Are investors in this nuclear power stock missing the fact that NuScale is running out of cash?
Shares of NuScale Power (SMR 3.79%) inched 2% higher through noon ET after a weekend of positive news got investors excited about nuclear energy stocks again.
As NuScale never ceases to remind investors, it’s “the first and only [small modular reactor company] to have its design certified by the U.S. Nuclear Regulatory Commission,” and thus a logical stock for investors in nuclear technologies to gravitate toward.
What do China and Bill Gates have in common?
Bad news first. A new report from the Washington, D.C.-based Information Technology & Innovation Foundation says massive subsidies from China’s government have given that country a “10 to 15 year” lead over the U.S. in deploying advanced fourth-generation nuclear power plants.
China has 55 reactors in service and is building 27 more. (The U.S. has one.) China’s also building them faster, with plans to add 150 new plants by 2035 — making its nuclear power industry about twice the size of America’s.
The good news is that while state-sponsored nuclear power is winning in China, private industry is stepping up in the U.S. On Sunday, billionaire Bill Gates told CBS he will invest billions of dollars into next-generation nuclear power company TerraPower, which wants to build a $10 billion sodium-cooled reactor in Wyoming, with an integrated molten salt energy storage system. Gates also promised efficiencies of scale, saying once TerraPower has 10 plants built, costs will fall and electricity rates will stabilize.
Is NuScale Power stock a buy?
Now here’s the other bad news: NuScale Power has nothing to do with Gates’ TerraPower. While both companies develop novel ways to use nuclear power, TerraPower’s novelty lies in how cools its reactors and stores its power; NuScale just makes smaller plants, but still uses water to cool them.
While it’s possible that generalized enthusiasm for nuclear power will benefit NuScale, the chances of it benefiting from Gates’ billions seems slim. Meanwhile, NuScale has $132 million in the bank, is burning $175 million a year, and is on course to run out of cash in less than a year.
Rich Smith has no position in any of the stocks mentioned. The Motley Fool recommends NuScale Power. The Motley Fool has a disclosure policy.
