Nuclear power has been making big headlines lately. From recent news that Germany will extend the life of its nuclear plants for 12 years past their 2021 scheduled closures, to the prospect of nuke plants in Vietnam and – to the chagrin of the U.S. – in Iran. With these headlines, it’s interesting to ponder the nuclear energy question as it relates to the market.
Should the U.S. take new steps into the nuclear energy arena, the move would be a bonanza for energy stocks. Of course, a renewed nuclear push won’t happen without massive political and public will, at a time when many Americans fear a staggering federal deficit. But the opportunities abroad appear to be growing, so even without a concerted effort to build nuclear power plants in the U.S., some publicly traded companies could make a pretty penny enlisting staff overseas. Costs vary, but a single nuke plant is in the ballpark of about $2 billion – so even a fraction of that business can mean big revenue.
And while there may not be a rush to build now, there is the prospect of buying nuclear energy stocks in the anticipation of a boom in the future. President Obama has made clear his intention to “find ways to safely harness nuclear power,” so one would think nukes aren’t wholly out of the question. The U.S.’s more than 100 nuclear plants have so far proven safe, generating energy at competitive prices as power demands and costs continue to rise.
If the U.S. decides to turn its attention to nuclear power after decades of indecision – and again, there’s no telling if it will – the benefit would not only befall Americans looking for renewable energy sources but a great gain for a number of stocks.
Scarce uranium supplies could help Canada’s Cameco (NYSE: CCJ), a company primarily engaged in exploration and the development, mining, refining and conversion of uranium for sale to nuclear power reactors in Canada and other countries. CCJ which is down -20.60% year-to-date against the Dow, at $25.53 per share.
Another is the United States Enrichment Company, or USEC (NYSE: USU). In the 1990s, the government sold enrichment plants to USEC, which is amid trying to modernize and use centrifuges, cutting the amount of electricity required to enrich uranium by about 95%. USEC had trouble finding U.S. companies willing to heavily invest, but the Bethesda, Md.-based company last week was awarded $75 million from Toshiba and Babcock & Wilcox. Toshiba owns the Pittsburgh-based Westinghouse Nuclear.
The Japanese company will buy $200 million of convertible preferred stock in USEC to help the company raise money in efforts to commercialize a better uranium enrichment technology. At $4.93 per share, the stock has risen about +6% since late August.
In regards to proposed equipment for additional nuclear plants, GE’s (NYSE: GE) nuclear services business could profit from providing the big equipment. The company has had a rough year, though it has stayed mostly in line with the Dow’s figures over the last year, +1.44% against the Dow’s -0.56% and S&P 500’s -1.74%. GE is also partnered with Hitachi (NYSE: HIT), which could see an additional boost as well.
Veteran nuclear engineers and clean-up experts Fluor (NYSE: FLR) and Chicago Bridge & Iron (NYSE: CBI) may also get in on the action with construction work. FLR is $47.90 per share, up +6.43% year-to-date against the Dow and S&P (CBI is up +14.93%).
Then there are the utilities themselves, which would see lower costs in a nuclear move. Existing companies with nuclear power plants would be the next logical operators of any new plants. The biggest include Excelon (NYSE: EXC), down -13.98% year-to-date against the Dow and S&P; Dominion Resources (NYSE: D), up +13.08%; Entergy (NYSE: ETR), down -2% and at about $80 per share.
Again, though nothing is certain, it’s not too far out of the realm of possibility that the U.S. would give nuclear energy a second go. While a few new U.S. nuclear plants may be wild speculation, considering the concessions that will have to come out of a Republican-controlled House (or Senate) should the GOP dominate in the fall, it’s not that crazy of a notion.
And as the saying goes, maybe just crazy enough to actually work for investors.
As of this writing, Burke Speaker did not own a position in any of the stocks named here.
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