The U.S. Government is Supercharging the Nuclear Energy Resurgence With $17.5 Billion in Loans. Here's What it Means for Utility Stocks.
The Department of Energy announced a splashy new program to encourage build-outs of nuclear power generation assets in this country.
By Eric Volkman
The U.S. nuclear industry just received an injection of nuclear fuel from the federal government. On Tuesday, the Department of Energy (DoE) announced it was providing loans to help finance five nuclear projects in the country. While the announcement was short on details, it was unquestionably a boon for both the nuclear industry and the broader utilities space. Let’s dig in.
A new push from the Feds
The DoE’s press release stated that the program centers on one particular company and reactor — Westinghouse and its AP1000. Westinghouse is a joint venture between nuclear fuel specialist Cameco (CCJ 2.07%) and Brookfield Renewable Partners (BEP 0.34%).
This stands to reason, as the DoE pointed out that the AP1000 is the sole large-scale advanced commercial reactor licensed for use and currently operating in the country.
The specific goal is to shorten the manufacturing and delivery times for the many sophisticated, specialized components used to build reactors. At the moment, there’s a global bottleneck in the supply chain for such goods; the DoE’s initiative aims to help resolve it with cold, hard government cash.
Under the program, Westinghouse is to partner with up to five utilities and/or energy companies to effect this. Each of the five loans will support two reactors at a project site. Westinghouse will act as something of a coordinator for the project, procuring the needed goods at fixed prices.
Once completed, the projects will be jointly owned by Westinghouse and its partner. Both entities in each undertaking are required to fully commit $500 million in project equity apiece.
Westinghouse has apparently already selected its partners, as the DoE said the company signed letters of intent with seven of them (with up to five, again, ultimately being approved by the Department). Neither it nor the government has identified any of these companies, so we don’t yet have a fix on who they might be.
We can, however, make some educated guesses on who might be up for a bit of work on the program, and who might end up operating the new reactors.
Stocks going nuclear
The company that leaps immediately to my mind is Cameco, as it’s already deeply involved with Westinghouse, owning a 49% stake in the company. Even if it didn’t own a single dollar of its equity, Cameco is a major uranium miner and key supplier of the fuel, which will be needed to power those 10 planned reactors.
Another prime candidate is GE Vernova, which has done well in the current nuclear boom — a cornerstone of the government’s energy policy, by the way — in an era when the heavy energy resource needs of artificial intelligence (AI) technology require build-outs of large, reliable power solutions. This company has been doing brisk business in steam turbines and generators for the nuclear industry, and as a go-to manufacturer, it’s nearly a lock to be chosen for the initiative.
Southern (SO +0.92%) is also a juicy candidate, as it operates the only two AP1000s currently producing energy in this country. Given that experience, plus the fact that it holds an operational blueprint for this highly complex reactor, it could theoretically construct and implement a new build relatively quickly.
Dominion Energy (D +1.18%) and Constellation Energy (CEG 0.91%) are two major energy producers in the U.S., and to me, they look like fine candidates to operate reactors. The former operates in the Washington, D.C., area “data center alley,” so-called because the region has the highest concentration of hyperscale data centers on this planet.
As for Constellation, simply by virtue of the fact that it currently operates the largest nuclear fleet in America, it should be top of the candidate list for the project’s reactors. It’s also got plenty of large-scale clients, as it recently inked a long-term energy supply deal to feed a key Walmart (WMT 0.33%) warehouse in Illinois.
The boat-lifting tide keeps rising
All in all, though, this deal is unquestionably beneficial for the nuclear industry and the energy and utility companies that have embraced nuclear assets. They are the backbone of this determined, top-down push into this classic but still next-generation form of energy generation, and I don’t think that momentum will slow even when, and if, the political winds shift in this country.