Full interview: Utah data center developer Kevin O'Leary reacts to 75% reduction demand

[00:00:00] Speaker 1: So this letter from Senate President Stuart Adams, who, as you know, chairs the MITA board here, who first approved the hyperscale development, put out this letter today calling for a drawback, about a 75% drawback. What does that actually mean for the development plans? Does that change your plans at all? [00:00:20] Speaker 2: Well, that's like a green. So let's just, I got this letter. Let's pick it up from the morning. I got this letter at about 9.04, okay, this morning, because I think it went on to exit 9, and it went out to the whole world. I mean, including all the people involved in the Stratos project, the engineering firms, the design firms, turbine companies, all the employees, like, didn't go over very well, to be honest with you. And I'll tell you why. If this is not the deal I have with Adams, that's not what we agreed to. So let's start there. We're going to talk about pros and cons on this thing. Cutting back the deal, 75% is like me selling you a house, and you get to live in the upstairs toilet. That's it. I mean, that is a remarkable difference to what we agreed to, because this project, in its initial phases, is $15 billion. It's a very complex project that involves a lot of different firms, design engineering, as I mentioned. So I'm not happy about this letter on that attribute. 75% haircut? That doesn't seem fair to me. That's not what we agreed to. But there's a lot of other stuff in here. And just so you know, by around 930, there was an inbound wave of phone calls. My phone lit up like it was going to melt, trying to figure out what this means to the project. Because this is a demand note, demand letter, even though we have agreements in place. So let's go down the shopping list here. Or do you want to stay on that topic for a second? [00:02:24] Speaker 1: I'm interested in what the deal was to begin with, as you understand. It was 40,000 acres. [00:02:31] Speaker 2: There was no debate about it. It was 40,000 acres. Well, Larry Digital was the master manager of that, the master developer of 40,000 acres. So the economics has changed dramatically with this proposal or this demand note. 75% reduction, even though we agreed to buy 40,000, okay? And I, listen, I made that deal with Adams, okay? We looked each other in the eye. It means a lot to me. This is not what we agreed to. Next. Shopping list. Shop, well, let's go through the shopping list because it's a demand note. Water stewardship and great Salt Lake commitment. Commit to implementing the latest available technologies. Agreed. We always agreed to that. Any excess water must be treated and dedicated to the Salt Lake at the developer's expense. I didn't agree to that, but I'm willing to certainly consider it now that we're sitting in this situation. Even though some of the water currently used in the area flows, none of the water, actually, none of the water in this 40,000 acres goes to Salt Lake. So now you're asking me to agree to figure out a way to get it there. Didn't say no. Just that's on the demand thing. Land conservation. Enter into a momentary of my understanding with the Utah Department of Natural Resources outlining conservation of the land within the reduced project area to ensure wildlife and agricultural uses are preserved and protected. I never agreed to that, willing to consider it. I mean, like, to be honest with you, I feel like I'm getting my head squeezed, okay? That's how I feel about it right now. Kind of, you know, you're trying to buy a car, you're trying to close on it, and boom, all these new rules and regulations come in. Heat capture and environmental impact mitigation. Incorporate heat capturing technologies and provide independent scientific and engineering analysis for the project. I have to do that anyways to get a permit, but I didn't agree to it in this context, willing to talk about it. Provide additional transparency and public engagement in the process. Well, I've been very vocal about what's been going on there, and you are well aware of my claims about the propaganda that's been pouring into Utah. Yeah. So in some ways, I'm actually think there may be something interesting about this demand note, and we'll talk about that in a second. Environmental performance standards work within the relevant state and federal agencies to ensure the project area utilizes the best available technologies and meets all or exceeds all environmental performance requirements. The project area must demonstrate industry-leading environmental stewardship protection. Well, of course it has to. I mean, I have to do that to get a permit, EPA. I've got to do that for air. I've got to do that for water. It's got to be totally transparent. So, my take is this. I don't agree with the president on the 75% haircut, okay? I'm outraged. I'm pissed off. However, I want to do something here. I want to make it work out. And I understand there are real concerns of real people living in Utah with real addresses in Box Elder. Not imported outrage. Real people there. 66,000 of them. I'd like to work this out, okay? But I'm going to need... I have everybody around the world working on this letter right now. Everybody trying to figure out, how do we do this? How do we take... How do we build a micro version of this to prove out the model? That it doesn't create all that heat. That it doesn't use excess water. Particularly knowing now it's not going to come from the lake. If anything, we'll get it back to the lake. That it is going to be compliant. That we care about the environment. That it won't be noisy. All of that stuff. We would have to build a fraction of what was proposed. And agree to, I might add, to do what he wants here. He's asking us to do a tasting kitchen. But I'm telling you, I'm not against it. I'm not against it if it solves this problem. Because he is reacting to political blowback. It has to be. Why else would he do this? [00:06:59] Speaker 1: He has a primary in a few weeks. Do you think that has anything to do with it? [00:07:03] Speaker 2: How can it not? He's listening to the people. I get it. But, I mean, this is like, I've never seen anything like this before in a $15 billion project. I've done lots of developments. This is. You say he's listening to the people. I'm choking on the 75% haircut. [00:07:20] Speaker 1: Yeah. I'm choking on that. Okay. You say he's listening to the people. Do you think those people are Utahns? Do you think those people are his constituents? [00:07:31] Speaker 2: I know there's a lot of misinformations. The people that are voters that he would be concerned about. This is my theory now. This is what I think is going on. Have been fed all this propaganda, all this misinformation. Everything that's been put out there has been false. The amount of water used. The noise. The size of the facility. How big we were going to build it. All of that. What I'm bringing to the table. And what I. Here's the silver lining on this letter. And I just had a call with my key team people a few hours ago. Maybe we do this with, with Adams. If we can figure out. If we can figure out how to do this with Adams. Because. How do we actually build. My point is. Everything. All the falsehoods get thrown out the window. If all of this transparency is provided in this agreement. If we talk exactly about how the size of what we're going to build. If we talk exactly about the amount of water we're going to use. If we talk exactly about the amount of heat it's going to generate. Well, you know what? Maybe that's not a bad idea. Maybe that's not a bad idea. Maybe. He's got something here that I hadn't thought about. When I was so pissed off at 915. This morning. Because I was. [00:08:52] Speaker 1: That was the first time you heard about this. Was that letter that got sent out? Listen. I've been. [00:08:57] Speaker 2: I have talked to Adams multiple times. I've talked to Cox multiple times. I've talked to Schultz multiple times. I've talked to Mida multiple times. This isn't something we dreamt up in the last two weeks. I'm well aware of what's going on. And all of a sudden Utah became a story. A national story along with all the other data centers. There's only about 15 of us that do these complex data center developments. These are incredibly complex. Require a tremendous amount of money. So we're all talking to each other. Now, the 75% haircut is what I'm. Well, I've said it 15 times. You know how I feel about it. So to me, he decided to do this on his own. I don't know if he. If he talked. I have no idea who he talked to about this. Whether he went to his Mida board. Whether he talked to anybody. He just decided to do the 75% haircut. But as our team talked about it today. And we'll probably have something by Wednesday. We may be able to work with this. Because we want to work with it. We don't want to give up all the work we've done in the investment. Over $20 million in design so far. And I don't think you want to give up 2,000 jobs. That are really high paying. And 4,000 construction jobs. I think there are many people of the 66,000. In Box Elder County. And in Utah itself. That would want to do this. If they felt. That they understood exactly what was on the table. That it was transparent. That they had the exact facts about water. And heat. And noise. And size. I think they want to do it. So in a way. And I don't know if Adams intended this. But in a way. There may be a silver lining here. I just need. I need a couple more days. To work with the engineers. To figure out. How do we do it? How do we. [00:10:54] Speaker 1: 25%. Is this worth it to you. From a business perspective. Or you have to counter offer. Something in the middle. Well I'm going to. [00:11:02] Speaker 2: I want to get it. I want to get into the details. First of all. Can I take. A 75% haircut. Or some. That isn't. That's not like a 15% discount. That's a huge. Reneg. Retrade. Whatever you want to call it. So can you? I don't know. All right. I don't. I don't have it. I don't have enough data yet. From my engineers. To know if we can do that. We may come back. With some counter proposal. But it's sort of like. That's not the deal. That wasn't the deal. But look. I'm not. I'm not walking away. Okay. Because. It's not who I am. I don't work that way. Maybe. Adams has. Done something here. Where something good comes out of it. That's my point. And that. That was my own team. Telling me that about an hour ago. Saying wait a second. Wait a second. Why don't we go back to engineering. And see what's the smallest. Commercial kitchen we can build. To prove out the model. Like how small. Can it be and still work. And still get a tenant. And I'll know that on Wednesday. [00:12:12] Speaker 1: So this is going to take a little bit more time. In April it seemed like there was some amount of need to move quickly. As a way to lock down tenants. You know these hyperscalers for this project. Well there still is. [00:12:23] Speaker 2: Because I've got multiple hyperscalers interested in Utah. And you should make the assumption. There's national interest. From the government itself. From the government itself. Because we need to have more capacity. More compute capacity. For defense. So. All of that and above. And so all of those are partners calling me today. [00:12:45] Speaker 1: Saying what the hell is this? Have you heard from any other states today? Saying if Utah is unwilling to do this. We're happy to take it. [00:12:52] Speaker 2: I'm not going to say that. But you should make the assumption. That I have other options. And I don't want to leave what I've already worked so hard on. [00:13:01] Speaker 1: Yeah. [00:13:01] Speaker 2: You know that's. The competition right now you should be aware of. Is from Mississippi. Glenville. Kentucky. Texas. Alberta. Canada. Wyoming. There's lots of people that want to have 2,000 jobs. And 5,000 or 4,000 construction jobs. And if. But I'm deep. I'm deep into this project. We've done a lot of work on it. And there's. And we've got a lot of people that have been partnering with us. Saying yeah. It's going to work. It has everything we need. And it's not in somebody's backyard. Remember this is on arid land. That grew alfalfa. Which uses a lot of water. Most of that alfalfa. Went to Saudi Arabia. And China. To feed their cattle. I don't think the people in Box Elder know that yet. So it's not like they're giving much up on growing alfalfa. And it used a lot of water. We may use less per acre. Than alfalfa growing. I'm just learning this stuff from water engineers. So. You know. You and I should have this narrative again. Maybe Wednesday or Thursday morning. When I know exactly what I can do with this. [00:14:18] Speaker 1: We'll be happy to talk to you. [00:14:20] Speaker 2: Yeah. I mean. If we're going to have a narrative with the people in Box. I want to talk to the people in Box Elder. That actually this affects. Not. Not propaganda driven. People from out of state. You know. You know. And all that stuff that's been going on. Which is wrong. It's not only happening in Utah. It's happening all over the country. I am in the camp now. That says the Chinese are pouring a ton of propaganda into stopping. Any growth of power grid or data centers or any kind of compute capacity. I've said that countless times and I'm not going to stop. And so I know exactly who's doing it in Utah. And I already brought that topic up. But that's not what I'm worried about here. I'm worried about the demand note. The Adams demand note. That's what we're calling it now. [00:15:02] Speaker 1: What's your conversations been like with Adam today? Haven't had one yet. [00:15:07] Speaker 2: Because you know why? There's no point in me talking to him until I get what I can do from this. What can I come back with? What is engineering and physically possible, financially possible? What can we come back with and still keep our tenant who's still interested in Utah after all this s***? So, excuse my French. After all this poo-poo. [00:15:31] Speaker 1: Do you think there's legal teeth to a letter like this? I mean, could you just say no and then see what happens? [00:15:39] Speaker 2: That's not how I am. I don't say no to my partner. I considered Adams my partner. And he did. That's why I'm not happy with the 75% haircut. I felt the same way about Cox and about Schultz. So that's how I operate. Shake a head. You make a deal. You've got to deliver. So how do I fix? How do I make this work? But now my partners are the people, the only ones I care about are the box elder people. I want to go to them and say, look, forget about all the propaganda. Here are the facts. Now with this new haircut, whatever it ends up being, here's what we can do. And bring all this economic prosperity and the jobs and the construction jobs and the hundreds of millions of taxes every year. All of it. That's all been agreed to. [00:16:27] Speaker 1: So you think by Wednesday you'll have a counteroffer or at least an idea? [00:16:31] Speaker 2: No, I think what I'll have is what I really need. I don't know if I'll have a counteroffer, but I'll know what's the smallest test kitchen, I'm calling it that, we could make that would keep the whole project intact. Like how small can you, how small can you go? Is it like 500 megawatts, 250 megawatts? Like how, how can you economically do it? Because that's a, that's a, that's like a fraction of what we proposed. Are those hyperscalers? It's effectively the same ratio haircut that Adams is proposing. That's what I'm looking for. What's the haircut ratio on the, on the test, on the tasting kitchen so that everybody can taste what it really, instead of all the BS that's been flying around, see what it really looks like. What we're building is new, new age data center. It actually looks attractive. It's a beautiful building. It employs people. It has, it's, you'd be proud to work there. So if we built a test kitchen of that and they'd come and look at it, I think it would take a lot of the angst out of the whole thing. And that's the only light, the only goodness that came out of this letter. It's forcing engineers right now all around the world to say, okay, how the hell do we work with this? I still can't believe this 75%. Like that's just, you got to have some serious kahunas to do that. [00:17:55] Speaker 1: Do the hyperscalers that you're working with, are they, do you think, willing to cut back 75% or even do just a proof of concept and not something operational? [00:18:04] Speaker 2: Well, I've been talking to them all day. [00:18:07] Speaker 1: They, they get the joke. [00:18:09] Speaker 2: They get the joke. We're working on it. We're talking about what we could do. New ideas on, on reducing water even more, maybe not even using it for cooling, maybe using air cooled. We've got a lot of ideas. It did spark a lot of conversation about technology. I'll tell you that. So we just have to determine who gets the first, let's say it ends up being 250 megawatts, which is the taste kitchen size. That's like eating one piece of popcorn out of the bag. Who gets it? And, you know, when does that get built? And how do we work within? Because we still have to get water permitting and we still have to get EPA. And you have to put in your plans. So, you know, we've got to kind of have a plan of some kind. We have to redo the plan if we're going to, you know, abide by the demand note here. But I, you know, you're, I haven't talked to anybody about this outside of the sphere. You're the first. You came out of nowhere. So, well, thanks for calling us back. You called first. I'm happy to do it. So, you know, this is, this is rolling through the community. It, I know this sounds crazy, but one of the things we talked about, could Utah be the new model for being able to build out data centers and not pissing off the entire population? [00:19:44] Speaker 1: Do you think you could start over? And do that? Maybe. What do you think it would take? [00:19:53] Speaker 2: Building something really small to start. Proof of concept, you're saying. Yeah. Instead of building out, you know, seven and a half gigawatts, which was the proposal we agreed to, we built some fraction of that. Maybe the same ratio on the haircut. I don't know. But then we, then we make it the shining example of how you do it all across the states. Here's how we did it in Utah. Because it's certainly been a storm. [00:20:21] Speaker 1: What does 250 megawatts look like? What, what would that kind of power be used for, you know, like for scaling down? What does that look like? [00:20:30] Speaker 2: Well, they don't even make them that small anymore. That was what happened, you know, four or five years ago. Nobody does that. There's no tenant. We do that today because it's the capital cost is so heavy for such a fraction of what you need. The minimum build now is 1.4 gigs for a one gig of compute power. So you can build that on maybe 1500 to 2000 acres, including the power gen. But we would do a fraction of that here because, I don't know, how do we do this so that we don't know yet. That's why I said we've got to wait till, I think it's going to be something like that. But then it could also be, hey, this is how we did it in Utah. This is how the community engaged in it once we were this transparent and downsized it so much. [00:21:32] Speaker 1: Maybe. But then you still run into the problem of having to scale up later. [00:21:36] Speaker 2: Well, if you build one and everybody's happy with the taste kitchen and you haven't, you haven't destroyed the Great Salt Lake and you're not, and you're actually sending water to it and the heat thing is all BS and they prove it and the noise isn't there and it looks beautiful. I don't think people are going to have a problem scaling it at whatever pace it gets scaled at. That's the whole point. It's all misinformation. I know it's misinformation. I know what the new era data center looks like. It's not like the one that everybody's complaining about were built 20 years ago. Noisy, lots of heat, tons of water. They built them in Virginia. Bob Seltzer was not going to get those. That's it. [00:22:18] Speaker 1: I don't know what else to tell you because I've only had this for eight hours. Well, we'll be happy to talk to you again on Wednesday. [00:22:25] Speaker 2: Yeah, I'll let you know. Yeah, I'm hoping Wednesday, maybe it's going to be Thursday, we'll see, but it's going to be this week. What we'll come back with. And by then I'm going to talk to Adams first. I haven't talked to him since he put this letter out because I'm just, I'm, I'm working on my anger management. [00:22:54] Speaker 1: Well, right now it sounds like you're coping with the field of dreams model. [00:23:00] Speaker 2: Yeah, we'll see. We'll see. We'll see. You know, I actually do believe there's many people, including the ranchers that we bought this land from, that would like to see this project advance. [00:23:15] Speaker 1: Come back out here and talk to folks about it. [00:23:18] Speaker 2: Yeah, I'll do that for sure. But right now I got to deal with the engineers and the turbine guys in Germany and all over the world and everything else trying to figure out what the answer to this, this is. My next stop is Washington, D.C. Ironically, I'm receiving the AI award beside the, I'm probably going to bring this up in my acceptance speech. The guy that was a co-founder, NVIDIA, and I are receiving the award for supporting medicine, education, research. I mean, you know the benefits of AI, democratizing education, providing productivity to every company. I mean, we haven't talked about that at all. All we're talking about is the downside of data centers built 20 years ago. Nobody's thinking about the future. So, ironically, I received that award Wednesday, and I'll probably bring this up. I'll bring up Adam's letter to Washington, D.C. Who's the award from? You know what? I'll send you the whole thing. Do I have your email address? You do, yeah. Okay. I'll send it to you right after the call. All right. You can read about it. It's pretty interesting. I mean, it is ironic, though, don't you think? The timing you're saying is ironic? It's just, it's just, it's just ironic. [00:24:44] Speaker 1: Have you talked to Governor Cox? Has he reached out today after this? [00:24:48] Speaker 2: No, but I've talked to all of them recently. Yeah. I think this initiative, look, I'm guessing. I'm speculating. I think Adams did this on his own. He just took it on himself. [00:24:59] Speaker 1: Do you think because of the election coming up? Because of why? [00:25:08] Speaker 2: Yeah. I think he's reacting to voters' concerns. And I would react to voters' concerns, too. I would like to set them straight about the facts. And maybe that's the silver lining in this crazy letter. I mean, look, this letter, you'd never see a letter with a 75% haircut in real estate. [00:25:32] Speaker 1: Never. But you're familiar with some amount of haircut in the deal-making space. [00:25:37] Speaker 2: 20% is huge. [00:25:39] Speaker 1: Yeah. 75% is the same. Yeah. Is this an opportunity? Is he expecting you to counter-propose? Is that what this is setting up? Or do you think he's serious? I don't know. [00:25:55] Speaker 2: This is why I want to go talk to the engineers first. What can we counter-propose? What can we actually counter-propose? Keep the tenant in place. Keep the hyperscaler happy. And keep Adams happy. And keep the voter happy. And then build out what this micro-kitchen thing is going to be. I actually thought this was a typo when I first read it. The 75% where it's on the letter. I said, oh, it's a 2. 25. This came out of an inkjet printer. It had a little mark on it. And then my first phone call said, no, that's 75%. Because they published this letter out on the wire. I actually had a little throw-up in the back of my throat. I've got to be honest with you. It's outrageous. It's just outrageous. That's why he had to do it on his own. And I'm going to forgive him for it one day, I think. I don't know. I hope so. But you're not leaving. You're not abandoning him. I'm not leaving. I don't leave. That's not my mode of operandi. I don't do that. But I'm a little pissed off, to be honest with you. And for good reason, I think it's justifiable. Well, Kevin, thank you for talking with us. [00:27:08] Speaker 1: It'd be great to talk to you again this week. [00:27:10] Speaker 2: Yeah, no, I'll send you the thing on the award right now. And I'll get Nancy to figure out. We just got to get the engineers on board. We got to figure out what the hell we're doing here. I mean, it's like, you know, we've been designing this thing for months and months and months and months and months and months. And then cut it down by 75%, like, you're seven and a half hours into it right now. Yeah, yeah. [00:27:35] Speaker 1: All right. Take it easy. Thank you. Thanks, Kevin. It's nice meeting you. Yeah, bye-bye.