Inside FMI's First 'Energy & Power Overview'

Roughly $1 trillion of investment is headed into U.S. energy and power over the next five years. Whether the industry can build it is the harder question: transformer lead times now run three to four years, permitting fights drag on with local jurisdictions and everyone is bidding for the same small pool of skilled labor. Backlogs have never been bigger, and this conversation keeps coming back to whether these companies can deliver the work they have already won.

In this episode of FMI's "Built In" podcast, Scott Winstead, president of FMI Consulting, is joined by four colleagues from the firm's consulting and investment banking arms: Blake Angelo and Evan Fairmont, partners who co-lead the Energy & Power practice, and Russell Clarke and Andrew Henderson, managing directors with FMI Capital Advisors. Angelo and Fairmont's work spans more than $6 billion in energy infrastructure projects, and all four helped author FMI's inaugural "Energy & Power Overview," the first time the firm has broken this market into its subsegments.

What we cover:

Where the $1 trillion goes: half into transmission and distribution, with $300 billion in distribution alone.Spending rising from about $158 billion to $255 billion a year, a compound annual growth rate near 10% (twice the pace of the past four decades).Five-year forward peak demand up sevenfold since 2022, from 24 gigawatts to 166.Data centers tripling their share of U.S. electrical demand, from about 3% to 9%, and the one-third of new projects planning to bring their own power behind the meter, three-quarters of it natural gas.The three constraints — procurement, permitting and people — and how even basic materials went from order-as-needed to 16-week lead times.Why the old plan-engineer-procure-build sequence is breaking down, with equipment ordered before the engineering is finished.How owners now hand a single contractor a whole portfolio of projects instead of bidding them one at a time.Companies that convert backlog into finished projects track portfolio risk in their information systems and keep accountability clear as work moves between engineering, procurement and the field.Investors are putting money into the pinch points: engineering talent, craft labor, tier-two and tier-three equipment producers and the interconnection queue.Premium valuations track how hard a business is to copy, not its growth rate or its data center exposure.The trap in a record backlog: sellers who think they have hit their peak and the ones who will peak again in six months and again in 12.Buy versus build, and why firms tend to overestimate what they can do in-house.Whether this is a cycle or a decade, why small nuclear reactors can't be built fast enough to help and what would change the team's view.

This podcast is produced by FMI. Investment banking content in this episode reflects the perspectives of FMI Capital Advisors, Inc., a FINRA member broker-dealer. This content is for informational purposes only and does not constitute investment advice, a solicitation, or an offer to buy or sell any securities. FMI Capital Advisors provides M&A advisory services to companies in the energy and power sector and may seek advisory relationships with companies discussed. Past performance is not indicative of future results. Forward-looking statements reflect current market conditions and are subject to change.