Infrastructure

Are U.S. Nuclear Power Plant Operators Really at Business Risk? (CCJ, USU, XLU, AEE, CEG, ETR, EXC, FE, PGN, SO)

Jon C. Ogg

It goes without saying that nuclear power has hit skid row.  The damage to the industry that has been caused by the earthquake and the tsunami which followed in Japan has been nearly mind-numbing.   Cameco (NYSE: CCJ) has lost about 20% of its value since Friday alone, and USEC Inc. (NYSE: USU) had seen almost close to the same drop before its shares recovered today.  Go past the hype, go past the fear-mongering, and go past the sensationalism.  There are many nuclear power plants already online in America and many still pending.  We want to see how the market is treating U.S. utilities which have nuclear power plants in their electricity portfolio.

To show just how bad the market has been even to utilities, the leading ETF is the Utilities Select Sector SPDR (NYSE: XLU) and its shares have fallen 4.6% since Friday closing Wednesday at $30.99 with a 52-week range of $25.76 to $32.89.  We did of course not cover every single utility with nuclear power, but our coverage below accounts for a combined market capitalization rate of more than $100 billion.  Our review focused on Ameren Corporation (NYSE: AEE), Constellation Energy Group, Inc. (NYSE: CEG), Entergy Corporation (NYSE: ETR), Exelon Corporation (NYSE: EXC), FirstEnergy Corp. (NYSE: FE), Progress Energy Inc. (NYSE: PGN) and Southern Company (NYSE: SO).

We broke out how much each of the partial US nuclear energy complex has fallen since Friday, what the 52-week range is, what the market caps are, and which are some of the listed nuclear properties which we took from the U.S. Nuclear Energy Institute.

Ameren Corporation (NYSE: AEE) is down only about 3.5% since Friday with shares at $26.79; 52-week range is $23.09 to $29.89 and its market cap is $6.4 billion. Nuclear properties include Callaway.

Constellation Energy Group, Inc. (NYSE: CEG) is down about 6% since Friday with shares at $30.30; 52-week trading range is $27.64 to $38.73 and its market cap is roughly $6 billion.  Nuclear properties include Calvert Cliffs, Ginna, and Nine Mile Point.

Entergy Corporation (NYSE: ETR) is down almost 9.5% since Friday with shares at $66.65; its 52-week trading range is $66.31 (hit today) to $84.33 and its market cap is about $12 billion.  Nuclear properties include Arkansas Nuke 1 & 2, Grand Gulf, Indian Point, James A. Fitzpatrick, Palisades, and River Bend.

Exelon Corporation (NYSE: EXC) is down almost 7% since Friday with shares at $39.95; its 52-week trading range is $16.78 to $45.56 and its market cap is $26.5 billion. Nuclear properties include Braidwood, Bryon, Clinton, Dresden, La Salle, Limerick, Oyster Creek, Peach Bottom, Quad Cities, Salem, and Three Mile Island.

FirstEnergy Corp. (NYSE: FE) down almost 6% since Friday with shares at $36.59; 52-week range is $33.57 to $40.80 and its market cap is $11.2 billion.  Nuclear properties include Beaver Valley and Perry.

Progress Energy Inc. (NYSE: PGN) is down ‘only’ almost 4% since Friday with shares at $44.55; 52-week trading range is $37.13 to $46.83 and the market cap is about $13.1 billion.  Nuclear properties include Brunswick, Crystal River, H.B. Robinson, and Shearon Harris.

Southern Company (NYSE: SO) is down close to 4% since Friday with shares at $36.80; 52-week range is $32.04 to $38.79 and its market cap is close to $31 billion.  Nuclear properties include E.I. Hatch, J.M. Farley and Vogtle.

Many of these plants have switch-over capabilities, but there is one thing to consider here.  Despite these plants being old, shutting these plants down in any short order is just not likely in the cards barring maintenance or other disasters.  Switching to fossil fuels is also a much more costly initiative for consumers.

What seems to be at issue is that newer regulations would come with a higher cost of securing and operating “safe nukes” if there is such a real term.  Our take is that nuclear expenses will rise as a result, but the future demand damage of uranium may make the fuel cheaper ahead and any higher regulatory and security costs that the plants take on will probably be passed down to Joe America.

JON C. OGG