Nuclear Energy: Radiant Revival

Those declared dead live longer. Eleven years ago, after the reactor accident in Fukushima, the beginning of the end seemed to have come for nuclear energy, but it is now celebrating a renaissance. New nuclear power plants are planned around the world. In China alone, 13 new reactors are currently under construction. France announces the construction of up to 14 new ones. Even in Germany, people are thinking about extending the lifetime of nuclear power plants.

According to the International Atomic Energy Agency IAEA, around 30 countries want to get involved. “Our new forecasts show that nuclear energy will play an indispensable role in low-carbon energy production in the future,” says IAEA Director General Rafael Grossi. Even many environmentalists are in favor of nuclear energy because it produces no CO2 emissions and can help achieve climate goals.

Two recent events have given nuclear power a boost: the new EU taxonomy regulation and the war in Ukraine. The EU Commission wants to classify nuclear energy as a “green” energy source from 2023. These include energies that make a significant contribution to mitigating and adapting to climate change. The Commission’s main argument for including nuclear power in the taxonomy is that it contributes to a stable base load supply that helps smooth out the fluctuations in renewable energy.

This classification is an incentive for more private investments and investor money to flow into nuclear power in the future. Eco-funds are allowed to buy shares in nuclear power plant operators, service companies or uranium mines. Moreover, the war in Ukraine has strengthened pro-nuclear forces as Europe seeks to reduce dependence on Russian gas.

Gates and Buffett sense business

Bill Gates and Warren Buffett also believe in the future of nuclear power. In 2021 they therefore founded the companies TerraPower and GE Hitachi Nuclear Energy. These are designed to produce Small Modular Reactors that are prefabricated in factories and assembled on site. The two star investors want to set up hundreds of these mini reactors by 2026 at the earliest. Due to series production, these should be cheaper than normal nuclear power plants and also far safer. Since they generate less energy, a meltdown is significantly less likely. In addition, there is less nuclear waste, which also emits less.

It is unclear whether the idea of ​​the two Americans will prevail. Since enriched uranium is used, there is a risk that something will be siphoned off. This would make it possible to build an atomic bomb. In addition, many mini reactors would have to be installed in order to achieve the performance of a large nuclear reactor. That would be difficult to get across to the general public.

It doesn’t matter whether the mini-power plants prevail on a large scale or only in moderation, one thing is clear: the swan song to nuclear power was premature. The comeback means that companies from this sector will earn well in the future and that share prices will therefore also have upward potential. For ten years after Fukushima, they knew only one direction – down. Even big players in the industry lost 80 percent or more in value.

Since mid-2021, the trend has reversed and stocks are bullish. For example, shares in Canadian Cameco, one of the largest global uranium mine operators, have doubled since July 2021. But companies are still a long way from their highs seen in the last uranium boom in 2006-08.

Uranium price has doubled

The price of uranium has also risen sharply. Within a year it doubled. Since the nuclear power plant operators have concluded long-term supply contracts at fixed prices, there have only been few purchases on the stock exchange so far. From 2025, however, many of these contracts will expire. Then around 75 percent of the uranium needed to generate energy will no longer be contractually secured. The current global reactors use 170 million pounds of uranium annually. Mine production still covers part of this demand, but since 2015 the supply gap has widened. “The supply gap is currently 50 million pounds,” says Christian Schärer, uranium expert at Liechtenstein asset manager Incrementum.

The deficit will continue to grow in the coming years. It could also get bigger in the short term, since around eight percent of global uranium comes from Russia. Should it be sanctioned, it will not be on the world market. The cheap Russian uranium can be replaced by that from other countries, but at a much higher cost.

That should push up the uranium price. Large uranium producers benefit from this, and their profits then increase. Investors can take advantage of this and buy such titles. These stocks are very volatile and only suitable for very risk-averse investors who can tolerate high fluctuations. In order to spread the risks over several titles, it is advisable to invest in a fund or a certificate. The purchase of a blue chip such as Cameco can also be considered with a small share. There are no products on the uranium price itself.

Investor info

The Canadian operator of several large uranium mines is the industry leader. After several quarters of losses, the company delivered modest earnings per share in the fourth quarter of 2021. The company benefits greatly from the increased uranium price because it produces at high costs. Therefore, some mines that were closed due to unprofitability were restarted. The stock is very volatile.

With the endless uranium mining certificate, investors can acquire the 15 largest uranium mining companies in the world in a package. The best known are Cameco, NAK Kazatomprom (Kazakhstan), Paladin Energy (Australia) and Uranium Energy (USA). There is a currency risk. The composition is checked every six months after capitalisation. Net dividends are reinvested.

The BO-Index Grüne Zukunft, developed by the editors, contains stocks of companies that are benefiting from the shift away from Russian imports and the energy transition. Investors invest in a certificate that replicates the index one-to-one. It contains 16 equally weighted stocks. The shares are brought back to the original weighting semi-annually. Information at: https://boerse-online-invest.de/gruene-zukunft

Notice of Conflicts of Interest:
The price of the financial instruments is derived from an index as an underlying. Börsenmedien AG, the sole shareholder of Finanz Verlag GmbH, developed this index and holds the rights to it. With the issuer of the securities shown, Alphabeta Access Products Ltd. and Morgan Stanley & Co. International plc, Börsenmedien AG has concluded a cooperation agreement under which it grants the issuer a license to use the index. In this respect, Börsenmedien AG receives remuneration from Morgan Stanley & Co. International plc.

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