The federal government is giving a $1.5 billion loan to Holtec International to help the private company restart the Palisades nuclear power plant. It will be the first nuclear power plant to restart in the United States, but follows the start-up of two brand-new nuclear power plants by Southern Company earlier in 2024.
Wall Street believes this could be the sign of the rebirth of nuclear power. If so, here are three ways to play that rebirth in October.
1. Constellation Energy is a public play on reopenings
Constellation Energy (CEG) is a large competitive power producer, which means it sells power on the open market instead of being a regulated utility. Its biggest point of differentiation is that it owns or has an interest in 14 in-service nuclear power facilities (which includes 25 actual nuclear power plants), the largest nuclear power assemblage of any public company. That alone makes it an interesting way to play nuclear power.
However, if you are looking at the restart of the plant in Michigan and think that’s an interesting story, well, Constellation Energy just announced it is going to reopen a plant at Three Mile Island. Microsoft is planning on buying all the power under a 20-year purchase agreement.
Constellation estimates it could increase its earnings growth rate by up to three percentage points, taking it from 10% to 13%. That’s huge, and investors quickly pushed the stock higher. But if you want in on the reopening trend, Constellation is the only public option you have right now.
2. Cameco sells uranium, the nuclear fuel of choice
Cameco (CCJ) is a miner from Canada. Its main product is uranium, which is what is used to create the fuel that powers nuclear power plants. That makes it a vital supplier to the nuclear power industry.
If there is a nuclear renaissance taking shape, Cameco will likely benefit as demand for uranium rises. Notably, it has sizable operations in Canada, which is politically and economically stable, making it a more reliable supplier than some other large uranium providers in the world. That could result in Cameco being the supplier of choice in the U.S. market.
There is one important caveat with Cameco that is true of virtually all miners. Cameco sells a commodity, and thus its top- and bottom lines will rise and fall along with the price of uranium. This has been a large problem for uranium miners in past years, as the price plunged to painfully low levels following the nuclear meltdown in Fukushima, Japan.
The price has since recovered, and a nuclear revival would likely be highly supportive of higher prices over the longer term. But investors need to go in with the clear understanding that Cameco’s business has historically been fairly volatile.
3. NuScale Power is looking to the nuclear future
One of the biggest problems with nuclear power is that nuclear power plants have historically been large and time consuming (and expensive) to build. Southern Company’s new nuclear units (Vogtle 3 and 4), for example, were years late and billions over budget.
This is what NuScale Power (SMR) hopes to change. It is working toward the approval of a small modular nuclear reactor design (SMR). The next big milestone in the effort will come in mid-2025.
Read that last statement to mean that NuScale doesn’t yet actually have permission to build its SMRs. But it is making good progress toward that goal; it will simply require more time — and money. This is basically a money-losing nuclear upstart.
Why invest in it? Well, assuming it does get the approvals it needs, building its SMRs will solve some of the biggest problems facing large-scale nuclear adoption. SMRs are built in a factory, reducing costs. Their smaller size increases safety and allows them to be placed in remote locations. And they can be chained together to create a larger power plant.
If NuScale Power ever starts building SMRs, it could be a game-changing technology in the nuclear power sector. This is a high-risk play, of course, but investors who think long term might like the prospects here.
Three ways to play if nuclear power excites you in October
The big draw around nuclear power is that it doesn’t produce the gases that promote global warming. So while the energy source has something of a negative image, it is still clean energy. And it is clean energy that is always available, unlike intermittent power sources like solar and wind.
So if you are watching the news as October gets underway and are intrigued by the restart of shuttered nuclear power plants, three ways to play the nuclear power resurgence are power plant restarter Constellation Energy, nuclear fuel provider Cameco, and nuclear power futurist NuScale Power.
— Rueben Gregg Brewer
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Source: The Motley Fool