Does General Electric See a Nuclear Comeback?
General Electric Company (NYSE:GE) through its partnership with Japan’s Hitachi, Ltd., working together as Hitachi-GE Nuclear Energy Ltd., have signed a partnership agreement to cooperate in the field of decommissioning and remediation of boiling water reactors (BWRs) in Japan. (Source: “Hitachi-GE signs BWR decommissioning agreements,” World Nuclear News, November 12, 2015.) Despite all the trepidation and hoopla at the Paris climate conference (COP21), renewables will not be replacing coal and gas as soon as regulators would like. Nuclear energy is the real alternative and GE stock will benefit.
As part of this cooperation, France’s AREVA, one of the largest, if not the largest, nuclear energy and uranium mining companies in the world, will participate in the preliminary studies for the decommissioning of BWRs in Japan along with GE and Hitachi. The groups will also study other opportunities linked to the decommissioning and remediation of these reactors.
Hitachi-GE Nuclear Energy is a world leader in developing, designing, construction, and maintenance of nuclear reactors in Japan. While many investors hear about uranium mining and reactor projects, reactor decommissioning projects are more interesting from the business perspective and GE stock will benefit from the company’s significant experience in this activity, thanks to a variety of contracts undertaken in the United States and Germany. GE can exploit that experience in winning decommissioning and remediation contracts in Japan and beyond.
This Could Be Big for GE Stock
The large Asian economies are increasingly looking to nuclear power as a solution to replace polluting coal plants (not just CO2, but also NOx, soot, and other real pollutants), given that the miracle solar and wind power, so-called alternative or renewable energy sources where hydro power isn’t feasible, are too costly and inefficient.
Indeed, since May 2014, the price of uranium in the world market has jumped 35%, recovering from the lows following the Fukushima incident of 2011. After mothballing Fukushima and other nuclear reactors, Japan has started to go back to nuclear energy. Japan’s government considers the revamping of its nuclear power capability as essential in sustaining Japan’s economic growth, although capacity is still not even close to 2011’s levels.
In the early 60s, Japan has considered nuclear a strategic priority, becoming a leader in nuclear energy research and development. Hitachi, GE’s partner, is one of the companies that have acquired the most experience. Before Fukushima, nuclear plants provided 30% of Japan’s electricity. Since Fukushima shut down, Japan has been forced to import more natural gas and coal to meet its energy needs.
Now, Japan has accelerated the process of restarting the reactors provided in compliance with the strictest security standards set by the regulatory authorities and GE is in a position to take full advantage of the nuclear revival.
China, too, is relying on nuclear energy. It has 22 reactors in operation, 26 under construction, and many more in the planning stages. Beijing is planning to triple nuclear capacity by 2030 and adapt Western technology, offering further opportunities for General Electric. (Source: “China Shows How to Build Nuclear Reactors Fast and Cheap,” Forbes, October 22, 2015.)
GE Stock to Benefit from Nuclear Comeback
One of Hitachi’s nuclear sector competitors is Toshiba, which happens to control Westinghouse Electric, a U.S. company specializing in nuclear technology. Given the latter’s ambition to double in size in a decade, investing in East Asia and India, it can be speculated that the Hitachi-GE team is aiming for similar growth targets. For instance, GE and Hitachi plan to build reactors in the United Kingdom.
Nuclear power is also a strategic priority for South Korea, with 23 reactors in operation there. South Korea already gets one-third of its electricity from nuclear power and has already planned a substantial increase in capacity by 2035. Seoul seeks a cooperation agreement to enable it to overcome the limitations in the fuel cycle imposed by the agreements following World War II.
An aggressive policy of nuclear expansion is underway in India, hungry for energy to drive industrial and social development. Although the government claims to be interested in using renewables (20%) as much as possible by midcentury, it is not leaving the topic of energy to chance and wishful technologies, choosing instead to back up its growth plans with nuclear power. India expects to address 25% of its power generation needs through nuclear power by midcentury. (Source: “Dr Jitendra Singh inaugurates 7th Nuclear Energy Conclave in New Delhi,” Business Standard, November 3, 2015.)
The Bottom Line on Nuclear Power
Despite renewable energy talks, in the United States, the Obama Administration is committed to reviving nuclear power. Several factors have so far held back the nuclear energy industry’s recovery, such as the abundance of shale gas on the cheap and a higher distrust of nuclear power in the wake of Fukushima. Nevertheless, GE stock, which benefits from all kinds of energy-producing methods, being one of the world’s top manufacturers of large power generation turbines, is set to benefit.