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NuScale Stock: Time For Small Module Nuclear Reactors? (NYSE:SMR)


ITER Fusion Reactor. Tokamak. Thermonuclear Experimental power plant.

Filipp Borshch/iStock via Getty Images

NuScale Power (NYSE:SMR) is attempting to bring a decades-long desire to make small modular reactors a reality. The idea sounds great: Design one small, scalable, cost-efficient nuclear reactor – and then build many of them to achieve economies of scale and help solve the massive challenge of global warming. Engineers have been working for decades for such a solution and NuScale appears to have the best chance of breaking through. I say that, because, in 2020, SMR became the first and only company to have an SMR design receive “standard design approval” from the US Nuclear Regulatory Commission (“NRC”). But is that enough for NuScale to actually achieve widespread adoption of SMRs and does it pose and attractive investment opportunity? Let’s take a closer look.

Investment Thesis

Having a small, cost-efficient, scalable, reliable, and safe module reactor design would be great. Such an SMR could be used to satisfy relatively small-scale demand and also be scaled up to solve large-scale demand – both relatively quickly and in an economical way. In an era of seemingly runaway global warming, an affordable zero-carbon source of electrical power is obviously very desirable. Repeated production of a single design SMR should bring economies-of-scale throughout the supply chain and keep costs affordable.

NuScale's SMR

NuScale

Source: June Presentation

And that’s just what NuScale has in mind when it designed its NuScale Power Module (“NPM”). Each NPM is capable of generating 77 megawatts of electricity (“MWE”) and can serve as a reliable, carbon-free source of baseload electrical power generation that can serve as backup for renewable wind, solar and hydropower generation. In addition, the business plan is to enable multi-NPM configurations to satisfy larger utility baseload use-cases and, by growing volume, eventually achieve economies-of-scale:

  • NuScale’s 12-module (VOYGR™-12″) power plant is capable of generating 924 MWe
  • NuScale also offers four and six-module power plant configurations, the VOYGR-4 and VOYGR-6, which deliver 308 MWe and 462 MWe, respectively.

The Corporation

In May, NuScale Power completed its merger with Spring Valley Acquisition Corp Transaction and reaped ~$380 million in gross proceeds. Those proceeds included $235 million from financial and strategic investors via public equity (“PIPE”) investors, including:

  • DS Private Equity
  • Nucor (NUE)
  • SailingStone Capital Partners
  • Samsung C&T Corporation
  • Segra Capital Management
  • And participation by Spring Valley’s sponsor which is backed by Pearl Energy Investment Management

The money raised exceeded the $200 million NuScale estimated it needed to keep going through 2024.

Fluor (FLR), which has been working with NuScale since at least 2013, will continue to hold a majority interest in the company (~60%) and provides NuScale with engineering services, project management, administrative and supply chain support.

Anchor Project

NuScale’s anchor project is with Utah Associated Municipal Power Systems (“UAMPS”). The association has nearly four dozen members across the states of Utah, California, Idaho, Nevada, New Mexico, and Wyoming. The first power plant is to be built at the Department of Energy’s Idaho National Laboratory.

Business Activities

Meantime, NuScale is busy engaging and developing relationships in 10 countries, which in addition to the U.S. include Poland, Romania, Japan, and Korea.

Recent technological achievements through June of this year include:

NuScale Technology Achievements

NuScale

Source: June Presentation

My sense is that many of NuScale’s potential utility customers are waiting for – what I consider to be the “proof-of-concept” plant – to be built in Idaho.

Valuation

After a big jump in the stock price in July, NuScale currently has a $3.3 billion market cap (and a 13.7% short position):

Chart
SMR data by YCharts

I saw no specific news for the jump in NuScale’s stock price. However, the entire clean energy space leaped higher in July based on speculation the Schumer/Manchin bill could actually pass through the Senate. The bill has lots of clean-energy related investment and, apparently, the thought is that SMR will be a beneficiary

In June, NuScale gave a financial update re-affirming guidance for (only) $16 million in FY22 revenue. For the three-month period ending March 31, 2022, the company reported:

  • Total available capital was $383.7 million.
  • Revenue of $2.4 million and a net loss of $(23.4) million compared to revenue of $0.7 million and a net loss of $(22.7) million for the same period in 2021.
  • Research and development expenses of $24.4 million compared to $18.8 million for the same period in 2021.

Clearly the company is burning cash. However, even if the cash burn grew to, say, $30 million per quarter, the available…



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