Exiting the exit: How investors are benefiting from the comeback of nuclear power

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by Walter Böhm, Euro on Sunday

EIt is extremely important to let the three German nuclear power plants that are still in operation run for longer.” With this statement, Thierry Breton, EU Internal Affairs Commissioner, urged the federal government in an interview at the beginning of July to at least phase out nuclear energy The reason is clear: Russia is threatening to cut off its oil and gas supplies to Europe, which would likely mean a medium-sized disaster for industry and consumers.

The three nuclear power plants Emsland, Neckarwestheim 2 and Isar 2 are currently still in operation. It is actually planned to finally take the nuclear power plants off the grid at the end of the year. According to the statistical federal state, these supplied six percent of all electricity in Germany in the first quarter. Natural gas accounted for 13 percent. If the three nuclear power plants continued to run, around half of the gas that has been used to generate electricity so far could be used in industry and to heat buildings.

No wonder that even in Germany, which is critical of nuclear power, the call for an extension of the service life is getting louder. In the meantime, the FDP is already demanding that the government discuss whether the three nuclear power plants should continue to operate. CSU boss Markus Söder has been asking for this for a long time. The Greens in particular are still opposing. But just a few months ago it would have been unthinkable that the eco-party would agree to an extension of the lifespan of coal-fired power plants.

For the industry, it is secondary what the federal government decides. Nuclear power has been playing music in other countries for years, in Europe for example in France. The neighboring country has been relying on radiant energy generation for decades. There, more than 50 reactors currently produce around 70 percent of the electricity required. And more nuclear power plants are planned.

Low CO2 emissions

The French have a very different view of nuclear technology than the Germans. Here, nuclear power is considered an environmentally friendly source of energy because its use emits few greenhouse gases into the air. In fact, according to the Intergovernmental Panel on Climate Change, emissions from nuclear power plants amount to twelve grams of carbon dioxide equivalent (CO2) per kilowatt hour (kWh). This means that the nuclear power plants perform a bit better than offshore wind turbines and are significantly better than solar parks. And coal-fired power plants emit more than 60 times as much as reactors.

With its assessment, France has also asserted itself in Brussels. As part of its taxonomy, i.e. its assessment, the EU classifies not only gas but also nuclear power plants as green transitional technologies. This means that green funds can also invest in companies from the nuclear power sector.

France is by no means alone in its sympathy in Europe. Eastern European countries such as Poland, Hungary and the Czech Republic in particular are considering building new reactors. In addition to the supposed climate friendliness, which can certainly be argued about, independence in power generation plays a decisive role here.

Russia supplies around eight percent of the uranium produced worldwide. But if the supply ceases to exist due to sanctions from the West or a supply freeze by the Russians themselves, this could be compensated for far better than with oil or gas.

Asia relies heavily on nuclear power

Nuclear power plants are also extremely popular in Asia. This may not necessarily apply to the population there, but certainly applies to the relevant governments. In the Far East, but also worldwide, the demand for electricity is increasing. Many countries also rely on nuclear power in their energy mix.

China alone is planning 35 more plants. 13 of these are already under construction. For comparison: Last year, a total of 436 reactors were running in 33 countries worldwide. Russia also relies heavily on nuclear energy and, according to the World Nuclear Association, wants to build 27 reactors in the coming years. Moscow would rather sell its oil and gas than use it itself. India also has ambitious plans with the planned construction of twelve new nuclear power plants. In Europe, France in particular stands out with 14 new plants in the pipeline, and technical progress is also helping.

The industry has been announcing the development of smaller reactors for years. They should be cheaper to build than conventional systems. Series production is planned, which will enable economies of scale. In the case of large kilns, on the other hand, the construction costs regularly get completely out of hand. In addition, the smaller plants should get by with less enriched uranium, which also results in less waste and a core meltdown like that in Fukushima is less likely. Among others, the two US billionaires Warren Buffett and Bill Gates in the development of these next-generation nuclear power plants.

Uranium price corrected

Either way, it is foreseeable that nuclear power will celebrate a comeback worldwide eleven years after the meltdown in Fukushima. After years of stagnation, the price of uranium jumped again in the middle of last year, but has recently corrected significantly downwards. Looking ahead, the war in Ukraine and the associated uncertain energy supply situation should support the uranium price.

In addition, a number of the usually fixed supply contracts between uranium producers and customers will expire in the next few years. Then the increasing supply shortage should make itself felt in the prices for the metal. However, the shares of the mining companies are not a sure-fire success. The prices of Cameco, Denison Mines and Paladin are extremely volatile and have come under considerable pressure again since the spring.

It is therefore advisable for interested investors who are not afraid of contact with the nuclear power sector to diversify their investments. So you should also consider companies that build, for example, nuclear power plants or provide specific services for them. This is the case, for example, with Vinci from France. There are also raw material promoters who also mine uranium, but where the metal does not play the main role – for example at Harmony Gold. Finally, there are diversified investments such as ETFs or certificates.

INVESTOR INFO

The Canadian group is by far the largest producer of uranium in the western world. Cameco operates several mines in politically stable countries like Canada. However, due to extensive costs, the company needs a comparatively high uranium price to be in the black. That was the case in the first quarter. Cameco earned $0.10 per share. A year earlier, lousy had accrued. The stock is a typical turnaround bet.

At the beginning of the year, the Swiss bank launched a strategy certificate on its nuclear power index. This includes the 25 uranium and nuclear power companies with the highest market capitalization. This primarily includes developers and operators of uranium deposits. Issue surcharge and index fee are moderate at 0.5 and 1.25 percent. The certificate has lost almost ten percent in value since it was issued in early 2022.

Investors who are afraid of contact with uranium and want to focus on the topic of energy from an ecological point of view can opt for a certificate on the BO Index Green Future. It consists of 16 companies from the fields of hydrogen, solar and wind energy, green suppliers as well as infrastructure and energy efficiency. In the future, these companies should benefit from the fact that Europe is making itself less dependent on Russian energy.

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