria Korsnick, CEO of NEI, explore future energy policies post-election. They delve into the implications of the Trump administration on energy reliability and affordability. The trio emphasizes bipartisan collaboration to enhance nuclear and natural gas support while navigating the evolving legislative landscape, including potential changes to the Inflation Reduction Act. Their insights highlight the critical intersection of energy politics, national security, and technological innovation.

Today we had the honor of hosting Senator John Cornyn of Texas, who has served in the US Senate since 2002 and is now in his fourth term. Senator Cornyn has been a steadfast advocate for Texas interests and supports policies that promote responsible domestic traditional energy production while exploring new energy sources to strengthen US energy independence. Senator Cornyn has held several key leadership roles including Republican Whip and currently serves on the Senate Finance, Intelligence, and Judiciary Committees. Before joining the Senate, Senator Cornyn served as a district judge, a member of the Texas Supreme Court and Texas Attorney General. We were thrilled to connect with Senator Cornyn for an election, energy and geopolitical focused discussion one week away from the 2024 Presidential Election. We begin by asking Senator Cornyn for his perspective on escalating international conflicts and global geopolitical tensions, including the Iran-Israel conflict, North Korea’s involvement in Ukraine, and threats from Russia and China. We discuss the importance of robust US intelligence and deterrence to maintain global stability, the need for proactive US leadership in foreign conflicts, and the reality that “our holiday from history is over.” Senator Cornyn outlines opportunities and challenges in the coming lame duck session, key legislative actions, and Congressional priorities including national defense funding, tax policy, and the federal budget, as well as key Senate races and the potential for Republicans to retake the Senate. We explore America’s energy potential, the strategic importance of US LNG to European allies, challenges with transmission and permitting for energy infrastructure, the evolution of US policy toward China, the possibility of permitting reform, and the merits of state versus federal power. We also touch on incentives for reshoring critical manufacturing to address supply chain vulnerabilities, national debt and budget priorities, and the critical importance of national unity despite political differences. It was a fantastic discussion, and we are very grateful to Senator Cornyn and his team for their continued efforts on behalf of the energy community. Mike Bradley kicked off the discussion by highlighting that markets this week are increasingly focused on a handful of Big Tech Q3 earnings and next week’s Presidential election. On the bond market front, bond traders continue to be perplexed that the 10yr bond yield has spiked from 3.6% back to 4.3% over the last month, which is a higher level than the 10yr was trading prior to the 50-basis point cut at the September 18th FOMC Meeting. He noted that bond traders seem to be betting that Trump will win the Presidency and that his promise of Chinese Tariff increases and significant Federal regulatory cuts might lead to higher “real” growth and higher deficits. On the crude oil market front, WTI had fallen roughly $5/bbl this week on a brief de-escalation in Mideast tensions and concerns that Chinese economic stimulus plans would disappoint. On the broader equity market front, the S&P 500 continues to post new highs. Big Tech stocks seem to be retaking market leadership given that the market-weighted S&P 500 Index is again outperforming the equal-weighted S&P 500 Index. On the energy equity front, lower oil prices are leading many energy companies to take a more cautious approach on their Q3 calls which is continuing to weigh on the entire sector. Arjun Murti emphasized that long-term macroeconomic trends are more influential than election outcomes alone, and that a balanced “all-of-the-above” approach to support maximizing traditional resource production and exports as well as new energy technologies is crucial not only for the US but for developing nations seeking diversified energy for geopolitical and economic stability. We hope you find today’s discussion as interesting and insightful as we di

 Today we had the privilege of hosting Peter Lake, former Chairman of the Public Utility Commission of Texas (PUCT). Peter was appointed by Governor Greg Abbott to stabilize and strengthen the Texas electrical grid following Winter Storm Uri in 2021. He concurrently served as a Board Member of ERCOT and concluded his term with the PUCT in June 2023. Previously, Peter chaired the Texas Water Development Board. Since leaving public office, Peter has served as an independent strategic advisor and technical consultant through his firm, Cardinal Rose. We were thrilled to welcome Peter to our offices in Houston for a discussion of power systems broadly and his incredible experience tackling the Texas grid problems after the tragic events of February 2021. In our conversation, Peter provides candid insights into the post Uri rebuilding experience and discusses how and why Governor Abbott reached out to him to take on this incredibly hard role. We discuss the challenge in regaining public trust following the crisis and the strategies required to rebuild confidence in ERCOT, his very productive partnership with interim ERCOT CEO Brad Jones, the decision-making process at PUCT and its impact on power systems, ERCOT’s unique governance structure and its relationship with PUCT, and the changes implemented after the 2021 storm. Peter shares his views on managing through a crisis, the importance of uniting stakeholders to facilitate efficient decision-making, and the rapid progress Peter and his team made with support from the Texas Legislature on projects that had previously been delayed. We explore the actions needed to address grid reliability, the challenges posed by Texas’s rapid power demand growth, the need to expand transmission and dispatchable energy resources, the critical balance between renewables and reliable backup power, the importance of market-oriented solutions, concerns with over-reliance on batteries, problems brewing now in other US grids, and the federal government’s role in system reliability. Peter also touches on the close relationship between water management and energy, the potential for adopting incentive models to improve power reliability, and much more. We walked away with a deeper appreciation for the efforts made by Peter and the teams at PUCT and ERCOT in 2021 to stabilize the grid and are grateful to Peter for sharing his unique insights. As Texans, we are all personally thankful to Peter and everyone else who stepped in to an unbelievably hard situation after the storm to improve the grid in Texas.    Mike Bradley kicked off the discussion by highlighting that this week looks to be starting out as a pretty slow and less volatile trading week for most markets. On the bond market front, over the last 4-5 weeks the 10yr bond yield has increased from ~3.6% up to ~4.2% due to a belief that the FED won’t raise interest rates in 2024 as much as was previously expected. On the crude oil market front, WTI was up a couple dollars per barrel this week on talks of a further increase in Chinese stimulus. On the broader equity market front, the S&P 500 was down marginally this week after a significant runup over the past three months. Broader markets could trade sideways over the next couple of weeks as investors further digest the unexpected runup in interest rates, the beginning of Q3 earnings and the outcome of the U.S. Presidential election. On the energy equity front, a couple of oil service companies issued disappointing outlooks last week which weighed on the service industry. He also noted that this week’s Q3 reporting would be peppered with a handful of electric utilities, mining companies, natural gas E&Ps and oil service companies. Jeff Tillery discussed the growing excitement in nuclear with major recent developments (Three Mile Island, tech offtake contracts, and tech company investments) but cautioned to stay mindful of potential challenges and realisti

Today we were delighted to welcome Dr. Carolyn Kissane, Associate Dean of Graduate Programs and Global Affairs at NYU’s Center for Global Affairs. Dr. Kissane is a Lifetime Member of the Council on Foreign Relations, a Senior Fellow at the George H.W. Bush Foundation for US-China Relations, Co-Host of “The Clean Energy Revolution” Podcast, and Founding Director of NYU’s Energy, Climate Justice, and Sustainability Lab. Carolyn earned her Ph.D. in Comparative Education and Political Science from Columbia University and has been with NYU since 2004. Her research focuses on energy, sustainability innovation and policy, and cybersecurity. We were thrilled to connect with Carolyn for an insightful discussion on energy and global affairs. In our conversation, Carolyn provides background on NYU’s energy studies, its interdisciplinary approach, and the growing importance of understanding the connection between energy systems, economic security, and human security. Carolyn shares observations on the increasing focus on climate and energy security at the Council on Foreign Relations, especially with regards to trade and tariffs. We explore the changing dynamics of oil markets, the ineffectiveness of sanctions, the increase of rule-breaking in international trade, shifting student perceptions of energy, global energy dynamics and the U.S.’s competitive advantage due to its abundance of natural gas resources. We touch on Carolyn’s experiences in Kazakhstan, the severity of the energy crisis in Europe and Germany’s economic struggles, the difficulty of reversing these challenges due to regulatory and high energy costs, how bureaucratic challenges and regulatory barriers are slowing down development in Europe and the US, Javier Milei’s political appeal, US energy competitiveness, and much more. We ended by asking Carolyn for her vision of climate policy leadership ten years from now. It was a broad-based discussion and we’re thankful to Carolyn for sharing her time and unique insights. Mike Bradley kicked us off by highlighting broader equity market volatility, the beginning of Q3 Energy sector reporting, and observations regarding this week’s plunge in crude oil price. On the broader equity market front, ASML Holding’s stock priced plunged due to their semiconductor orders noticeably missing estimates which in turn pressured the “hot” Technology sector lower. Liberty Energy and SLB will be the first two oil service companies reporting Q3 results this week with investors focused on their NAM oil service activity & pricing outlook and international revenue guidance. On the crude oil front, WTI price plunged ~$5/bbl (~$70/bbl) this week due to three interrelated issues: Mideast supply concerns, a reduction in global oil demand estimates, and Brent oil traders recently repositioning themselves from a “net short” to a “net long” managed money futures trading position. Jeff Tillery added to Mike’s comments and emphasized that the narrow range analysts are predicting for oil prices in 2025 is unlikely to be accurate and to consider the potential factors that could drive prices either higher or lower than consensus. We greatly enjoyed our global discussion with Carolyn today and hope you find it as interesting as we did. Our best to you all!

Today we had the opportunity to visit with Dr. David Spence, Chair in Natural Resources Law at the University of Texas and Author of “Climate of Contempt: How to Rescue the U.S. Energy Transition from Voter Partisanship.” Dr. Spence joined the University of Texas faculty in 1997 and his research focuses on the law and politics of energy regulation. He holds a Ph.D. in Political Science from Duke University and serves as a professor of Business, Government & Society at the McCombs School of Business in addition to teaching at Texas Law. “Climate of Contempt” was recently published in August and addresses the politics and forces that have affected energy policy. We were thrilled to thrilled to explore the book’s key themes and arguments with David. In our conversation, we discuss the various factors David has researched contributing to ineffective policymaking, the value of engaging in open and honest discussions across ideological lines, how social media and advocacy media influence policy understanding, the destructive effects of today’s media landscape on comprehending complex issues, and issues with social media echo chambers. David shares some of the feedback he’s received since publishing “Climate of Contempt,” the reluctance of political leaders to address the failings of their own party members, the role of natural gas in energy policy, and the benefits of being technologically agnostic. We touch on shifts in attitudes toward nuclear energy, the need for more discussions around risks and trade-offs with energy technology, growing global energy demand, the potential for technological innovation in energy, and how differences in energy and environmental policy influence where industries decide to locate their operations. We also cover the challenges of regulating energy markets, the counterproductive demonization of oil and gas, potential ways to encourage cross-sector collaboration between academia, government and the commercial sector, and more. For additional resources related to “Climate of Contempt,” please visit www.climateofcontempt.com. We greatly enjoyed the discussion with David and appreciate him sharing his time and insights with us. Mike Bradley opened the discussion by highlighting two areas, those being the recent surge in both U.S. bond yields as well as global crude oil prices. On the bond yield front, he discussed that despite the FED’s 50-basis point interest rate cut three weeks ago, the 10-year U.S. bond yield has surged from ~3.65% to ~4.00% mostly due to hotter-than-expected recent economic data. He flagged that several important economic reports will be released this week (CPI, PPI & Consumer Sentiment) and that these reports could create some added bond and equity market volatility. Regarding crude oil, in the past week WTI price surged to over $77/bbl (~$9/bbl gain) due to concerns of whether Israel would attack Iranian nuclear sites and/or crude oil export terminals/refineries. Last week’s news of a Chinese stimulus program also contributed to the surge in global oil prices, but one of the key reasons for the recent surge in oil price is a “short squeeze” which is an outgrowth of an extremely bearish trader positioning in crude oil futures (especially Brent). He also noted that on Tuesday, WTI price slid by over $3/bbl (~$74/bbl), as well as the price of several base metal commodities, on news that the Chinese government was holding back on additional economic stimulus spending. Jeff Tillery pointed out that while a stronger underlying economy is good for long-term energy demand, short-term price boosts from geopolitical turmoil may have a negative impact on stocks over time. Thank you again to David for joining and thanks to you all for your support and friendship!

In this enlightening discussion, Dr. Salvatore Mercogliano, an Associate Professor of History at Campbell University and maritime expert, dives deep into the recent dockworkers' strike and its repercussions on the energy sector. He highlights the tension between unions, the impact of COVID-19 on shipping profitability, and the looming challenges of automation. Dr. Mercogliano also paints a picture of an increasingly expensive shipping landscape in the next decade, influenced by geopolitical tensions and evolving environmental regulations.

Join Toni Stojcevski, General Manager of Project Sales & Development at Wärtsilä Marine, and David Millar, Principal of Markets at Wärtsilä Energy, as they dive into the crucial role shipping plays in the global economy. They explore Wärtsilä's innovations in alternative fuels and the complexities of transitioning from bunker fuel to cleaner energy. The urgency for the shipping industry to achieve net-zero emissions by 2050 is emphasized, along with the significant investments required and the challenges ahead in navigating effective decarbonization strategies.