U.S. Nuclear Renaissance Should Produce Chain Reaction of Growth


"Uranium miners could soar on recovery of uranium prices."

Now that the $787 billion stimulus package has been signed into law, newly appointed Energy Secretary Steven Chu does not want to waste time doling out about $18.5 billion in funds earmarked as loan guarantees to assist in the construction of America's first new nuclear power plants in more than 30 years.

The loan guarantees will help fund the development of five new reactors, costing an estimated $5 billion to $12 billion each. Presently, the U.S. has more than 100 active reactors producing 20% of the nation's electricity requirement. In addition, the U.S. Nuclear Regulatory Commission expects to receive 34 new applications to build nuclear plants by 2010. After a long hiatus, nuclear power has come back into vogue as a "green" technology, because it produces little or no carbon emissions.

With a renaissance of nuclear power now in the works, where should investors place their bets in what is shaping up to be a multi-year spending spree?

The increased demand for nuclear fuel is likely to push up the price of uranium and, along with it, the companies involved in mining this key energy commodity.

Companies processing uranium into reactor-ready fuel also should benefit from the expected expansion of U.S. nuclear capacity. At present, the only enrichment plant in the U.S. is operated by USEC (NYSE:USU). To meet the expected increase in demand for processed fuel, USEC has filed plans to construct three new processing plants in the U.S., one of which will be operated as a replacement to its aging, high cost existing plant. The new plant will cost about $3.5 billion and is expected to qualify for $2 billion in loan guarantees.

Power producers with existing nuclear facilities also should benefit, as they now are likely to get the green light from government regulators to expand capacity.

Now that the Obama administration is committed to kick-starting America's nuclear resurgence operators, the industry has the potential to realize above-average growth over the next few years.

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