In last week’s cover story, we addressed the booming interest in uranium among the investment community. As we noted, much of this growth in capital flowing to uranium-related companies has been driven by a view among investors that climate change and other factors will create significant growth in nuclear power and thus result in increased demand for nuclear fuel. The drive towards clean energy and ESG-related investments is clearly very strong, but we have yet to see this wave of money find its way directly into the nuclear power sector to a significant degree. Even though there are already some initial signs that this may be changing, it remains far too early to tell if nuclear power will truly become the next new darling of the capital markets.
Purchasing shares in utilities that operate nuclear power plants is often one avenue by which investors can express their views. Some large publicly-traded nuclear power operators around the world include the likes of EDF in France, Exelon, Duke, Dominion, and Southern Company in the U.S., CGN Power and CNNP in China, and Kansai Electric and Kyushu Electric in Japan. Having reviewed the recent stock prices for these and other nuclear utilities, it does not appear that any of them have received the same kind of investor attention that uranium mining stocks have. While a few utility share prices are up over the past year, including Duke, Southern, EDF, and CNNP, it is hard to see a direct linkage between ESG-focused investor interest and nuclear utility stock prices. Of course, these utilities also often have large non-nuclear operations, and thus investors in these companies are not expressing a view solely based on their nuclear assets.
However, some impending utility developments could help to shine a light on how investors are judging nuclear power more directly. In France, the government is working on Project Hercules, which envisions separating EDF’s nuclear and hydropower businesses into a new entity. It will be interesting to watch whether investor sentiment changes towards this new version of EDF as the reimagined company will no longer include renewables. A slightly different but similar action is also happening in the U.S. with the country’s largest nuclear operator Exelon, which plans to spin off its nuclear and other generating assets into a new company and only keep its utility businesses within the old structure. This new “SpinCo” will also be publicly-traded, so investors will have an even more explicit way to show their views on a nearly pure-play nuclear generating company.
Other nuclear power-related investment opportunities are also emerging. Small and advanced reactor vendors are gaining attraction in all key markets around the world. While most of these developers are not publicly-traded companies, we cannot rule out an initial public offering (IPO) if they start to gain more steam. However, more immediately, we are seeing signs of several leading advanced reactor developers entering the capital markets. For example, NuScale Power recently announced it has retained Guggenheim Securities to explore financing options to accelerate commercialization of the company’s SMR design. Other vendors, such as X-energy, Oklo, and Ultra Safe Nuclear Corp., are also known to have initiated direct investment efforts over the past year.
Additional investment opportunities in nuclear-related companies could also be on the horizon. One potential larger deal involves Westinghouse Electric Company, whose 100% owner, Brookfield Business Partners, has recently signaled an interest in selling off a minority stake in the company that could possibly be as much as a 49% share. Since Brookfield paid $4.6 billion for Westinghouse in 2018, we will be closely watching the kind of new investor interest that could emerge for a minority stake in the company. Elsewhere, we have also seen a recent uptick in mergers and acquisitions within the nuclear supply chain and engineering services sector, which could indicate that capital flows are beginning to enter this space with an eye towards future growth.
Although investor interest in nuclear power is still somewhat scattershot with mostly smaller pockets of interest for unique opportunities, the ESG push in the West as well as other factors could certainly lead to an expansion of investments in nuclear power in the coming years. Government actions, like the recent shift in the U.S. towards additional support for at-risk nuclear plants and in the EU to include nuclear as part of the clean energy taxonomy, could create opportunities for investors to see even more value in nuclear power.
For a long time, it has felt like nuclear power’s future depends almost entirely on government policies, either those promoting or hindering it. Of course, government actions will always remain critical in shaping nuclear power utilization around the world; however, a real sea change could come about if nuclear power became more central to the discussion over the future of energy markets leading private investors to become more engaged by putting serious capital behind the positive story that continues to build for nuclear power. As we have already seen in the uranium market, momentum investing can do a lot to shift the tides of an industry. If nuclear power were to catch hold of a similar wave of investor interest, it could have much bigger ramifications for the entire industry, including uranium and all other parts of the fuel cycle and beyond.
Jonathan Hinze is President of UxC, LLC. He has been at UxC since 2006, during which time he has helped to expand the company’s products and consulting work in numerous ways. Mr. Hinze has nearly two decades of direct experience in the nuclear industry, and therefore has an extensive wealth of knowledge on the nuclear fuel cycle and reactor markets. One of his main areas of focus over the years has been nuclear reactor developments and global nuclear power forecasting as well as analyzing the future of the nuclear fuel markets and the reactor supply chain. His areas of expertise include an in-depth knowledge of the international nuclear marketplace, nuclear technologies, government policies, nonproliferation, and the strong interplay between all these forces on a domestic and international level. Mr. Hinze received a Bachelor of Arts in East Asian Studies from Haverford College and a Master of Arts in International Trade and Investment Policy from the George Washington University.