Throwing In the Towel on Nuclear

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When the Fukashima Dai-Ichi nuclear plant started its slow meltdown a little over a month ago, it took a while for the investment community to figure out exactly what it meant for the future of nuclear power. Nuclear-related stocks have been pummeled on fears that the industry has reached its half-life, but we haven't really known what the real future of nuclear power would be.

But last week's news that NRG (NYSE: NRG  ) was writing off its investment in a nuclear plant development may tell you everything you need to know about where nuclear power is headed. The South Texas Nuclear Development Project (STP 3&4), which was suspended last month, is leading NRG to take a $481 million pre-tax hit in the first quarter to write-off assets related to the development.

The potential development isn't the only one in the U.S., with the Watts Bar Nuclear Plant's Unit 2 set to come online next year. But NRG's writedown may tell us everything we need to know about the future of nuclear for companies in the sector, like General Electric (NYSE: GE  ) , Toshiba, and Siemens (NYSE: SI  ) . Siemens is at the very least uneasy about its nuclear ambitions, and it might be fighting for a smaller pie even if it decides to stay in the game.

I have to agree with fellow Fool David Lee Smith that opportunities are arising in nuclear if you stick with uranium suppliers. New plants may be in question, but the nuclear plants that are already operating aren't going to be shutting down any time soon. Exelon (NYSE: EXC  ) , Cameco (NYSE: CCJ  ) , Uranium Energy (NYSE: UEC  ) , and Uranerz Energy (NYSE: URZ  ) will have demand for their services for years to come. Demand may not be as strong as they hoped, but unlike the builders of nuclear plants, their entire business hasn't come into question yet.

Interested in reading more about nuclear stocks? Add your favorite stock to My Watchlist.

Fool contributor Travis Hoium does not have a position in any company mentioned. You can follow Travis on Twitter at @FlushDrawFool, check out his personal stock holdings or follow his CAPS picks at TMFFlushDraw.

Exelon is a Motley Fool Inside Value recommendation. Motley Fool Options has recommended a covered strangle position on Exelon. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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  • Report this Comment On April 26, 2011, at 12:56 PM, JohnSJR wrote:

    I'm sorry to say but Mr. Travis Hoium article was not very well thought out. The fact is that the United States is starving for energy - any energy - and nuclear power is one of the most available. That said, we have a president who isn't very bright when it comes to energy. He doesn't like nuclear, he won't allow drilling in the Gulf and ANWAR where we know there is a lot of oil and he doesn't like tar sands. He doesn't like coal so what does he like? His choices are solar - but that's very expensive and wind power. Both need huge subsidies.

    On the other side of that coin we have an energy source that is safe [there has been only one other accident, Chernobyl, that caused a loss of life yet all of the environmental whackos are leaping in to try to destroy this source. Why? I believe they, like Obama, want to see this country become a third world country. We already do not manufacture anything but rather export our jobs overseas - mostly to China. Our dollar continues to decline in value and now both the Australian and Canadian dollar are worth more.

    There are currently about 440 nuclear plants in the world. Another 50-60 are now under construction. Only in the west have we seen this panic - China and India and Brazil and Russia will continue to plan ahead and build nuclear plants. If anyone has noticed, those are the nations that are growing. America is in a long decline and has been since the mid 60's with the growth of the environmental movement which has stopped logging, stopped mining and embraced "diversity".

    As for nuclear energy, 1 lb. of uranium pent-oxide has the same amount of BTU's in i than 80 barrels of crude. A barrel of crude is now selling for over $112. A pound of uranium pent-oxide is selling for about $50 on contract or around $57.50 on the spot market. Do the math. Do you want to spend $8,960 for the same amount of energy that $50 will produce? All in the name of political correctness? Are YOU willing to pay that electric bill? Are you willing to pay $6-$8 for a gallon of gas because President Obama won't allow drilling? I'm not

  • Report this Comment On April 28, 2011, at 10:21 AM, pvsheridan wrote:

    So, Mr. Hoium, the finance types at NRG (i.e. banker-types) "throw in the towel" and that makes for what? All we need to know.

    Your implied but unstated notion, and that of many trendy cattle-stampeded types, that placing back-up systems in known danger areas (i.e. previous tsunami land reach/height levels) somehow equates to a history of reasoned/disciplined decision making, and should also be relied for future decision making, is how we got 'here' in the first place: People having input that are not qualified to do so.

    In a word, management at Fukashima blew it, and we're all going to pay a high price for their abject incompetence, if in no other way than tolerating the trendy cattle stampedes.

    By way of example, who/whom kept the cost of the back-up systems at Fukashima minimal? Ah yes, the finance types.

    The events at Fukashima have nothing to do with the overall safety of "going nuclear," but everything to do with managerial expediency/incompetence. 'Funny that-that issue, so far, is avoided by the cattle stampeding mass media; i.e. that run by, ah yes, management types.

    Why it takes a horrific catastrophe such as Fukashima to get management to ensure system integrity is thee issue, not nuclear or anything else per se. It is in that context that the actions of NRG should be analyzed; an issue that is sadly lacking from your article.

    Just so we're clear; those Fukashima facilities performed extremely well at the earthquake level of accident analysis. The back-up systems? Probably criminal charges should be sought.

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