How to Make Money Investing in Energy
Aside from the data centers themselves, the biggest money maker in real estate today is in power plants built to serve AI data centers. Hi. Welcome to Bring Back the Bustle, a podcast about revitalizing rural America. I’m Shavon Jones, your host.
A bit of housekeeping before we delve into this episode: First, Happy New Year. We’ve been off since Thanksgiving both for the holiday season and also to prepare for our capital campaign which is underway as I speak. Interested accredited investors can request a copy of our Private Placement Memo using this link (which means you have to go to our website www.ruralqrof.com to click on the link that’s here in the transcript).
Update on Our Last Episode
Second, when we left off at the end of part one of Season 1, we were talking about energy. Specifically, we’d completed an episode about the power grid: how to share it and who is paying for the excess demand caused by data centers. I promised a second episode dedicated to making money from data center power consumption. And that’s what today’s episode is. However, during our five week hiatus, I noticed what may be the beginnings of a campaign to confuse the public about why the poor are being saddled with much of the bill for data center energy consumption.
The article that caught my attention was in the WSJ. I’m a subscriber and regular reader of the Journal, but I never touch the opinion page. The article that caught my attention, while clearly propaganda, was in one of the fact-based sections of the paper. So, I read it expecting to get information useful to our Fund. I ended up getting corporate spin masquerading as journalism.
Here’s the gist of what the article claimed: Americans are paying more for energy because of weather events and to upgrade the grid.
We addressed the point about weather events in our last episode (Get Off My Grid). The cost of hurricanes, wildfires and other natural disasters is spread across all rate payers as it should be, and as it always has been. In other words, the reason our energy bills have spiked of late isn’t because of weather events since we’ve been paying for those all along.
Higher energy prices also are not to improve the grid. If you’ll recall, former President Biden signed a bipartisan infrastructure law with $62B set aside for energy. The law expressly says the money is for modernizing the electrical grid. So, rather than double-digit increases to poor people’s energy bills, we collectively were paying for grid maintenance and modernization through tax dollars. So, what’s being passed on to individual rate payers is new power generation for data centers. And if someone is uncomfortable saying that, perhaps they should stop passing it along.
Making Money in Energy
Now, to today’s episode. Data centers (and crypto companies and cloud storage purveyors, etc.) have dramatically increased the demand for energy. With an increase in demand comes more earnings. This episode is about how to get some of that money.
How is the demand for energy being met? In two broad ways: through a mix of fossil fuel and renewable energies. You have gas, coal, water, wind, solar, and nuclear sources of energy being harnessed to meet the demand of corporate consumers like data centers and the rural communities nearby.
The Supply Side
The supply side is a bit more complicated than the demand side. Here, the actual supplier of the energy source isn’t necessarily the party who owns or finances it. This means you don’t have to understand how a gas plant operates or how a hydropower plant operates to make money from it. All you have to know is who the players are in the space and how you can do business with them.
Invest in Public Utility Companies
Now, this podcast is about private investing, right. We’re a private fund. But I would be remiss if I didn’t acknowledge that one way to make money in energy is to invest in publicly-traded companies in the energy space. If you’re investing publicly, don’t limit yourself to just the utility company itself. Also look at companies that provide transmission cables, companies that provide the fuel, and companies that provide energy software and technology. Also look at utility bonds of stable municipalities. This public market is where you should play if you’re not an accredited investor but want to start making money in the sector.
Private Utility Investment
Of course, the amount of money available in the private sector dwarfs what is available in the public sector. So, if you have the ability and the free capital to get into a private energy deal, you can actually get rich. Power plants, whether renewable or fossil fuel, are billion dollar investments financed by large private equity funds. Therefore, you generally need millions to get in—unless you investing through a fund or vehicle that aggregates the funds of accredited investors and reinvests that money in energy.
That is one of the plays that we make here at the Rural Fund. If you’ll recall, we specialize in building small businesses such as entertainment venues, epicurean grocers, and hotels in towns anchored by data centers. Those are operating businesses. They generate lots of cash. We have to do something with that cash to grow it. Our favorite play is to place our idle cash in private energy investments.
Private energy investments often are backed by the government which reduces the risk of loss from the investment. So, you make a lot of money with low risk. But the barrier to entry is the huge upfront capital requirement.
We make the upfront outlay affordable for accredited investors. Our minimum investment is only $50,000. An investment in the Rural Fund will be spread not just across our small consumer businesses but also in our energy investments. You’ll be in energy deals with companies that construct energy plants or supply parts to those plants and with institutional investors who finance construction and equipment.
At this point, the best way to get more information is to schedule a consultation so we can get you a copy of the Private Placement Memo before this round of financing closes. You can schedule a consult on our website.
What’s Next?
As for the podcast, what happens next? A number of experts have been listening to our show and have expressed an interest in sharing their topical knowledge with us. So, I’m going to work them in for appropriate topics throughout the rest of the season and beyond. We envision about 15 episodes for this second half of Season 1 of Bring Back the Bustle.
Then, there will a second season where we will transition from finance to real estate development. As in the first season, we will look at the topic from the vantage points of the property owner, financier, and user. After that, Season 3 is expected to be about business operations. This will showcase the inflow of cash to our businesses and how our investors make money. That’s as far ahead as we’ve thought. Hopefully, that’s enough that you’ll mark this podcast as essential listening for investors, entrepreneurs, and business people. I’m Shavon Jones. I’ll be here next week and I hope you’ll be as well.
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