Jefferies: ‘Are we near the rebirth of new nukes?’
Investing.com — The momentum behind new nuclear technologies is growing rapidly, according to Jefferies analysts following their annual nuclear supply chain conference.
Investor excitement is at an all-time high, with “tens of billions in equity value” now attributed to small modular reactor (SMR) companies, a significant leap from “single digits this time a year ago.”
The firm said three key factors are driving this renewed interest: Department of Energy (DOE) support, commercial backing, and licensing progress.
Jefferies explained that the DOE has provided loan guarantees to promising ventures like X-Energy and TerraPower, bolstering confidence.
Commercial partnerships, including X-Energy’s collaborations with Dow and Amazon (NASDAQ:AMZN), are also said to be pivotal, while licensing remains a hurdle, with NuScale being the only company so far to secure construction approval from the Nuclear Regulatory Commission (NRC).
Scale is critical for success, Jefferies notes, as it helps de-risk technology and lower costs for future customers.
“X-Energy is the most advanced at this point with two commercial orders,” they highlighted.
However, the cost structure is seen as a remaining challenge. Inflation, high labor costs, and elevated interest rates pose headwinds, according to Jefferies.
While Inflation Reduction Act incentives like upfront investment tax credits (ITCs) of 30-50% could help, Jefferies says few companies disclose their levelized cost of energy (LCOE), which is likely higher than alternatives like natural gas, wind, or solar.
TThe firm anticipates that non-utility entities, rather than risk-averse utilities, will lead the charge in deploying these technologies. Meanwhile, constraints in the nuclear fuel supply chain and uncertainties about uranium enrichment and processing are said to remain issues for both large and small reactors.
Looking ahead, Jefferies expects significant developments, including nuclear-powered data center announcements by early 2025, with companies like Talen Energy and Vistra presenting compelling investment opportunities in this evolving landscape.
