The growth of nuclear energy will be a massive story over the next few decades.
The world is moving away from fossil fuels in a significant way, but there are a few problems with mothballing power plants that burn coal or natural gas. Greener versions of power — like wind turbines or solar projects — aren’t nearly as environmentally friendly as first advertised, thanks to current manufacturing practices. Besides, even after a decade of serious investment into renewables, wind and solar power make up just 10.7% of global power generation.
Nuclear energy solves many of these problems. Nuclear plants are long-life assets that can last decades longer than solar or wind farms. Fuel is abundant and is easily transported, thanks to its relatively close proximity to uranium production. Two significant risks — meltdown and nuclear waste — have significantly improved over time, especially after Fukushima in 2011. It’s still not foolproof, but ask the thousands of folks who live within spitting distance of nuclear plants in Ontario, and they’d agree they feel pretty safe.
Many investors bullish on nuclear power bet on Canadian stocks like uranium miners, convinced that increased adoption of nuclear power will send its primary fuel higher in price. And if you don’t want the risk of an individual miner, there’s always a uranium ETF. But that isn’t the only way to access this exciting industry, although some have the disadvantage of not being pure-play nuclear stocks.
Much like the growing population is increasing the popularity of many top fertilizer stocks here in Canada, the push to greener forms of energy is increasing the popularity of some nuclear energy options.
Let’s take a closer look at 5 of these names, stocks that can help any Canadian investor get exposure to the nuclear energy sector.
What are the best nuclear energy stocks to buy right now?
TC Energy (TSE:TRP)Dominion Energy (NYSE:D)Denison Mines (TSE:DML)Constellation Energy (NASDAQ:CEG)Cameco (TSE:CCO)
TC Energy (TSE:TRP)
Based in Calgary, TC Energy (TSX:TRP)(NYSE:TRP) owns all sorts of energy-related assets, including oil pipelines, natural gas pipelines, and power assets in Canada, the United States, and Mexico. Most importantly for this article, the company owns a 48% stake in Bruce Power, consisting of 11 nuclear power plants in Ontario.
Bruce Power is regarded as one of the best nuclear operators in the world, with a history dating back to 1967 with zero significant incidents.
These plants provide Ontario with approximately 30% of its power at a cheaper rate than competing forms of energy. It’s a massive win for both consumers and the owner.
The company undertook a large project in 2016 to extend its various reactors’ life, including replacing critical components. The extension will add approximately 30 to 35 years of life to each, extending use into the 2060s.
While nuclear is only approximately 10% of TC’s business, Bruce Power is slated to help deliver earnings to TC Energy’s shareholders for a very long time. Unlike uranium stocks, TC pays a generous dividend and has consistently raised the payout for 20-plus years.
Dominion Energy (NYSE:D)
Dominion Energy (NYSE:D) is a large nuclear power plant operator in the United States. It owns four facilities located in Connecticut, Virginia, and South Carolina. These facilities generate enough green energy to power more than 3 million homes.
Unfortunately, Dominion isn’t a pure-play nuclear operator. This power producer also has coal-fired, natural gas, and oil-fueled power plants.
The company is using the earnings from these non-renewable sources to expand into areas like wind, solar, hydroelectric, and, potentially, more nuclear plants. If regulators cooperate, that is.
Like many of its power-generating peers, Dominion is suffering from a rapid increase in long-term interest rates. Although the company’s total debt isn’t excessive compared to its peers, management is still worried about how debt will hold Dominion back as it moves toward a greener future. So the company is in the process of a top-to-bottom business review, with the goal of selling certain assets to help shore up the balance sheet. This could mean some nuclear assets are on the auction block, but it’s more likely the company will look to sell some of its coal or oil-fired plants.
Finally, an investment in Dominion Energy comes with a certain amount of stability. Remember, this nuclear stock is a regulated utility. This is the type of boring business that has made people rich over decades. Other nuclear stocks might offer more upside, but Dominion’s business model is best for investors looking for a steady performer with plenty of dividends.
Denison Mines (TSE:DML)
Denison Mines (TSX:DML)(NYSE:DNN) is a uranium exploration and development company focusing on the Athabasca Basin of Northern Saskatchewan, an area renowned for its rich uranium resource deposits. Its flagship project is the Wheeler River Uranium Project, but it also has ownership stakes in various other properties.
One thing that makes Denison (and other uranium mining stocks) such an exciting way to invest in nuclear power is operating leverage.
No matter what the price of the underlying commodity does, a miner’s expenses stay relatively consistent. If uranium soars and the cost to extract it remains relatively constant, that’s good news for producers like Denison.
Although Denison is still in the exploration stage of developing its marquee asset, there are still plenty of reasons to get excited. It is projected to be the lowest-cost mine in the entire region. Mine life is projected at nearly 15 years with more than 100 million lbs in reserves. Management is also sitting on plenty of cash — along with physical uranium it can easily convert to cash — so it has a way to pay for all this development without diluting its ownership share below 95%.
Denison has other projects with some impressive partners; as a bonus, these assets have current production. It owns 22.5% of the McClean Lake Mill operation, with the rest owned by Orano, the French nuclear giant. It also has a 67% interest in the Waterbury Lake project, with the remainder of this partnership owned by Korea Hydro Nuclear Power. It’s good to have some of the largest nuclear operators in the world on your side.
Constellation Energy (NASDAQ:CEG)
Constellation Energy (NASDAQ:CEG) is the United States’ largest producer of carbon-free energy with a capacity of 32,400 MW. That’s enough to power more than 20 million homes. Constellation has assets spread out over virtually every U.S. state with the goal to produce zero carbon emissions by 2040.
Recently spun out of Exelon Inc, Constellation is nothing short of a beast in renewable power generation, especially nuclear power.
It owns 21 nuclear plants spread across states like Illinois, Maryland, New York, Pennsylvania, and New Jersey. These plants collectively generate more than 19,000 MW of energy, giving Constellation the title of largest nuclear power provider in the United States.
One significant advantage to Constellation’s fleet of nuclear plants is that they have minuscule operating costs that have slowly gotten cheaper in the last few years. Uranium prices have struggled, which helps, but the company also keeps costs low by maintaining a higher operating efficiency than many of its peers and minimizing expensive accidents.
Finally, Constellation has the support of regulators to extend many of its current licenses upwards of 80 years, extending the life of many of its nuclear facilities well beyond 2050.
Although there is a case for putting capital directly into nuclear power operators, the uranium producers will have a significant upside if nuclear power takes off. Luckily for investors, Canada has perhaps the finest uranium miner on the planet.
Cameco Corp (TSX:CCO)(NYSE:CCJ) has a great deal going for it. Unlike Dension — which has a lot of potential but not a lot of current production — Cameco already owns world-class assets that produce millions of pounds of high-grade uranium.
It has four main assets, including Cigar Lake, Key Lake, and McArthur River, all located in Northern Saskatchewan, and Inkai, which is located in Kazakhstan. It also has projects in various stages of development in Canada and Australia.
This uranium producer has a unique problem. It has all these great assets, but uranium demand needs to pick up for it to ramp up production. McArthur River, for example, had zero production in 2021 as Cameco decided to curtail production. With more than 50 nuclear reactors in various stages of development worldwide, production from this mine is expected to reach almost 10 million pounds by 2024.
In total, Cameco’s current production is approximately one-third of its productive capacity. Ramping up production as the market demands is an easy way for the company to goose earnings, and it doesn’t require much additional investment.
Finally, Cameco’s reserve life is the best in the world. If you include all three levels of reserve types, current reserves are flirting with a billion pounds. That’s enough to supply power for a very long time.
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Original Source: Stocktrades
Categories: Top Canadian Stocks