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Atomic Energy: Nuclear power M&A surges to record levels

Long stigmatized by accidents at Chernobyl and Fukushima, nuclear power has shaken its pariah status and is now back in vogue.

Dealmaking has followed. Mergers and acquisitions targeting North America’s nuclear power industry has surged in the last three years, reaching a peak of 17 deals totaling USD 11.1bn in 2022, according to Mergermarket data. This year is on track to surpass that record, with 15 deals worth USD 9.7bn so far.

The increase comes after a subdued seven years between 2014 and 2020, a time when nuclear had fallen out of favor due to Fukushima’s 2011 meltdown and because fracking had made natural gas cheap for electricity generation.

Chain reactions

Several interlocking tailwinds have driven the latest surge.

Nuclear power’s holocaustal reputation is no more. It is far safer than misconceptions over Chernobyl, Fukushima and Three Mile Island led people to believe. Even a cofounder of environmental group Greenpeace speaks in its favor. Governments now want to continue operating nuclear power stations because their technology is proven and safe, and they produce large baseloads of power that are extremely expensive and difficult to replace, said Robert Warnement, an attorney at law firm Skadden. Moves have been made to bring back or extend the operating life of decommissioned plants, such as Diablo Canyon in California and Palisades in Michigan.

The push to combat climate change by reducing carbon-dioxide emissions is another tailwind. Nuclear power emits no carbon, making it clean for the environment. To reach net-zero carbon emissions by 2050 will require existing nuclear power plants to continue operating and new ones to be built, since renewables like solar or wind can’t manage it alone, say proponents.

The US government agrees and is providing incentives. Under the Inflation Reduction Act (IRA), passed into law in August 2022, those building nuclear plants qualify for tax credits: NuScale Power [NYSE:SMR], a designer of small modular reactors (SMRs), says those credits cut the cost of its smaller units by half if they are built on an old coal-fired power plant and are made with US components.

Atomic annuity

The shrinking number of companies that have the expertise to service existing nuclear power plants – commercial reactors in the US replace a third of their fuel every 18 months – are highly attractive to investors because they provide an “annuity-type” return, said Warnement.


Westinghouse Electric, a nuclear services company, sold to uranium producer Cameco [NYSE:CCJ] and Brookfield Renewable [NYSE:BEP] for a record USD 7.9bn last October for that reason. About 85% of Westinghouse’s revenue comes from long-term contracts or highly recurring services.

There have also been consolidation plays, as utilities either strengthen or exit positions: In March, Vistra [NYSE:VST] agreed a USD 6.8bn deal for Energy
Harbor, creating the second largest competitive nuclear fleet in the US. 

New nukes

Then there are increasing numbers of deals for newer technologies. X Energy's USD 1.66bn blank check merger, announced last December, underscored investor interest in small modular reactor companies (SMRs).

NuScale was the first to have an SMR design approved in the US  and is working on a six-module plant in Idaho expected to become operational in 2030. If NuScale mostly meets its targets in the next year or two, that could spark greater investor interest in some of the other advanced SMR reactor technologies, said Warnement.

Other SMR competitors include BWX Technologies, Radiant Nuclear and TerraPower, while several larger, established companies – like Holtec, GE-Hitachi and Westinghouse – are also developing the technology in-house.

More aspirational technologies have also attracted investor interest. Commonwealth Fusion's USD 1.8bn funding round in December 2021 underlines the growing interest in fusion power, which replicates the way energy is produced in the Sun by merging nuclei together. The idea of fusion has long existed but remains a moonshot project. Still, they have accounted for one in six nuclear deals since the start of 2021, with companies such as Zap Energy, TAE Technologies and General Fusion also attracting big funding rounds.