What are the next catalysts for the nuclear sector?
Firstly, a global nuclear push is being led by the United States, Canada and Japan to focus on using nuclear as a primary source of clean energy. The mass project Clean Energy Ministerial (CEM) involves these countries focusing on full-scale nuclear power for electricity. Proposals to use nuclear are set to be handed to the CEM by the US this winter, so expect a lot more nuclear news to come, and more hype in the sector.
Other countries in the CEM include the UK, Romania, Poland and Argentina, as well as the UAE and Russia. Ahead of the deadline, many countries have already taken huge steps in using or mapping out how to ramp up nuclear. Poland is looking to buy ‘significantly’ more nuclear power from Ukraine, in the face of soaring energy prices. Meanwhile, the US Department of Energy (DoE) is proposing 80 percent of operating and retired coal-fired power plants are switched to nuclear power reactors, which will save 35 percent in capital compared with building new nuclear reactors.
Secondly, the US is fast-tracking its own nuclear initiatives as part of the Inflation Reduction Act, which was signed into law by President Biden on 16th August. It unlocks opportunities for nuclear plants and returns for companies involved in hydrogen, as nuclear power plants will get a suite of tax benefits, including tax credits, by supplying electricity to hydrogen producers. Nuclear energy generators will also get a production tax credit.
As such, Constellation Energy (CEG) could be a company to watch. Constellation is due to start hydrogen production this year, powered by Constellation’s nuclear power plant in New York. It was previously awarded a grant by the US DoE. The thinking is by using nuclear capacity to create clean hydrogen it could increase Constellation Energy’s earnings. According to Morgan Stanley, that could increase Constellation Energy’s earnings by 10 percent. In anticipation of higher earnings and the news of the grant, Constellation Energy’s shares are up over 100 percent year-to-date (YTD) at the time of writing (15th September), making the company the second-best performer in the S&P 500 YTD.
Thirdly, aside from the positive push for nuclear, there are risks to be aware of that could create volatility. The Australian government’s adviser on low emission technology and Australia’s former chief scientist said Australia has no need to include nuclear power in its future energy mix. Meanwhile, the European Union wants to raise $140 billion from capping profits of renewable and nuclear electricity providers, as well as taxing the windfall earnings of oil and gas companies, to help consumers pay energy bills.
Where are the biggest uranium reserves in the world?
Australia has the world’s largest uranium resources. However, Kazakhstan has the highest global uranium production, followed by Namibia, Canada and Uzbekistan, with these top five being responsible for the majority of global uranium production (World Nuclear Organisation). So what is holding Australia back from being the world’s biggest producer of uranium? The Western Australia government has somewhat put the brakes on approving new uranium mining projects. Australia uses no nuclear power and has a heavy reliance on coal, which provides 60 percent of its energy needs. As such, 100 percent of Australia’s uranium production is exported, accounting for a quarter of energy exports.
Most uranium in Australia, comes from the crown uranium jewel, the Olympic Dam, which is the world’s largest known single deposit of uranium. It’s owned by BHP, the world’s biggest mining company.
BHP operates one of the five uranium mines in Australia. Many other mines in the nation were shut for environmental reasons, with Rio Tinto’s partially owned mine shut down in January last year to return the mine to its original state. Meanwhile, Boss Energy bought an idle uranium mine in Australia in 2015 and only recently won development approval for the mine in 2022. Boss Energy drilled its first holes of the planned 86 wells at its Honeymoon uranium project in South Australia in September 2022.
All in all, these issues highlight how hard it is to get a uranium mine up and running, to fill the supply gap for nuclear power.
Companies involved in nuclear power that could benefit from the nuclear push
For more nuclear inspiration, we have put together a list of nuclear power companies with a significant part of their business in nuclear or uranium-related industries; from uranium mining and refining, to nuclear power producers and plant operators, and those involved in energy transmission, as well as those suppling nuclear components and fuel. You can find the list below. **
Alternatively, you can also look at a Uranium ETF, such Uranium ETF (URA).
However, if you are into picking stocks perhaps from your own research or from our inspiration list, remember; a company’s share price performance is generally based on earnings growth, and expectations for future earnings and cashflow growth. If you reflect on the best performers on the NYSE and on the ASX in 2022 as an example, we know fossil fuel and other energy companies rose the most. Also consider amid the higher inflation and interest rate environment, which sectors and companies (stocks) should be able to replicate that, and deliver the most earnings and revenue growth. We think the energy sector will continue to outperform, so when reviewing your portfolio for the quarter, it could be worth exposure to the energy sector.
Also consider using Saxo’s platform to find out more about the companies listed. After searching for a company, in the Product overview screen, you will see the latest news from the company and key company events to watch out for, such as when results will be released. After clicking on Fundamentals you will see revenue, EBITDA or earnings, and net income from previous years, as well as estimates for the current period, with estimates provided by research house FactSet. **
Nuclear Power Theme
|Company ||Code |
|Duke Energy Corp ||DUK|
|Dominion Energy Inc ||D|
|Electricite de France SA ||EDF|
|Exelon Corp ||EXC|
|RWE AG ||RWE|
|CGN Power Co Ltd ||1816|
|Endesa SA ||ELE|
|Cameco Corp ||CCO|
|Korea Electric Power Corp ||KEP|
|Fortum Oyj ||FORTUM|
|NAC Kazatomprom JSC ||KAP|
|Tokyo Electric Power Co Holdings Inc ||9501|
|BWX Technologies Inc ||BWXT|
|NexGen Energy Ltd ||NXE|
|Paladin Energy Ltd ||PDN|
|Uranium Energy Corp ||UEC|
|Denison Mines Corp ||DNN|
|CGN Mining Co Ltd ||1164|
|Energy Fuels Inc/Canada ||UUUU|
|Yellow Cake PLC ||YCA|