Archive for the ‘Investment’ Category

Nuclear Townhall
December 1, 2010
From the Editors

Motley Fool, the unconventional Internet investment advice forum, is starting to worry about its enthusiasm for the Nuclear Renaissance. A few months ago the Fool ran a video celebrating nuclear and touting several utilities that were trying to build reactors.

Now it’s getting the news that these projects aren’t moving very fast.“Earlier this month, Power Engineering magazine ran a piece titled `Tattered Renaissance,’ detailing the molasses-like pace of progress on the new nuclear construction front,” says today’s post on Motley Fool. “This key line from the article really sums up the current quagmire:  `The economic downturn, low prices for natural gas, low forward power prices, steep capital costs and the slow pace of the loan guarantee awards have conspired to moderate the appetite for new nuclear power in many markets.’"

The Fool details the collapse of Constellation’s bid to build a third reactor at Calvert Cliffs and NRG’s financial problems at South Texas. It does have good things to say about the Shaw Group, which has just struck a partnership with Toshiba that duplicates its already fruitful relationship with Westinghouse.

It appears that The Fool’s focus is largely U.S. and utility centric with respect to the outlook for the Renaissance. Obviously the logjam at the Nuclear Regulatory Commission is making progress on nuclear development in this country painfully slow. But nuclear is booming abroad and there’s no reason why U.S. companies can’t participate.

Shaw is one obvious example but the real opportunity seems to be in mining and enrichment. Uranium prices are climbing smartly as China, India and Russia move ahead with dozens of reactors.

Perhaps you’d have to be a Motley Fool to fail to take off the jingoistic blinders.

Read more at the Motley Fool

At least one group of observers seems to think the Nuclear Renaissance has legs – Wall Street investors.
 
“ETFs, Stocks Soaring in Nuclear Power Sector: These ETFs and stocks are powered by the new nuclear revolution,” says InvestorPlace, an online investment advice service. ETFs are “exchange traded funds” put together by various brokerage companies.

“Nuclear is soaring and the sector has the wind at its back,” exudes InvestorPlace. “Energy costs are on the rise, nuclear power demand is going to grow, utility stocks are close to recent highs and the economy is no longer expected to slip back into the red. There are several drivers, and several ETFs and major companies that are set to benefit.”

The site lists three mutual funds that seem to be riding the renaissance wave:

·        PowerShares Global Nuclear ETF (NYSE: PKN)

·        Market Vectors Nuclear Energy (NYSE: NLR)

·        iShares S&P Global Nuclear Energy Index (NASDAQ: NUCL)

In addition, InvestorPlace recommends two companies that will be familiar to people in the nuclear industry:

·        Cameco Corp. (NYSE: CCJ), and

·        USEC Inc. (NYSE: USU)

Both have recently hit 52-week highs. USEC, of course, is currently waiting to hear whether it will receive a federal loan guarantee for construction of a state-of-the-art centrifuge uranium enrichment plant in Ohio.

Just to round out the fuel cycle, InvestorPlace also recommends Global X Uranium ETF (NYSE: URA), an ETF that tracks the Solactive Global Uranium Index.

Critics say Wall Street won’t fund the Nuclear Renaissance, but the stock market seems to be saying something different.

Read more at Investor Place

John E. Burget is a veteran finance manager whose experience goes all the way back to Seabrook. Now president of Burget Capital Strategies in Houston, he has some good ideas on how to go about financing nuclear projects.
 
In a two-part series on Nuclear Energy Insider, Burget says that the two methods now favored most – government loan guarantees or Construction While in Progress (CWIP) – both have their limitations and hazards. Government loan guarantees can only cover a few projects. At the same time, “If US state law and Public Utility Commission regulations permit new project builders to pass capital charges on to ratepayers years before project completion [CWIP], it nearly always creates strong opposition.”
 
Burget recalls his experience as vice president of a highly regarded Wall Street firm involved in the funding of Seabrook. The New Hampshire project was delayed by environmental opposition until the Public Service Company of New Hampshire announced it could no longer proceed without charging construction costs to ratepayers in advance. Popular governor Meldrim Thomson agreed to do it but he was defeated by Hugh Gallen, a relatively unknown businessman who promised to oppose CWIP.

Burget proposed an independent New Hampshire Energy Finance Authority that would have the power to issue tax-exempt bonds to cover finance costs for any private power project. After two years of debate, the proposal almost made it through the state legislature – only to be sunk by Three Mile Island.
 
“To the best of my knowledge this particular legislation has not yet been adopted in any other state,” writes Burget. “However many US public power systems, and other specialized state agencies such as toll road, airport and port authorities that are not tax-supported, have long used revenue bonds for 100% debt financing of large capital projects without Federal or state guarantees.”
 
It’s an interesting proposal worth considering. Part II of Burget’s article, which will review the current regulatory environment, will appear today.

Read more at Nuclear Insider

For years one of the most common arguments of anti-nuclear activists has been that, even if a new reactor is ever licensed, there will be no money to build it. “The utilities can’t afford it. Wall Street won’t invest. Where’s the money going to come from?” they ask.
 
Yet there’s always been one obvious answer – other countries. Sovereign wealth funds around the world are looking for investments and the U.S. offers an attractive market. After all, with respect to nuclear, we are rapidly becoming an underdeveloped country.
So it wasn’t any surprise yesterday to hear that the Japan Bank for International Cooperation is in negotiations with NRG Energy for a possible investment of $4 billion in the South Texas Project.
 
Of course Japan has an interest in South Texas. The two reactors will be Westinghouse AP1000s, owned by Toshiba. “Jordan and other Middle Eastern nations, Turkey, Vietnam, Indonesia and Malaysia will be the growing markets for nuclear plants,” said Tadashi Maeda, head of the bank’s corporate planning department. “In addition, the U.S. is a huge and well-developed market.”  So that’s where we rank internationally, right up with Turkey, Indonesia and Vietnam.
 
Maeda said the loans would be contingent on South Texas getting loan guarantees from the U.S. government – an issue that is still very much in doubt.
 
Japan suffered a severe blow last summer when it lost the bidding for a $20 billion nuclear project in the United Arab Emirates to upstart South Korea. The government has since been taking steps to promote Japanese nuclear companies abroad.
 
“Japan can’t be a big fish in a small pond,” Maeda said. “The country needs to break out of the pond by globalizing and standardizing its technologies.

Read more at Bloomberg News

While the U.S. Nuclear Renaissance continues to move ahead cautiously on an uncertain path, efforts to advance U.S. uranium enrichment technology and capacity are clearly moving ahead.

Yesterday, USEC (the United States Enrichment Corporation) announced a strategic contribution from Babcock & Wilcox, the leading American construction corporation, and Toshiba, which owns the Westinghouse nuclear franchise. The $75 million investment will go toward construction of the American Centrifuge Plant in Piketon, Ohio, the first U.S. enrichment facility to use advanced new centrifuge technology.

The partnership has the overtones of a global effort as well, since the rapid expansion of nuclear energy in Asia will require new enrichment capacity. "As energy needs grow around the world, we are very pleased to expand our role in the nuclear renaissance," said Yasuharu Igarashi, corporate senior vice president of Toshiba, in announcing the investment.

The agreement closes out the first phase of a $200 million investment plan to which the companies agreed last May. The $50 million phase 2 will be contingent on USEC securing a loan guarantee from the U.S. Department of Energy (DOE). The $75 million balance is also contingent on another federal loan guarantee.

American Centrifuge is regarded a key advance in the efficiencies of nuclear power. Critics often argue that although reactors produce no carbon emissions, the enrichment process is hugely energy intensive – and it does take the output of two 1,000-mw coal plants to run the gaseous diffusion enrichment plant in Paducah, Kentucky. The Piketon plant, however, will use 95 percent less electricity.

USEC is aligned with Duke Energy and UniStar in a partnership – the Southern Ohio Clean Energy Park Alliance – to build a nuclear plant at the U.S. Department of Energy’s Piketon complex.

Read more at Market Watch.

Gem*Star reactor design developed by ADNA Corp. Does that ring a bell?  It sure doesn’t. But for Patrick Cox, who writes the “PennySleuth” stock tips for Howe Street Week, it’s one of the many investment opportunities in nuclear power.
 
Investors are beginning to discover small startups in the nuclear and that bodes well for research and growth.
 
The Gem*Star reactor uses a particle accelerator instead of the fuel itself as a neutron source. This means it can burn unenriched uranium or any other fissionable material that isn’t blended to the point where it can sustain criticality. It also means the reaction can be turned off in a moment simply by halting the accelerator.
 
It’s an intriguing idea and worth exploring. The important point is that if enough investors take Cox’s advice, there will be money enough to do it. As Cox concludes: 
 
“Of course, revolutionary new reactor designs like this one are still going to be up against enormous regulatory hurdles. On the other hand, the political climate of late has changed significantly in favor of nuclear power generation.”

Read more at HoweStreet.com