How To Play The Nuclear Energy Renaissance

How To Play The Nuclear Energy Renaissance

To meet the greater electricity demand, nuclear plants are being built and more are planned. The need for a clean source of energy is essential for countries that plan to abide by the Kyoto Protocol. In the United States, 11 power companies have filed license applications that could result in 15 nuclear plants being built. In the rest of the developed world, countries plan to have more of its electricity generated from nuclear power plants. Over the next 15 years, China plans to build 40 nuclear power plants. To profit from this trend towards nuclear energy, here are some ideas:

The Uranium Producers: With all the nuclear power plants being built and more expected to come online, the long term prospects for uranium remains bright barring any major nuclear accidents. Furthermore, the supplies from recycled nuclear weapons and government stockpiles are being drawn down, adding to the bullish scenario. A direct way to get exposure to this sector is to invest in uranium producers.

For maximum leverage on this play, the investor wants to look at producers that are not hedging their production and/or is only a couple of years away from actual production. The corresponding percentage price movement of these stocks tends to be greater than that of the commodity itself. The investor also wants to see if the producer’s mines are located in politically stable environments. The countries with the world’s largest uranium reserves are Australia, Kazakhstan, Canada, the United States and South Africa. Other factors that the investor needs to look into include: management and their operating history, the amount of working capital available and their exploration and development program.