Cameco, Nuclear Names Soar After US Government Invests $80BN In Nuclear Reactors

Back in May, immediately after Trump issued his “nuclear” order (a day which was the unofficial start of Trump’s new Industrial Policy, and which the president described as a “huge day for the nuclear industry”), we wrote “Trump’s “Nuclear” Order And How To Profit” an article meant for our premium subscribers which laid out “All You Need To Know About The Coming Nuclear Energy Transition.” The highlight, as premium subs know, was our focus on two primary beneficiaries from the “nuclear opportunity”: established Uranium names such as Cameco, and modular reactor names such as Nano Nuclear, Oklo and NuScale.

Specifically, this is what we said, when recapping the stock implications from Trump’s nuclear order.

• Cameco (CCJ/CCO.TO) is set to benefit as a uranium producer, in our view, as increased nuclear generating capacity would increase demand for physical uranium and conversion services as demand for fuel would likely increase. We note this would likely be a longer term tailwind. Additionally, CCJ/CCO.TO has a 49% stake in Westinghouse which we view would be a more immediate winner given Westinghouse’s exposure to new reactor builds and operations and services. The Westinghouse segment would likely see an uplift as construction on new nuclear plants begins, if the AP1000 technology is chosen for these new builds.
   
• Small/Mobile Modula Reactor companies could potentially benefit if there is additional allocations for loan dollars earmarked for SMRs, as well as a push for SMRs to be used for either civilian or defense power applications.

Fast-forward 5 months later to this morning, when our forecast that CCJ would be the first winner from Trump’s nuclear Industrial Policy was validated, after Cameco and the Trump admin announced an $80 billion deal with Westinghouse Electric (Cameco owns 49%) to build nuclear reactors, the latest push to meet rising demand for electricity from artificial intelligence.

The strategic partnership, which also involves Brookfield Asset Management and Cameco, aims to deliver on President Trump’s AI ambitions and scale up an industry he sees as vital to competing with China. It will create tens of thousands of jobs, the companies said in a statement on Tuesday.

Specifically, CCJ announced that the company and Brookfield Asset Management have entered into a partnership with the US Government to accelerate the deployment of Westinghouse’s reactor technology across the US. The $80bn commitment is expected to include near-term financing of long lead time items. In a note from Goldman’s research team (which turned bullish on the name about a year ago, and roughly 3 years after us) wrote that they “view this partnership as a significant step forward in reinvigorating nuclear supply chains to accelerate deployment of nuclear power deployment in the United States. We reiterate our Buy rating and highlight key takeaways within.“

According to the release, each two-unit Westinghouse AP1000 project creates or sustains 45,000 manufacturing and engineering jobs in 43 states, and a national deployment will create more than 100,000 construction jobs, the companies said. In short, this is a huge win-win deal for everyone (except a handful of environmental radicals). 

“The program will cement the United States as one of the world’s nuclear energy powerhouses and increase exports of Westinghouse’s nuclear power generation technology globally,” according to the statement.

Some more details from the investment:

Under the new strategic partnership, the US Government will be granted a participation interest (Participation Interest), which, once vested, will entitle it to receive 20% of any cash distributions in excess of US$17.5 billion made by Westinghouse after the granting of the Participation Interest. For the Participation Interest to vest, the US Government must make a final investment decision and enter into definitive agreements to complete the construction of new Westinghouse nuclear reactors in the US with an aggregate value of at least US$80 billion.

Additionally, in recognition of the anticipated acceleration of long-term value creation that the US Government is expected to help unlock by deploying its financial, regulatory, policy and diplomatic tools to support the objectives of the partnership, if, on or prior to January 2029 the Participation Interest has vested, and if the valuation in an initial public offering (IPO) of Westinghouse is expected to be US$30 billion or more at that time, the US Government will be entitled to require an (IPO). Immediately prior to, or in connection with the IPO, the Participation Interest will directly or indirectly convert into a warrant, with a five-year term, to purchase equity securities equivalent to 20% of the public value of the IPO entity at the time of exercise after deducting US$17.5 billion from the public value.

Of course, this is just the start: back in March 2024, when the autopen formerly known as Joe Biden was still in the White House (and when we were pitching the Power-Up America trade which has soared in the past 18 months, blowing away even AI stock returns) we said to go all in Uranium names ahead of the coming explosion in power demand.

got uranium? pic.twitter.com/kK8ENvrUbg

— zerohedge (@zerohedge) March 31, 2024

Sure enough, the mainstream media has been slowly catching up, and today BloombergNEF writes that US power consumption from data centers is set to double by 2035, to almost 9% of all demand, and is “causing a rush to build new power stations and secure grid connections. But building new reactors takes several years and some companies, like Google, are looking at reopening shuttered nuclear plants to try to get power quicker.”

So as Trump’s industiral policy rolls on, the winners are becoming increasingly clear: those who read our May 26 primer how to trade Trump’s nuclear policies, and bought CCJ, have doubled their money.

And while we would urge subs to take off at least half of their CCJ long so their position is now risk free, for those wondering who may be next, we suggest you look at the other nuclear components of our Power Up America basket, which among others include such Modular Reactor companies as Nano Nuclear which we are confident will be next on Trump’s Industrial Policy checklist.