The paper company suddenly worth $20 billion.

Today’s Links

On the surface, Oklo, Inc. has a compelling vision for the future of energy. It seeks to produce small, safe nuclear reactors with an innovative, sodium cooled design that eliminates meltdown risk, although dealing with sodium, a volatile metal, can be tricky. The basic technology is a proven one, with one small experimental reactor in the US that operated for decades. The French had a harder time with their reactor, while Russia has used the technology the most widely and India is currently constructing a reactor using this basic technology. The company also intends to standardize components for lowering cost and mass producing its reactor units - all a key selling point for the coming generation of small modular reactors (SMRs) that are meant to succeed the pricey behemoths of the past. The company got its start about ten years ago. It’s CEO holds a PhD in nuclear engineering from MIT and had OpenAI’s Sam Altman as an early investor back in 2015 and as Chairman of the Board until just a few months ago. Altman stepped down purportedly due to potential conflicts of interest as Oklo is signing all kinds of deals to deliver power to AI data centers in the future, and OpenAI could be a future customer of the company. This all sounds amazing - and the company has been rewarded a nearly USD 20 billion market capitalization. What’s not to like?

One problem is that while the company hopes to have its first reactor constructed and operation by the end of this decade, and has announced that construction is about to begin, there is no working prototype or even partial prototype that demonstrates the technology and only two of the four regulatory steps for their design have been passed. Also, remember that the S means in SMRs means “small” - Oklo’s 75 MWh reactor, once available at a USD 50 per MWh would see annual revenue of USD 32.5 million. Given the capital intensive process of getting the technology up and running, you would need hundreds of these reactors in place to justify even a fraction of the current market cap.

The final concern is the fuel that is meant to drive Oklo’s “Aurora” reactor. That fuels is something pretty specific called HALEU - a highly enriched uranium that is more enriched than what is used in standard nuclear reactors, but less enriched than nuclear-weapons grade stuff. The company has secured some small scale HALEU commitments for getting off the ground, but uncertainties surrounding the future supplies of this fuel at scale are a significant limiting factor for Oklo and many others, if not a show-stopper. No HALEU, no operating SMRs, in many cases. Can Oklo deliver? I have no idea - but it is priced to deliver an awful lot already. Some food for thought. It feels like this company is over-selling itself for now by announcing deals it will take many years to deliver on, assuming it is able to get its reactor design approved and the built and then ramped up into the hundreds - with the assumption that the currently non-existent mass production of HALEU also ramps up in parallel. Of course, it certainly helps to have the government helping clear the way with efforts like the deal just signed by the US and UK to promote nuclear technology. Let’s see how this shapes up in the months and years to come.

Questions and comments, please!