NuScale Power (SMR 0.97%) is not an investment for the faint of heart. Indeed, it is losing money today and will probably continue to do so for at least another few years. But if you can handle a little risk, this nuclear power start-up is extremely attractive.
Here are three of the primary reasons why more aggressive investors might not want to wait until some future tomorrow to jump aboard NuScale Power.
1. NuScale Power could be in the sweet spot for nuclear power
Building a traditional nuclear power plant is complex, time-consuming, and very expensive. The last two plants to come online in the U.S., Vogtle 3 and 4 in Georgia, were a huge drag on Southern Company's business while they were being built.
The biggest problem, however, was that the plants took longer to build than expected and cost more than planned. These were not small issues, with the plants nearly a decade behind schedule and costing about twice as much to build as projected.
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NuScale's business model is different. It plans to build small, modular nuclear power reactors in a factory. There are a number of benefits to this approach.
The factory environment allows for better control of the construction process. It will also allow for efficiencies, since building techniques will be standardized and equipment will be used to build more than one nuclear reactor. A standardized supply chain should also make access to key parts easier. Construction times should also compress materially, allowing NuScale to supply customers quickly and cost effectively.
In addition, NuScale has designed its plants with the ability to link them together. This means multiple small modules could be chained to create one large power plant to provide electricity to the grid. Or a single small nuclear reactor could be placed next to a data center to supply just that data center.
There is a huge amount of optionality when it comes to NuScale's proposed offering. And because they are smaller and built on the learnings from history, small modular nuclear reactors have enhanced safety protocols that should make them relatively low risk.
All in, NuScale Power's fundamental story is very attractive.
2. NuScale isn't trying to reinvest the wheel
One subtle difference between NuScale and some of its peers is that NuScale's technology isn't really new. It is built off of currently available technology. Some companies in the small modular reactor space are trying to generate electricity from fuels that simply don't exist, so they lack a reliable supply chain. This newer technology may be amazing when it comes out, but it is nowhere near ready for prime time.
Don't underestimate the importance of this. NuScale Power's goal is to deliver its first small-scale modular nuclear reactor by the end of the decade. While that's still four years or so away, newer technology could be a decade or longer away. And scale production could be further out still, given that entire supply chains would have to be created from scratch.
NYSE: SMR
Key Data Points
You can argue that NuScale Power's product is just iterative. That's true in some ways. But the use of existing technology to improve the nuclear power options available to the world could literally change the dynamics in the nuclear power industry. That's especially true if the safety of small-scale nuclear reactors lives up to expectations, given the massive headline risk posed by nuclear meltdowns at large nuclear power plants.
3. NuScale Power is on the cusp of getting the green light
There are other companies trying to do the exact same thing NuScale Power is doing: taking existing technology and scaling it down. However, NuScale Power says it is "the first and only small modular reactor technology to receive NRC design approval and certification." No other company has submitted for similar approval, and getting approval is a years-long process. Simply put, NuScale has a huge head start that could leave it with an important first-mover advantage.
But the massive event that investors should monitor in 2025 is the final approval for a nuclear power plant in Romania, which is expected to occur in the fourth quarter. If this project gets approved, it will be the first commercial customer for NuScale Power, stringing together six of its small modular nuclear reactors to create a larger power plant. So not only is NuScale Power theoretically ahead of its peers, it could effectively start commercial operations by the end of the year.
Notably, it is already starting to build key components in preparation for the approval of the Romanian nuclear power plant. Thus, it will hit the ground running if it does get the green light.
NuScale is not a good investment for everyone
Most investors probably shouldn't buy NuScale Power. It is a small start-up that is losing money.
However, if you don't mind taking on some risk, the dominos appear to be lining up nicely for NuScale Power. It has attractive technology at a time when more power is increasingly in demand. What it is offering is new, but based on technology that is well known and understood. And it has a head start on all the competition that is looking to do the same thing.
If you believe that being the first mover is important, then NuScale Power might be the kind of stock you want to load up on now, as it nears an important business inflection point.
