by Scott A. Mathews
The meltdown in Japan is potentially a global gamechanger for the nuclear industry that was thought to be entering a renaissance. Nothing signaled the gamechanger effect more than German Chancellor Merkel's move to suspend the entire German nuclear policy.
The problems are principally from the storage containers of spent nuclear rods which are stored on-site at the nuclear facilities in order to save on security and consolidate the location of the waste. This shortsighted cost concern is likely to cost the entire industry, as well as raising the very valid question of how viable nuclear energy is since storage solutions have never been developed that truly eliminate risk or mitigate the accumulation of the extremely toxic waste.
The U.S., which shares the same short-sighted Japanese storage techniques, will likely see this fact highlighted by policymakers in the U.S. All things considered, nuclear companies or major conglomerates with structured, significant investment in the nuclear arena can expect to face very serious headwinds moving forward.
Here are some names that you might expect to see suffering from the fallout of events in Japan:
General Electric (GE)
This blue chip of blue chip firms has built up the strength of its power generation businesses in recent years. So big it will shake the Japan effect, but it is still engaged with the nuclear space in such a way that the stock has trended down since events in Japan started unfolding.
The French behemoth of the nuclear space, look to see Areva taking considerable hits if not going in all-out defensive mode (just take a look at its website to see the PR battle being waged). The stock dropped precipitously from $36 to a low of $28 in the days immediately following events, and now has bounced slightly to $30. The company is engaged at all levels of the nuclear value chain - extraction to production. Given the French government's traditional backing of its star industry leaders, Areva counted amongst them, as well as a major investment in the industry as a French national source of energy, we can expect to see strong pushback (relative to current circumstances) from Sarkozy & Co. This should provide mitigated protection for Areva and other French players in the space, at least from an investor confidence perspective. France is likely the strongest resister to the gamechange effect. However, if catastrophe truly unleashes in Japan, all bets are off.
The German giant has exposure in the space. Unlikely to be happy about Merkel's recent announcement, it is diversified and should bounce back well. Just yesterday it offloaded a good portion of exposure at a 20% discount by selling its stake in a nuclear venture for $1.62 billion to its partner in the venture, Areva.
NRG Energy (NRG)
NRG has a diversified portfolio and has moved to increase nuclear operations as a proportion of its assets in the past few years. It has bounced back strongly from the events of this month, but political headwinds could spell trouble. It has secured financing, in part, due to the previous moves by Obama to reiterate support of nuclear power. However, there isn't too much visibility at this moment on how American politics will assimilate events into its agenda moving forward.
The world's largest uranium miner, Cameco took a sharp hit from events this month, dropping from $37 on the day of the earthquake to bottom at $28 before bouncing along with the rest of the industry. Initial damage seems to be cleared, but headline and political risks still pose considerable threats to the security of CCJ.
EDF (Electricité de France) (EDF)
Producing nearly 63 gigawatts from nuclear sources, EDF is a major nuclear name. That said, it does benefit, perhaps more so than Areva, from the French government's backing (it is an 85% shareholder). All the same, it has taken its lumps from Japanese events and nearly 10% of its share value has been erased since march 11.
One of the five largest European utilities players, RWE is one of the German nuclear operators for whom the provisory policy suspension by the German government will be having an effect. Its stock price has reflected similar losses to its peers since March 11, moving from near $48 on March 11 to nudge just under $43 five days later.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.