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Datacenter demand dominates US utilities' Q4 2023 earnings call discussions

US electric and multi-utilities are preparing for the investment opportunities and retail sales growth driven by datacenters and AI.

During fourth-quarter 2023 earnings calls, management teams laid out five-year plans to invest tens of billions of dollars in the infrastructure needed to support the influx of datacenters in their service territories, as well as the overall electrification of the economy. Companies also have begun to see a surge in commercial load as power-hungry hyperscalers access the grid.

"There is an enormous amount of demand being driven across the US economy by the growth in datacenters driven by a lot of things, of course, but specifically generative AI. And that growth is pretty explosive at this point," Rebecca Kujawa, president and CEO of NextEra Energy Resources LLC, said during parent company NextEra Energy Inc.'s fourth-quarter 2023 earnings call.

The company has "over 3 GW of projects that we're building in the coming years for these customers," Kujawa said. "And I do believe that is the tip of the iceberg ... not even talking about what we already have installed."

Southern Co. executives said significant economic growth in their Southeast US service territories is behind the company's $5 billion increase to its five-year capital plan.

Southern expects annual electricity sales growth to average about 6% from 2025 to 2028, with subsidiary Georgia Power Co.'s total retail electric sales forecast to grow at about 9% annually.

"Datacenters represent right now, we think, somewhere around 80% of that emerging load," Southern Chairman, President and CEO Christopher Womack said. "One of the benefits of this sales growth is having the opportunity to put downward pressure on rates for our customers across the board."

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'Dominated by datacenters'

An S&P Global Market Intelligence analysis shows a significant uptick in the number of "datacenter" mentions on earnings calls held during the first calendar quarter of 2024. In addition, at least 21 utilities mentioned the term "datacenter" on earnings calls held during the first quarter of 2024, according to the analysis of earnings call transcripts.

While investors zeroed in on Dominion Energy Inc. finalizing its business review, the Richmond, Va.-headquartered multi-utility also addressed how it serves the world's largest datacenter market located in northern Virginia.

"To give you a sense of how unique this is, consider that the region is bigger than the next five largest US markets combined. It is also larger than the next four international datacenter markets combined," Dominion Chair, President and CEO Robert Blue said during a March 1 investor day.

Summer peak load growth in PJM Interconnection LLC's Dominion transmission zone is projected to average 5.5% annually over the next 10 years based on the grid operator's 2024 load forecast, Dominion management said.

"We continue to see a lot of transmission investment opportunities," Dominion Executive Vice President and COO Diane Leopold said during the company's Feb. 22 earnings call. "In the last PJM open window, there were about $2.5 billion of additional projects that were awarded to us. Much of that supports growth in the datacenters, and we fully expect there will be additional projects in future years to keep pace with that demand growth."

Electricity demand from datacenters in Virginia increased by about 500% from 2013 to 2022, Dominion said in a June 2023 presentation to PJM.

PPL Corp. has seen datacenters "with some very large load requirements" popping up in its Pennsylvania and Kentucky service territories, according to company management.

"In Pennsylvania, in particular, we have a decent amount of capacity on the transmission network that we could add this load without a lot of investment," PPL President and CEO Vincent Sorgi said. "And of course, in Kentucky, we have relatively cheap power prices."

American Electric Power Co. Inc. Executive Vice President and CFO Charles Zebula said commercial sales for the Columbus, Ohio-headquartered electric utility grew 7.8% in 2023 and "were again dominated by datacenters."

"This is a trend we expect to continue over the next several years as the global demand for data storage and processing accelerates through the growth of AI and other technologies," Zebula said. "Commitments for 2025 are exceptionally robust."

"The biggest opportunities so far have been in Ohio and Texas," Zebula added.

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Abundant opportunities

Numerous other large-cap utilities from coast to coast updated analysts and investors on the opportunities they see from datacenter demand.

Among the companies planning to capitalize on these opportunities are PG&E Corp., FirstEnergy Corp., Exelon Corp., Entergy Corp., WEC Energy Group Inc., Evergy Inc., Xcel Energy Inc., Ameren Corp., Sempra, AES Corp., Public Service Enterprise Group Inc. and Pinnacle West Capital Corp.

"I want to remind everybody to plan conservatively," CMS Energy Corp. President and CEO Garrick Rochow said on the Jackson, Mich.-headquartered company's earnings call. "We're not counting any of that upward supply and sales type opportunities until we see the meter spinning."

Black Hills Corp. and MDU Resources Group Inc. also highlighted the growth and investment opportunities spurred by datacenters and AI.

"This is an area that we are enthusiastic about, given the upside potential that it offers to our earnings with little to no capital requirements," Todd Jacobs, senior vice president of growth and strategy for Black Hills, said during the South Dakota-headquartered utility's call.

Black Hills has provided service to datacenter customers in Cheyenne, Wyo., for about 10 years and views the region as a "highly attractive location" for datacenter and blockchain customers.

"In general, we view the impact from these customers as representing around 5% of our total EPS in the early years of our five-year plan and continuing to grow to around 10% of total EPS by the end of our five-year plan," Jacobs said.

'Quite sizeable'

Independent power producers and retail electricity providers such as NRG Energy Inc., Vistra Corp. and Constellation Energy Corp. also are positioned to benefit from datacenter growth.

"Most forecasts have a doubling of this datacenter load by 2030," Vistra President and CEO Jim Burke said on the Irving, Texas-based company's earnings call. "Texas, which is already the second-largest datacenter market in the country, may end up getting a disproportionate amount of it."

Vistra is seeing "way more customers approaching us around datacenters than we've had so far on hydrogen," Burke said.

Constellation's ability to provide around-the-clock clean energy provides an opportunity that is "quite sizeable," according to management.

"Datacenters are 24/7 consumers. We are 24/7 producers. So, it's kind of a perfect marriage," Constellation President and CEO Joseph Dominguez said.

NRG management said the company is "one of the largest competitive providers of power" to hyperscalers and other datacenter operators.

"Ultimately, these guys are going to turn to partners like NRG," said Robert Gaudette, executive vice president of NRG Business. "As the market tightens, they are going to look for people who have got the expertise that we have. So, it is going to be good for the industry, but it is definitely going to be good for us."