By Avi Salzman
Companies that own nuclear reactors have been the biggest beneficiaries of rising demand for nuclear power for most of this year. That includes Constellation Energy and Vistra, whose stocks have more than doubled this year.
Now, a new group of nuclear stocks is beginning to rise -- companies that are designing, building, and fueling new kinds of reactors. That includes NuScale Power, Oklo, BWX Technologies, and Centrus Energy, and their ascent may just be getting under way.
On Monday, Alphabet's Google announced that it had made a deal with privately held Kairos Power, a California-based developer of nuclear reactors, to support the development and construction of several reactors. Financial terms weren't released but Kairos expects to get the first reactor up and running by 2030, and potentially build several more by 2035.
Google is part of a growing trend of tech companies buying power from nuclear plants to satisfy their escalating need for electricity for data centers that power artificial intelligence applications. Microsoft contracted with Constellation Energy to buy power from a reactor at Three Mile Island, and Amazon.com bought a data center site in Pennsylvania attached to a nuclear plant owned by Talen Energy.
Neither of those reactors are technically "new." The Three Mile Island plant operated until 2019, when it shut down for economic reasons. Google's deal, by comparison, would result in the construction of totally new reactors. Oracle Chairman Larry Ellison has also said that his company is planning to power its data centers with multiple small reactors.
Michael Underhill, chief investment officer of Capital Innovations, has been researching and investing in nuclear stocks for years and thinks the Google announcement is a strong signal.
"This is the next industrial renaissance. Artificial intelligence will not happen without nuclear power," Underhill said. He thinks the trend is just in "the first inning."
Kairos is one of a handful of companies that are developing new kinds of small modular nuclear reactors, or SMRs, that they say can be built more quickly and efficiently. Their reactors are smaller than the 94 reactors producing power today. Existing reactors usually have the capacity to produce about 1,000 megawatts (1 gigawatt) of power, or enough to power more than 500,000 homes. So-called small modular reactors are less than 300 megawatts; Kairos' reactors are designed to be 75 megawatts. In total, Google plans to buy up to 500 megawatts worth.
They're called "modular" because they're designed to be built by factories in pieces that are shipped to the construction site. They also tend to operate differently. Some use uranium that is processed differently than the uranium used in the light-water reactors that dominate the industry today. Kairos uses a ceramic "pebble-type" fuel and a molten salt cooling system, which the company says allows the reactor to operate at lower pressure than traditional reactors.
Kairos has a construction permit to build a test reactor in Tennessee, but will need more permits to construct commercial reactors for Google. Terrapower, a small modular reactor company founded by Bill Gates, also uses molten salt as an energy storage system in its reactor design. Terrapower recently started construction work around a potential reactor in Wyoming.
In an interview, Kairos CEO Mike Laufer said that the Kairos reactors operate at higher heat and lower pressure than existing reactors, making them safer and more cost-effective. "We don't have the same big, heavy components that a lot of other nuclear technologies require," he said.
Only three SMRs exist in the world today, and none are in the U.S. But there could be dozens by the 2030s. Congress even passed a law this year meant to speed up approval of new SMRs and make permitting less costly.
It's not easy to invest directly in the trend. Kairos and Terrapower are privately held, as is X-energy -- another leading SMR developer that has received federal funding and has a development deal with Dow, the chemical company.
Some other SMR developers are publicly traded. Oklo, whose chairman is OpenAI CEO Sam Altman, completed a SPAC merger earlier this year. Since going public, the stock has been volatile, but has recently ridden the wave of enthusiasm for nuclear power higher, rising 20% in the past week. It's still seeking approval for its nuclear design.
Another player is Nuscale, based in Portland, Ore. Nuscale is the only SMR developer to have received approval for its design from the Nuclear Regulatory Commission, but it has also faced obstacles. Its plan to build a reactor in Idaho was terminated last year after it couldn't sign up enough power-buyers, causing shares to crash. But recent announcements about SMR developments have caused the stock to quadruple this year, lifting it back above the levels where it traded before the Idaho project was shelved.
Other nuclear companies, including Westinghouse and nuclear equipment provider BWX Technologies, have also designed SMRs. Westinghouse is owned by Brookfield Asset Management and uranium miner Cameco. Virginia-based BWX is publicly traded and has signed deals with joint venture GE Hitachi Nuclear Energy. GE Vernova, General Electric's publicly traded energy spinoff, is working on deploying SMRs in Canada.
Another way to play the trend is through uranium. Important uranium miners include North American leader Cameco and smaller players NexGen Energy and Uranium Energy. Investors can also buy uranium enrichment company Centrus Energy. Uranium has to be enriched to be useful in reactors. Having domestic uranium enrichment capabilities is particularly important, because Russia dominates the market and Congress passed a law this year to stop buying Russian uranium. Centrus is already selling a particular kind of uranium, known as High-assay low-enriched uranium, or HALEU, that many of the SMR developers use.
Underhill owns Oklo stock. He also suggests looking at industrial companies based in Asia, including Mitsubishi Heavy Industries and Doosan, that are suppliers to nuclear reactors.
Small nuclear reactors are the hot new thing in energy. They have a long way to go before they're pumping power into the electric grid. But if they do, there are likely to be several winners.
This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.
(END) Dow Jones Newswires
October 15, 2024 18:58 ET (22:58 GMT)
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