The Future of NuScale Power: Where Will It Stand in One Year?

NuScale Power (SMR 0.63%) claims it is making significant strides ahead of other companies in developing small-scale nuclear reactors, also known as small modular reactors (SMRs). With various compelling reasons to support its position, NuScale holds promise for investors, making the next year a crucial period for the company.

While NuScale will not sell any reactors within the upcoming 12 months, there are several key developments to monitor for those interested in the company.

Understanding NuScale Power

Initially, NuScale focused heavily on research and development (R&D) to create the first commercially available small-scale nuclear reactor. These reactors offer numerous advantages.

Firstly, their smaller size allows for reduced construction costs compared to traditional large nuclear reactors. Secondly, advancements in technology enhance their safety during operations. Finally, SMRs can be sited closer to population centers, meeting energy needs more effectively.

This ability to adapt SMRs for diverse locations could establish them as a preferred choice for utilities and industries, such as data centers.

The potential demand for nuclear energy is substantial. According to NuScale's estimates, energy needs could increase sixfold over the next two decades compared to the last 20 years.

Given their capacity to provide clean power, nuclear reactors are expected to play a vital role in the evolving energy landscape. Coupled with the flexibility offered by SMRs, their demand appears promising.

One of the essential reasons for NuScale's confidence is their belief that they are several years ahead of competitors. Their technology is based on established standards, whereas many competing companies are attempting to develop their systems from the ground up. NuScale intends to rely on existing supply chains for core components of nuclear plants, such as fuel. Moreover, competitors who are scaling down existing technologies are likely lagging in the regulatory approval process.

NuScale emphasizes that it is the only small modular reactor technology certified by the U.S. Nuclear Regulatory Commission, a significant accomplishment. Obtaining such certification is a lengthy process, and they believe that companies experimenting with new technologies could take over a decade to present a commercially viable power plant. NuScale aims to be operational by the decade's end.

What Can We Expect in the Coming Year?

As 2025 approaches, it's important for investors to keep realistic expectations regarding immediate financial outcomes. Although 2025 is still some time away from the end of the decade, the company made an important transition in 2024, moving from R&D to a focus on commercialization.

In the fourth quarter of 2024, NuScale saw its operating expenses decline by 40% year over year, signaling a trend that may continue and aid in reducing cash outflow.

Regarding cash management, the company successfully converted warrants at the end of 2024, resulting in a slight increase in shares but providing roughly $200 million in cash infusion, allowing more flexibility in their finances, although careful management of cash burn remains important.

Currently, NuScale has initiated the groundwork for six reactors, concentrating on components requiring longer lead times. The company is also confident enough from discussions with potential clients to place orders for additional components for another six SMRs. However, while a deal is in place for the first six reactors, there are no contracts yet for the subsequent six, meaning that spending is occurring ahead of confirmed demand.

Crucial milestones to watch for the next year include the anticipated regulatory approvals for the company's upgraded reactor designs, expected around mid-2025.

Another vital milestone will be the final investment decision regarding the power plant in Romania that plans to use NuScale's initial six reactors, anticipated to happen at the close of 2025. If this project receives approval, it could mark a significant turning point for the company, pushing them toward commercializing their SMR technology.

Execution is Key

The next year will be fundamental in determining if NuScale Power's technology is just an intriguing concept or a viable commercial reality. The management team must perform exceptionally well across various fronts to realize their potential. If all goes well, NuScale could become the leading pioneer in the SMR sector, providing them with a valuable advantage over competitors.

However, investors should note the inherent risks associated with this high-stake stock. Any misstep—such as unexpectedly high cash burn, complications in gaining essential regulatory approvals, or the Romanian project not receiving the final go-ahead—could considerably dampen NuScale Power's outlook.

NuScale, SMR, nuclear