Reliable electricity is a key feature of developed markets. As countries develop, building the infrastructure to create and distribute power is a vital step. And that's why energy is still a growth market: Of the seven billion people on the planet there are still two billion who don't have access to reliable power.
Cameco (NYSE:CCJ) is the largest publicly traded uranium miner. It provides the fuel for nuclear reactors around the world. Today there are around 430 nuclear plants in operation, but by 2021 the company expects there to be 521 -- a 21% increase. That includes the construction of 143 plants and the closure of 43.
But that doesn't give full justice to the potential demand. As CFO Grant Isaac recently noted at a conference, Cameco has chosen to show total reactors, not gigawatts of capacity. That's an issue because "...you could have two small reactor shutdown, one large reactor open and it looks like on a net basis you're down reactors, but on the gigawatt basis you may in fact be even if not up."
At the end of the day, however, Cameco expects uranium demand to increase about 30% in less than ten years. That's a huge opportunity, and it isn't unique to nuclear, coal, natural gas, and renewable will see demand increase as well.
Power to the people
While you could buy a company like Cameco or coal-giant Peabody Energy (OTC:BTUU.Q), it might make sense to look for less commodity focused ways to benefit. For example, AES (NYSE:AES) is a U.S. listed utility with only about 20% of its business tied to the United States. The rest of its business is in places like South America, Europe, Africa, and Asia. Although not every market it's in is set to see energy demand growth, it is well positioned in key growth regions.
And AES has been refocusing its business around markets in which it either has scale or the opportunity to grow. For example, the Philippines and India are core markets in Asia. While the U.S. market is mature, those two countries have real growth potential. If you don't want to deal with the volatility of commodity prices, AES is an interesting alternative.
So, too, is Suez (OTC:ENGI.Y). Although the company is based out of France, it owns assets around the world, including in Latin America, North America, Europe, the Middle East, Africa, and Asia. For example, at mid-year 2013 the company highlighted that of the 7.1 GW of capacity it had under construction, 75% was in what it describes as fast growing markets. That includes such far off locals as Saudi Arabia, Brazil, and Peru. It's also got projects in the works in places like China and South Africa.
Suez is a far more diverse company than AES, dipping its toes into everything from liquified natural gas to electric plants. But that just puts it in better position to benefit from overall energy demand. AES is focused on electricity generation, which has its own benefits if you are more conservative.
E.ON (OTC:EONG.Y) is another foreign utility to watch. Although most of its business comes from Europe, it has positions in Russia, Brazil, and Turkey. That said, about 70% of the company's European nuclear capacity is in Germany. That's not a good thing since the country decided to stop using nuclear power following Japan's Fukushima disaster. Still, it's a well run company expanding into new markets and building its renewable footprint.
Big growth ahead
According to Cameco's Isaac, "From 1980 to 2010 [electricity demand] tripled and from 2010 to 2035 electricity demand is expected to double again." That growth won't come from developed markets, but that doesn't mean you can't invest in it. Globally diversified AES is probably the best option for U.S. investors, but it's worth taking a look at foreign players like E.ON and Suez, too. That said, if you don't mind the volatility, uranium miner Cameco should benefit as well.
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