Nuclear Dilemma


  • Intro
  • How is Nuclear Energy Generated?
  • Benefits
  • Drawbacks
  • Current State of the Industry
  • Companies to Watch
    • Southern Company
    • Cameco
    • VanEck Uranium+Nuclear Energy ETF
  • Conclusion


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Nuclear power currently provides ~10% of electricity globally and ~20% in the US. It constitutes ~ 50% of the US’s carbon-free energy. Its death toll is lower than other popular energy sources such as coal or hydroelectric. But yet, there is so much negative stigma around it - for reasons we will soon examine - that seem to be undermining its adoption. 

In this write-up, we'll lay out the key principles around nuclear energy, its pros & cons, and some companies in the space to let you form an educated opinion and let you decide whether you’d wish to help fund the industry - cause dis ain't no gambling parlor folks. 

How is Nuclear Energy Generated?

First things first, where does nuclear energy come from?

"X" energy source heats up water turning it into vapor, which moves a turbine whose motion is transformed into electricity using magnets that trigger electrons' motions.

Substitute "X" by hydraulic, coal, natural gas or nuclear. The principle is always the same - The vapor is generated by either burning fossil fuels, or in the case of nuclear energy, nuc fission.

Nuclear fuel energy process


Benefits of Nuclear Energy

 1) It’s carbon-neutral. 

Full disclosure for those ready to fight me: it does release some greenhouse gasses, but only from the ancillary use of fossil fuels during their construction, mining, fuel processing, maintenance, and decommissioning — about as much as solar power does, which is about 4-5% as much as a natural gas-fired power plant.

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2) It’s cheap once the factories are built - The World Nuclear Association claims that capital cost accounts for at least 60% of plants' LCOE, or levelized (lifetime) cost of electricity. This constitutes the total cost to build and operate a power plant over its lifetime divided by the total electricity output dispatched over the plant's lifetime operations. The Biden administration is committing funding to plants in financial distress to avoid their closure and harness the fact they have already incurred the building costs.

3) They have a bigger ‘capacity factor’ than other renewables. Because they run on nuclear fission, once powered, it’s on. Not unlike solar which can’t generate energy at night or eolic which gets lame when the wind doesn't blow.

Drawbacks of Nuclear Energy

1) Entry barriers are high - Plants are expensive to build and they take a long time to get built. If Washington efforts fail to rescue plants about to foreclose, new incumbents in the market are unlikely to arise.

2) Risk of accidents - There have been 3 major accidents with nuclear plants. Below is a summary of the reason and consequent casualties.

In addition, hundreds of thousands of people had to be relocated to avoid exposure to radioactive gasses and water pollution of venicities.

More strict maintenance protocols and labor standards could have avoided the first 2 incidents. Force of nature is unpredictable but west of Europe has materially no risk for earthquakes, nonetheless some European countries like Brussels and Germany had plans to close all their remaining nuclear plants, plans which were jeopardized by Russian invasion of Ukraine. 

3) Tricky disposal of nuclear waste - Due to the waste elemental decay, it needs cooling and containment as otherwise it’ll emit heat and radiation. Its radioactive isotopes are mobile in water, meaning additional measures are needed so their ability to move into the groundwater is reduced. 

In 2008, Company Kurion developed a new method to contain nuclear waste in glass. French group Veolia acquired the company in 2016 for $350MM. Veolia trades in Paris Euronext ($VIE.FP) and as an OTC ADR in NYSE ($VEOEY). 

Finland is building a nuclear waste disposal site deep under the tiny city of Eurajoki - aka a tomb - expected to start operating in 2024, it plans to safely store spent uranium fuel rods for at least 100,000 years.

4) Part of taxpayers money goes to decomposing costs of nuclear waste which could give neighbors of nuclear plants municipalities another reason to oppose.

5) Some argue that money spent on nuclear are dollars not spent on the development of solar/wind.

6) Despite mobilization efforts from the central government, states are lagging behind.

In California for example, the 2 Diablo Canyon reactors, operated by PG&E, would qualify to receive federal government grants but due to local government standing against nuclear energy, they are set to close this year. 

When the San Onofre nuclear power plant closed in Cali in 2012, the electricity generated by it was replaced by gas-fueled operations, which caused a 9-million-ton increase in carbon dioxide emissions in the first year following its shutdown, equivalent to the tailpipe emissions of an additional 2 million cars.

Former closures due to similar issues in Illinois, New York, Ohio, and New Jersey led to a rise in emissions in those regions, poorer air quality, and the loss of thousands of high-paying jobs DOE said.

Current State of the Industry

Last April, the Biden administration pledged $6 billion to save financially strapped nuclear power plants, framing the decision as a part of the administration’s strategy to fight climate change. 

This is because despite general public opposition to nuclear plants, provided they operate safely, they can be effective in offsetting fossil fuel use. 16th Century England regarded coal as devil’s excrement but when adopted, it was key to the country’s industrial revolution. 

Similarly, energy from nuclear fission would radically decarbonize our skies, we already have built plants to produce it and the government is ready to subsidize it. 

Some argue education on the current state of the industry, advancements in waste disposal methods and a rebranding of the industry as “Elemental energy” instead of “Nuclear energy” would not only shed the stigma of “nuclear” and its association with bombs and radioactive fallout, but it would also emphasize the fact that the technology takes advantage of a natural process, just like solar and wind.


Companies to Watch 

Here are 3 companies worth exploring if you want exposure to the industry. They participate in different steps of the value chain and are exposed to various levels of international risk depending on their international presence.

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1) Southern Company


Worth $78 billion, it might be easier to mention which energy sources they don't work with - coal, biomass & geothermal - than which ones they do, not to mention they are fully vertically integrated.

In terms of nuclear power, they operate 3 nuclear generating stations and are currently expanding their capacity, with the only new nuclear power unit under construction in the nation, The Plant Vogtle expansion project.

And the reason they truly caught our eye is due to their partnership with Bill Gates’ Terrapower company to develop next-gen reactors, the so-called molten chloride fast reactor (MCFR) project. 

Bull case

  • Continued government funding for both:
    • General operations: The company can tap into the 1 trillion infrastructure White House bill.
    • MCFR project: The US Department of Energy (DOE) already invested more than $45 million in the new reactor and will receive more than $136 million through DOE's Advanced Reactor Demonstration Program.
  • Value of management - If I tell you the plant will be in Wyoming, can you guess who else is involved? The answer is most likely yes, Warren Buffet through Rocky Mountain Power — a division of PacifiCorp, which is owned by Berkshire Hathaway Energy. They will operate the plant.


Large investors loading up : 

If strong institutional ownership is an indication that large money managers, hedge funds and endowments believe a company is poised for long-term growth, it might be a good signal to load up.


  • Multiple states regulatory risks - given their presence across the country.
  • Consumers favor sourcing from companies with only green initiatives in their portfolios. The company serves approximately 8.7 million electric and gas utility customers.
  • Other industry specifics as higher financing costs as a result of rising interest rates environment and volatile commodity prices.

Key Metrics/ Valuation:  (as of premarket 5/4/22)

  • Current Share price: $73.61
  • Wall St price target: $73.94
  • Market cap: $77.73B
  • 2021 Revenues: $23.11B
  • EV/NTM Sales: 5.7x
  • EV/NTM EBITDA: 13.14x
  • Wall St 12 Analysts valuation breakdown:



The company just increased its dividend yield to 3.58%. They go ex-dividend May 13th, $SO you still have time to catch it ;)

2) Cameco 


Cameco has the second-largest uranium production capacity of any producer, behind Kazatomprom, which is HQ in Kazakhstan where mineral resources belong to the state, meaning the state has the right to nationalize private property.

Cameco also has operations in Kazakhstan, but 79% of the asset-level NAV is derived from operations in Canada.  

Geographical exposure details:

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Despite ample capacity, Cameco’s share of global production has declined in recent years (5% in 2020) due to its decision to suspend production at McArthur River in 2018 (~13% of global supply), and a number of its smaller operations in 2016 (US ISR + Rabbit Lake) as a response to sustained low prices. 

Cameco’s uranium segment is supported by its fuel services segment which involves the refining, conversion, and fabrication of uranium concentrate. 

Bull case

  • Higher demand: +43% by 2035. Drivers: Government efforts to achieve carbon-neutral / reduction targets.
  • It's the only large-cap pure-play uranium producer listed in North America.


  • Demand outpacing supply:
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  • Market prices: $45/lb prices of uranium would support the restart of McArthur River in 2024 and a material recovery in gross margins, from a mere 6% in 2020 to over 40% by 2025.
  • Competitive advantage: 79% of NAV operations are based in Canada, the company has no material political risk compared to other more unstable geopolitical companies. State-owned enterprises represent ~80% of current uranium supply. 
  • New contracts.
  • Potential M&A activity.


  • Lower uranium market prices in the long run and higher in the short run:
    • In the SR: Cameco is currently purchasing uranium on the spot market to supply its contracts, given they stopped production in some facilities.
    • In the LR: Utilities are locking future contracts with higher exposure to variable prices than in the past.
  • Canadian tax authorities case: Cameco currently has $785 million set aside in restricted cash and letters of credit in relation to a long-running dispute with the Canada Revenue Agency (CRA).
  • Operational risk - The high quality uranium of Cameco is extracted from water-bearing ground which must be frozen prior to mining to prevent water inflows into the mine. In 2003, a water inflow at McArthur River resulted in a three-month suspension of production.

Key Metrics/ Valuation: (as of premarket 5/4/22)

  • Current Share price: $25.75
  • Wall St price target: $36.43
  • Market cap: $10.27B
  • 2021 Revenues: $1.17B
  • EV/NTM Sales: 7.2x
  • EV/NTM EBITDA: 27.1x
  • Wall St 12 analysts valuation breakdown:



Cameco traded at an average of 23x EV/EBITDA during the last bull market run (2004-2007), with peak EV/EBITDA multiples of >40x. If demand for nuclear energy continues to rise, demand for uranium will increase and so will its price. It will take 9 months for Cameco to resume operations in its temporarily closed facilities. Resuming commercialization of its own uranium would enable Cameco to grow top line and its margins.

3) VanEck Uranium+Nuclear Energy ETF

For a combined exposure of uranium and nuclear energy, this ETF provides diversification across:

  • Sectors - utilities, materials, financials & more.
  • Geographies : 49.8% Canada, 13.2% Australia, 9.8% South Korea, 6.4% Japan, 5.8% Kazakhastan, 5.4% US and more.
  • Companies:


Green energy has the green light from governments worldwide but Nuclear… not so much. It operates on a scale of grays that goes beyond its characteristic power plants’ color. Some factors that will determine the future of the industry include government funding, political agenda, the public’s general opinion, and advancements in alternative zero-emission energy sources including batteries and other storage technologies efficiencies, availability of input materials, and ultimately the price competitiveness of each energy source. An intricate matrix of factors that hopefully didn't give you a headache. And if so, give us a call, we might be able to turn that into a new type of energy!


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