Nuclear energy takes on a new glow

Nuclear energy is undergoing a renaissance as a cheap and clean way to meet growing energy demands.

The movement is underway globally with some interesting developments in Ontario and other provinces that involve TC Energy (TSX: TRP) and GE Vernova (NYSE: GEV) the recent General Electric spinoff. GE Vernova focuses on clean energy technology.

The new nuclear isn’t the one we remember, with giant reactors and existential fears about  meltdowns such as at the earthquake-induced accident at the Fukushima plant in Japan in 2011 or  Chernobyl in the Ukraine 40 years ago. Those facilities would cost billions to build in today’s dollars and none have been built on that scale for 50 years precisely because of safety concerns.

Nuclear’s new attraction is that demand for clean power is growing. One catalyst is artificial intelligence, which requires data centres with powerful computers to crunch the information. Another is a desire to move away from fossil fuels.

What is under development are small reactors the size of two soccer fields rather than hundreds of acres. They generate between 5 and 300MW of energy versus 1,000 for the larger reactors. The parts can be manufactured elsewhere and assembled on site which means they can be built quickly and efficiently.

These reactors are called small modular reactors, or SMRs and versions of them have reliably powered America’s nuclear-powered submarines since the 1950s without incident. 

Google’s parent Alphabet, Amazon.com and Meta Platforms, Facebook’s parent are all showing interest in SMRs and investing in their development. At least four provinces are also interested: New Brunswick, Saskatchewan and Alberta, as well as Ontario.

Amazon is building several small reactors in Washington state. Google made a deal with a California-based developer to support their development and construction of small reactors. Meta has issued a request for proposals from nuclear developers to secure up to 4 gigawatts (GW) of new nuclear generation. Microsoft founder Bill Gates has personally invested US $1 billion in a nuclear power plant under construction in Wyoming using mini-reactors.  

In Ontario, TC Energy has a 48% stake in Bruce Power, one of the largest nuclear facilities in the world and the first privately-owned facility in Canada. It provides about 30% of Ontario’s electricity. TC Energy is upgrading Bruce to extend its life but also exploring SMRs as a future energy source. It is working with Cenovus Energy (TSX:CVE) and Alberta Innovates, an Alberta crown corporation to see whether SMRs can be used in oil sands extraction.

GE Vernova is working with provincially-owned Ontario Power Generation to build a small modular reactor as part of an expansion of the Darlington nuclear facility in Bowmanville, Ont. OPG is working with Sask Power on SMR’s designed by GE Hitachi. GE Hitachi is a joint venture between the two companies formed to provide nuclear services.

In another development, Brookfield Renewable Partners (TSX:BEP) formed a joint venture with Cameco Corp. (TSX: CCO; NYSE: CCJ) to purchase Westinghouse Electric. That partnership is leveraging Cameco’s uranium mining expertise with Westinghouse’s nuclear services. Cameco owns 49% of the venture and Brookfield 51% creating one of the world’s largest nuclear services businesses.

These developments present a long-term investment opportunity. One route is via uranium miners and related companies providing technical services. Cameco, with $3.1 billion in annual revenues, is one of the world’s largest uranium producers, with mines in Canada and abroad. Its shares are more than 300% higher over the last 5 years. In the last 12 months they are down 14%, falling with uranium prices which dropped by a third in 2024. It has also absorbed the cost of the Westinghouse acquisition. In March, the Trump administration imposed a 10% tariff on Canadian uranium imports.  

US-based BWX Technologies (NYSE:BWXT) with annual revenues of US $2.7 billion provides  nuclear components and services. Its shares have doubled in the past 5 years and are up 11% in the past 12 months.

Among ETF opportunities is the Global X Uranium ETF (NYSE arca:HURA)  which combines uranium miners with supply and service companies. The fund has US $2.65 billion in assets and while it is down 31% in the past 12 months, it is up 25% over the last 5 years. It yields a high 6.6% paid semi-annually and has a management expense ratio of 0.69%. Its holdings include Kazatomprom, the world’s largest uranium miner based in Kazakhstan. It also holds BWX, Cameco, Denison Mines and NexGen Energy Ltd. The latter two are small Canadian companies.

The Sprott Uranium Miners ETF (NYSE arca: URNM) also invests in a global basket  of uranium miners  and developers. It has $1.2 billion in assets and is down 39% in the past 12 months, but up 229.42% over five years. It has a management expenses ratio of 0.75% and a dividend yield of 3.68%. Its top holdings are similar to GlobalX.

Demand for uranium is projected to grow in the medium term with estimates suggesting an increase of around 50% from current levels by 2040. In the short run, tariffs and geopolitical uncertainty are putting pressure on the stocks.

For now, they represent an opportunity for aggressive investors who are patient and want exposure to the trend and are willing to absorb the ups and down of commodity prices.  

This article appeared in a recent issue of the Internet Wealth Builder.  For information on how to reprint this article please view this page.