Four Companies That Will Benefit from DOE's Nuclear Power Plant Loan Guarantees

You may have heard that the U.S. Department of Energy is planning to offer $18.5 billion in loan guarantees for the construction of more nuclear power plants. Not only would additional nuclear capacity reduce greenhouse gas emissions, it would also help private energy companies boost their market positions. Federal loan guarantees will reduce the cost of capital and make expanded nuclear power an easier goal to attain.

This is good news for investors too, as four publicly traded companies will share the $18.5 billion raised. The companies include NRG Energy (NRG), Scana (SCG), The Southern Company (SO), and UniStar, a joint venture between France’s EDF and Constellation Energy (CEG). These utility stocks are already fairly inexpensive on a valuation basis, with high dividend yields, so new future growth opportunities will only make them even more attractive.

The growth will help some more than others (Southern, for example, is a huge power player already, so nuclear might not make a large dent in their business), but I believe ventures like these serve to identify the leaders in the energy transformation movement. As a result, investors may want to take a closer look.

Disclosure: Peridot Capital was long shares of Constellation Energy preferred stock at the time of writing, but positions may change at any time

Comments

[Mad Hedge F...:]

Very timely. There is absolutely no way we can deal with our energy crunch without a huge expansion of our nuclear capacity, which sits at a lowly 20% of our power generation. France has already achieved this, getting 85% of its electric power from nuclear, followed by Sweden at 60%, and Belgium at 54%. Unless you’re a nuclear engineer, you are probably unaware that the technology has moved ahead four generations. The first one produced the aging behemoths we now see on coasts and rivers, which used high grade fuel that would melt down if someone forgot to flip a switch. Generations two, three, and four never got off the drawing board. Generation five is not your father’s nuclear power plant, relying on a new form of fuel embedded in graphite tennis balls that is just strong enough to generate electricity, but too weak to risk a disaster. This eliminates the need for four foot thick reinforced concrete containment structures, which accounted for 50% of the old design’s cost. Low grade waste can be stored on site, not shipped to Nevada or France. The permitting process is being shortened from 15 years to four by confining new construction to existing facilities instead of green fields, urged on by a less fearful public and even some CO2 conscious environmentalists. At least 30 new reactors are expected to start construction in the US over the next five years, and over 90 in China. There has got to be an equity play here. The Market Vectors Nuclear Energy ETF (NLR), which has jumped an impressive 78% to $25 since March, is the easiest way in. You can also buy its largest components, like Cameco (CCJ), the world’s largest uranium producer, or Électricté de France (EDF SA) which has the monopoly in France and is developing a major export business.

Jun 19 01:04 PM

[Trane250:]

Before we start building any more nuclear reactors, we must deal with the problem of nuclear waste. Just as new generations of nuclear reactor design will increase efficiency and reduce waste products, new waste reprocessing technologies will recover more fissile materials and reduce the toxicity of the non-recyclables. See below for details.

www.world-nuclear.org/...

Jun 20 08:57 AM

[Ferdinand E...:]

No, I hadn't heard that the DOE will offer these loan guarantees, but if this is true I am in favor. They should offer more than the amount you mentioned.

Does Sweden really get 60% of its energy from nuclear, or is that 60% really 'Capacity', Mad Hedge? I think energy is closer to 45%, or less.

And Trane 250, what you call waste the French call fuel (or potential fuel), but thanks for that link.

Jun 20 09:20 AM

[JET1C:]

I don't believe we will see nuclear power in this country in our lifetime. I live in Washington (not that one - the state) where millions were wasted in the 70' because of the NIMB's and morons, the over engineering and massive record keeping, the lawyers that kept creating lawsuits that finally bankrupt WPPS. I'm sure that some remember that fiasco. This is just a ploy by our members of congress to create the appearance of doing something useful while avoiding actually accomplishing anything. You know, just throw a lot of crap in the air and while we are all running for cover our congress will be dodging the real issues.

Jun 20 10:22 AM

[Old Trader:]

JET1C,

I certainly recall that incident. If memory serves, the project was ultimately supposed to include the building of 4 plants, 1 of which was finished and online, and a second was more than half-finished, when the Three Mile Island "incident" occurred, bringing evrything to a screeching halt. The project had been financed by muni bonds, ironically called "WHOOPS" bonds, which ended up in default.

As MHFT pointed out at the outset of the comments, the technology has advanced by leaps and bounds, and while the NIMBY mindset is still strong, and the eco-nuts are as powerful as ever, I suspect the realities of the energy situation might force the issue, and we'll see a slow revival of nuclear energy in the US.


On Jun 20 10:22 AM JET1C wrote:

> I don't believe we will see nuclear power in this country in our
> lifetime. I live in Washington (not that one - the state) where millions
> were wasted in the 70' because of the NIMB's and morons, the over
> engineering and massive record keeping, the lawyers that kept creating
> lawsuits that finally bankrupt WPPS. I'm sure that some remember
> that fiasco. This is just a ploy by our members of congress to create
> the appearance of doing something useful while avoiding actually
> accomplishing anything. You know, just throw a lot of crap in the
> air and while we are all running for cover our congress will be dodging
> the real issues.

Jun 20 12:23 PM

[jerrydd:]

Mad certainly has the right name ;^D

I'm not against nukes except for the facts that they are way too expensive, take too long to install and nuke fuel is going up fast. They also have the nasty habit like the mentioned companies of costing 50% more than bid!!

Facts are most RE is 1/2 the cost and the fuel is free. Some like river/tidal can be 1/2 the cost of coal even while wind/ST cost the same as coal plants but don't require fuel.

And it's even better if put on ones home, business with paybacks in 3-6 yrs once small wind, solar thermal are in real mass production.

I'm in Fla where they recent priced a new nuke plant at $9k/kw and the are increasing Progress energy's customers bills by 29% way before the plant has even broken ground!!

For $4k/kw I can build, install ST or wind at $2k/kw at a good profit. You can already by good 1kw windgens for $1k.
So just what do you think will get done before the nuke is even finished?
The world changed last July. You all better smarten up or you'll get screwed too. A smart thing to do is call our congressman and have them pass a fossil fuel tax to cover their huge subsidies and give us a tax cut so the real cost is in oil, coal so there is a true free market.

Jun 20 02:05 PM

[Old Trader:]

jerrydd,

I'm not against alternative energy, and have done some research into the type of retrofits you're talking about. One problem with wind, is that it s very "regional". Coastal areas are good, as are the Plains States, the rest of the country...not so much. From what I've read/heard, offshore wind generation shows promise, but its MUCH more expensive than land-based. (I'm talking large scale wind farms for that). Of course folks like PETA will complain about the sea gulls being chopped up by the blades, and the limosine liberals like Kennedy will complain the view from their Martha's Vineyard compounds are being ruined, but hey...no pain, no gain, right?


On Jun 20 02:05 PM jerrydd wrote:

>
> Mad certainly has the right name ;^D
>
> I'm not against nukes except for the facts that they are way too
> expensive, take too long to install and nuke fuel is going up fast.
> They also have the nasty habit like the mentioned companies of costing
> 50% more than bid!!
>
> Facts are most RE is 1/2 the cost and the fuel is free. Some like
> river/tidal can be 1/2 the cost of coal even while wind/ST cost the
> same as coal plants but don't require fuel.
>
> And it's even better if put on ones home, business with paybacks
> in 3-6 yrs once small wind, solar thermal are in real mass production.
>
>
> I'm in Fla where they recent priced a new nuke plant at $9k/kw and
> the are increasing Progress energy's customers bills by 29% way before
> the plant has even broken ground!!
>
> For $4k/kw I can build, install ST or wind at $2k/kw at a good profit.
> You can already by good 1kw windgens for $1k.
> So just what do you think will get done before the nuke is even finished?
>
> The world changed last July. You all better smarten up or you'll
> get screwed too. A smart thing to do is call our congressman and
> have them pass a fossil fuel tax to cover their huge subsidies and
> give us a tax cut so the real cost is in oil, coal so there is a
> true free market.

Jun 20 04:24 PM

[CLH:]

Our energy problem will never be solved except with nuclear. Wind and sun were fine in the 1600s but have no place in a society that will continue to use more and more energy. Can you imagine going to Mars with wind power? Get real folks.

Jun 21 06:29 AM

[RECON605:]

I gather what is being left out in the "CLEAN ENERGY" produced by nuclear power plants are the following:

The cost to rape the land of ores and minerals to extract radioactive ORE and minerals.

The cost of construction of the power plants including pollution from the materials used to built the plants.

The cost for storage AFTER THE FACT of the used up radioactive material.

Shall I go on?

Jun 21 07:33 PM

[jerrydd:]

Old trader said

I'm not against alternative energy, and have done some research into the type of retrofits you're talking about. One problem with wind, is that it s very "regional". Coastal areas are good, as are the Plains States, the rest of the country...not so much. From what I've read/heard, offshore wind generation shows promise, but its MUCH more expensive than land-based. (I'm talking large scale wind farms for that). Of course folks like PETA will complain about the sea gulls being chopped up by the blades, and the limosine liberals like Kennedy will complain the view from their Martha's Vineyard compounds are being ruined, but hey...no pain, no gain, right?

JD Sorry but you are exaggerating wind problems as the facts are home wind, solar thermal and soon PV cost less than grid power. You can run right wing spin but it's costs that will drive future energy production. And grid cots are going up and RE is coming down.
You can now buy a 1kw wind generator for $1k vs a new coal plant which costs $4k/kw. Do the math and include that wind doesn't require ever more costly fuel.
I live in Fla, a low wind area and still home wind is cost effective especially those under Progress Energy who is about to raise rates 29% to pay for a nuke plant 10 yrs from now thanks to our repub gov here allowing that.
By far the best energy is that we don't use by better insulation, windows, higher mileage cars, ect.
I drive an EV and conserve so my costs are very low as everything is electric cooling, heat, EV and my electric bill is between $22-45/month. Sadly my home is not a good RE site as it's under 100% coverage old oak forest. It does cost cooling bills though.
On Nukes they are way too expensive as our recently priced out ones prove.

Jun 23 01:29 PM