Why Constellation Energy, NuScale Power, Nano Nuclear and Oklo Stocks Are Up Today

Nuclear stocks glow green on Friday, and they did Constellation Energy (CEG 19.35%) to thank for that. This morning, the electric utility giant announced that it will restart Unit 1 at the infamous Three Mile Island nuclear power plant to provide electricity. Microsoft (MSFT -0.30%) data centers.

Nuclear stocks rise in response to the news. As of 10 a.m. ET, Constellation stock itself is up 14.4% as nuclear gets upstart NuScale Power Corporation (SMR 9.76%) and Nanonuclear energy (NN 21.62%) they gained 13% and 15% respectively and minuscule OK (OK 24.66%) leads the pack higher with a 16% gain.

Three Mile Island is in the news again

Let’s start with some background for those who don’t remember when Three Mile Island freaked out everyone living on the East Coast. In the middle of the night on March 28, 1979, Three Mile Island’s Unit 2 reactor (near Middletown, Pennsylvania) suffered a partial meltdown in what the US Nuclear Regulatory Commission (USNRC) calls “the worst US commercial nuclear power plant accident . operating history”.

The release of radioactivity from the plant was minimal and caused no “detectable health effects on the workers at the plant,” let alone nearby residents, according to the commission. However, the terror inspired by the word “collision” was enough to spark a movement, still ongoing, to tighten regulations on the construction of nuclear power plants. Thanks in large part to these tighter regulations, operating a nuclear power plant is one of the most expensive ways to produce electricity in the US today — despite the fact that nuclear fuel is one of the cheapest fuels available.

And yet America still needs energy — not least to run the giant server farms that power the kinds of artificial intelligence projects and cloud computing services that Microsoft wants to offer.

Why Constellation is reopening Three Mile Island

Hence today’s news. Having just signed “the largest power purchase agreement with Microsoft,” Constellation now needs a way to provide power. Reopening Unit 1 (note, not Unit 2which is still being decommissioned) at Three Mile Island will facilitate the provision of this power. Constellation notes that this single reactor will produce “835 megawatts of carbon-free power” for Microsoft and others and will be able to operate for “decades.”

Notably, however, restarting Unit 1 will require “significant investment … to refurbish the facility, including the turbine, generator, main power transformer, and cooling and control systems.” It will also require a comprehensive safety and environmental assessment, state and local permits, and USNRC approval. Constellation HOPE to achieve all this by 2028.

What it means for Constellation, NuScale, Nano Nuclear and Oklo stocks

So this is a process that will take both time and money for Constellation to begin. That’s important for investors to keep in mind when weighing an investment in the power company — which isn’t particularly cheap (at nearly 28 times earnings currently), hasn’t generated positive free cash flow since 2019, and which don’t really pay much in dividends, just 0.7%.

Investors in other nuclear stocks such as NuScale, Nano Nuclear and Oklo will look at the Three Mile Island news in a different light. Constellation’s decision to reopen the nuclear plant indicates a growing interest in nuclear power as an energy source, and this may mean greater interest and investment in new power plant projects such as those these companies are working on. With four years to go as Constellation orbits Three Mile Island, these companies have a window of opportunity.

That said, all three remain speculative investments with little or no revenue to their credit (much less profit) and much need for investment as they complete their projects and seek government approvals and customer contracts. Valued at under $1 billion each, these three small nuclear power stocks have plenty of room to grow.

There is also more than a little risk.