NuScale Power (SMR 5.97%) is burning cash right now. That's not surprising given it is a start-up operating a capital-intensive manufacturing business. However, the next year could be an important turning point for the company, and in five years, if everything goes well, it could be a profitable company with a deep pipeline of future business.
Here's what you need to know about NuScale Power today and where it could be in five years.
What does NuScale Power do?
NuScale has big plans, but not much of a business at this juncture. That's because what it is trying to do represents a drastic change to the current operating environment in the utility sector. Right now, nuclear power plants are large, site-built assets that cost massive amounts of money to erect. If the company gets its wish, the future will be filled with small modular nuclear reactors (SMRs).
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It already has approval for its SMR, though it is looking forward to getting approval later in 2025 for a unit that can produce slightly more power.
There are a host of benefits offered by SMRs. For starters, they are built in a factory setting, which helps to reduce costs and improves speed to market.
Second, they are smaller than traditional nuclear power plants, which means they can be placed closer to population centers or even directly next to wherever the power is needed (a data center, for example).
And third, the small size combined with the most modern technology should make SMRs safer than older nuclear power plants. And SMRs can be chained together to produce a larger facility, so they can even compete with traditional nuclear power plant technology.
There are a lot of reasons to like NuScale Power's business. But there's one huge reason to be worried about this upstart nuclear power company. It has SMR technology ready to go, but it doesn't have any customers yet.
This could be the big turning point
That last statement isn't exactly true. It has a potential customer lined up in RoPower, a Romanian power company. The agreement that's awaiting final approval is for six of NuScale Power's reactors, which will be linked together to form one large nuclear power plant. This is a material capital investment, and RoPower is in the final decision-making process, with a go/no go expected by the middle of 2026.
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The company is already gearing up for approval, having ordered the reactor parts that have the longest lead times. This way, it can hit the ground running if it gets the green light.
If NuScale gets this order, it will likely make it easier to get additional orders. That said, it still takes a long time to build SMRs, so RoPower's plant probably won't be fully operational until 2030 or so. That's roughly five years, and it will be the real test of NuScale's business and technology.
The company isn't sitting around and waiting for that test to play out, however. It has orders for long lead-time parts that will allow it to build six more SMRs. In other words, once it gets its first customer, it could be ready to start serving its second and third customers fairly quickly. So, in five years, the company could not only have its first reactors operating, but it could also have a backlog of additional business.
In a year, NuScale's future will be clearer
That said, the five-year outlook depends heavily on what happens over the next year or so. It has to get the first customer on the books before its SMR technology has any chance of going mainstream. But if it does ink the deal with RoPower, NuScale could be on its way to a very positive future over the next five to 10 years.
Given that the company is still in the start-up phase, it is only appropriate for more aggressive investors. However, if you believe nuclear power will play a big part in the world's energy future, it is worth keeping a close eye on NuScale Power. Perhaps you might even want to dip your toes in with a starter position.
