NuScale Power(NYSE: SMR) is looking to mass produce small-scale modular-nuclear reactors. It would be a major step forward for nuclear power to have such a product. But building any nuclear power plant, large or small, is a complex task and highly regulated by the government. NuScale's next big hurdle on the way to the finish line will come in mid-2025.
NuScale Power operates in a difficult industry
The name Chernobyl still conjures up frightening images because of the nuclear plant meltdown that occurred there in 1986, more than three decades ago. Fukushima is a more recent example of the risks of nuclear power thanks to the meltdown that occurred in that Japanese city in 2011. Even Three Mile Island, despite not actually getting to the point of a meltdown, still raises eyebrows even though it happened in 1979.
Image source: Getty Images.
The fear of a nuclear meltdown, and its aftermath, has left the nuclear power industry with huge hurdles to jump as it looks to build new power plants. The most recent large-scale nuclear power plants built in the United States, Units 3 and 4 at U.S. utility giantSouthern's Vogtle nuclear power facility, were billions of dollars over budget and long delayed when they were both finally attached to the grid in early 2024.
To suggest that building a nuclear power plant is hard would be a vast understatement. In fact, dreaming up the technology component could actually be the easiest part of the process. NuScale Power has done that bit. The hard part is getting the idea approved and then building the plant. That's the story background that investors need to understand when looking at NuScale Power and its plans to, effectively, mass produce small-scale modular-nuclear reactors.
NuScale is the only one, but it isn't there yet
NuScale likes to highlight that it has "the only SMR certified by the U.S. Nuclear Regulatory Commission." That's a pretty compelling statement, as it speaks to the progress the company has made in its quest to have a product that it can sell. But there was another important bit of information contained in the company's second-quarter 2024 earnings release: "Standard Design Approval application under review by the U.S. Nuclear Regulatory Commission and remains on track for mid-year 2025 completion, as scheduled."
So, despite having some approvals, NuScale still doesn't have all of the approvals it needs. The next big hurdle won't be here until mid-2025. That means that NuScale still can't actually build the product it wishes to sell, and it won't actually know if it can continue moving forward until the U.S. Nuclear Regulatory Commission makes its decision. It wouldn't be fair to suggest that NuScale is sitting around doing nothing, but it can only do so much with regard to its small-scale modular-nuclear reactors until it has jumped the next hurdle.
The reason this is so important is because NuScale's balance sheet has $130 million in cash on it. But, as its earnings statement highlights, it lost nearly $28 million in Q2. While NuScale has enough money to keep going, and it does actually generate some revenues to support its spending and investment needs, the business can't go on indefinitely. A lot rests on the outcome of the 2025 decision.
A high risk despite solid progress
It wouldn't be fair to suggest that NuScale Power is a bad company; that's simply not true. It has, in fact, achieved a huge amount of success. But it still needs to do more before it can actually build and sell a product. The company and investors will find out if it can keep moving forward over the year or if it needs to go back to the drawing board and make changes when the U.S. Nuclear Regulatory Commission announces its decision. If you are watching NuScale Power, you'll probably want to mark your calendar because a lot rests on a positive outcome from the regulatory review now underway.
Should you invest $1,000 in NuScale Power right now?
Before you buy stock in NuScale Power, consider this:
The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and NuScale Power wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.
Consider when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $710,860!*
Stock Advisor provides investors with an easy-to-follow blueprint for success, including guidance on building a portfolio, regular updates from analysts, and two new stock picks each month. TheStock Advisorservice has more than quadrupled the return of S&P 500 since 2002*.
*Stock Advisor returns as of September 16, 2024
Reuben Gregg Brewer has positions in Southern Company. The Motley Fool recommends NuScale Power. The Motley Fool has a disclosure policy.
