A huge step forward for the UK’s nuclear energy transition
11th August 2022 |
The UK has taken a major step forward in its nuclear energy future.
On 20 July 2022, the UK government granted planning approval for the Sizewell C nuclear power plant.
As per our 7 July 2022 update, planning approval for the site has been in limbo ever since the original plans were drawn up in 2020.
Conflicting interests amongst stakeholders, including Sizewell residents, site operator EDF Energy and former stakeholder China General Nuclear (CGN), have halted negotiations.
However, it appears matters have been resolved, with business secretary Kwasi Kwarteng finally confirming the plans.
European energy giant EDF Energy will build the new power station on the Suffolk coast, at a cost of £20 billion.
According to EDF, the plant will meet roughly 7% of the UK’s energy needs, and will operate for 60 years. It is due to come online in 2027.
What’s more, EDF is expecting the plant to generate 3.2 gigawatts of electricity, which is enough to power six million homes.
A decision on the financing of the project is due to be made next year.
Nonetheless, we believe the decision will help propel the UK’s nuclear energy industry forward, given the capacity of the new Sizewell plant.
It also shows the changing attitudes towards nuclear energy amongst policymakers.
The psychological impact of this to the wider community we expect to be significant. For decades, negative perceptions of nuclear energy stemming from high-profile disasters (for example, Fukushima and Chernobyl) have seen nuclear policy a bit “on the nose” with the public.
However, the narrative is slowly changing. Nothing like skyrocketing energy bills to bring people’s perceptions back to earth…
The public is fast coming to the realisation that nuclear energy can provide reliable, abundant and sustainable energy.
As a reminder, the UK government is seeking to decarbonise the country’s electricity supply by 2035. This means electricity produced by renewable alternatives such as wind, solar and nuclear will be the main sources of energy.
Also, the UK is hoping to generate 25% of its electricity supply from nuclear energy sources by 2050. Currently, nuclear resources account for 16% of the UK’s nuclear energy demand.
That’s a more than 50% increase in nuclear energy production over the next 28 years. Considering the average nuclear plant takes around five years to build, the plans are ambitious.
The UK will need to gear all of its nuclear energy resources towards this goal if it is to be achieved.
With this in mind, and the latest developments at Sizewell C, we believe Aura Energy (LSE: AURA), Yellow Cake (LSE: YCA) and Rolls-Royce Holdings (LSE: RR) will benefit.
Firstly, Aura Energy our early-stage mining company.
In particular, Aura mines uranium oxide at its Tiris project in Mauritania, Africa. Uranium oxide is used in the generation of nuclear energy.
According to CEO Dr Will Goodall, the company is “moving closer to uranium production.”
This was following a commercial update from Aura, which stated that the uranium grades at its Tiris project were between 500% and 600% higher than previously expected.
This is significant and could fast-track the Tiris project. Tiris is expected to produce 800,000 lbs of uranium oxide per annum. It’s also expected to begin production in 2024.
Given the current price of uranium oxide is $48.70, Aura could soon be churning out multi-million-dollar revenues, and become the uranium mining powerhouse we expect.
In addition, Yellow Cake is a uranium holding company, giving direct exposure to the uranium spot price without processing or mining risk.
Yellow Cake’s latest commercial update is also encouraging.
For the year ended 31 March 2022, the value of Yellow Cake’s uranium holdings came in at $916.7 million (approx. £757 million). This is a whopping 203% increase on its uranium holdings in the previous year. Currently, Yellow Cake holds 18.81 million lbs of uranium oxide.
Also, for the year ended 31 March 2022, the company recorded profits of $417.3 million. This is an incredible 1,295% increase on the same figure in the previous year.
In part, the soaring profits are down to the rising price of uranium oxide, and an increase in its uranium holdings through an ongoing commercial contract with energy giant Kazatomprom.
With Yellow Cake’s uranium holdings worth almost $ 1billion, a current share price of 364.19GBp and a market capitalisation of just £657 million, in our view the company is still undervalued.
Finally, Rolls-Royce is a provider of propulsion systems and energy infrastructure.
The company has been earmarked by the UK government in helping to drive the UK’s energy transition.
Last month, Rolls-Royce announced it had shortlisted six new sites for the development of a £200 million small modular reactor (SMR) factory. SMRs are smaller, mobile and cheaper to build than conventional nuclear power plants.
Rolls-Royce is hopeful the facility will come online in 2029, with planning approval still pending.
Lastly, Rolls-Royce’s latest financial figures are solid.
For the six months ended 30 June 2022 (H1 2022), Rolls-Royce recorded operating profits of £223 million. This is an impressive 486.8% increase on the same period in the previous year.
In addition, revenues increased by 8.5% across H1 2021 and 2022, rising from £5.2 billion to £5.6 billion.
In our view, Rolls-Royce is starting to show powers of recovery after a difficult lockdown period.
We look forward to seeing the part it has to play in not only the nuclear energy transition, but the wider green energy transition.
We reiterate our BUY recommendations for Aura, Yellow Cake and Rolls-Royce. You can find the original recommendations under the “open date” links in the buy list.
Buy list update
Saietta (LSE: SED)
Saietta is an engineering company that manufactures electric propulsion motors for the light electric vehicle (EV) market.
Its target market is Asia, which is dominated by light vehicles. Saietta truly captures the EV story that not many people know about, but one which could turn out to be bigger than the EV story in the western world.
Saietta’s first full-year commercial update is encouraging.
For the year ended 31 March 2022 (FY 2022), Saietta recorded revenues of £3.6 million. This is an impressive 300% increase on the same period in the previous year.
The company has also bolstered its cash position, rising from £2.9 million in FY 2021 to £18.4 million in FY 2022.
However, Saietta announced an operating loss of £11 million for FY 2022. This is up from £7.3 million in FY 2021.
We acknowledge the losses.
However, we shouldn’t forget that Saietta is ploughing money into the business as it seeks commercial expansion. The company also conducted a capital raise recently, bringing in £23 million through a placement.
Although placements do dilute investors holdings, they are necessary to expand and grow in absence of operating cash flow to fund expansion. The good news is that Saietta had no issues raising the funds – in fact, it was oversubscribed (the company originally set out for just £20 million). In this market, that’s a good outcome and the use of proceed to fuel growth is an exciting prospect.
This also came with news of a deal with major automotive supplier, Consolidated Metco. Consolidated Metco supplies wheel hub assemblies to the trucking industry, suppling the likes of Volvo, Ford and Daimler.
In the deal, Saietta will develop two new truck e-drive product systems, with the first being ready for commercial production in 2023.
We remain excited by Saietta’s prospects as it moves further into commercialisation.
We reiterate our BUY recommendation on the stock. You can find the original recommendation here.
The Frontier Tech Investor “Top Three”
Sometimes it’s hard to decide on which stocks to invest in from our buy list.
Below is our Frontier Tech Investor “Top Three” section showing three stocks in open BUY positions. If you’re trying to figure out what to invest in next, these are three that we think are a great place to start.
This doesn’t mean our other stocks are no good: this is just a tool to help you spot the next Frontier Tech Investor stock that could be worthy of your consideration.
Volex (LSE: VLX) – Volex is a global manufacturer of power and connectivity products. This includes power cables, fibre optics and charging plugs. It might sound a little basic, but these are critical mechanisms which are powering some of the key technologies of the modern day. These technologies include electric vehicles (EVs), artificial intelligence (AI) and big data networks. Volex has huge credibility behind it, particularly as it does business with some of most widely recognised companies in the world, including Tesla. You can find the original recommendation here.
Team17 (LSE: TM17) – Team17 is a video game publisher. It has a large collection of games which contains some of the most popular games of the gaming world. One of these is Worms, the enthralling last-man-standing survival game born out of the nineties gaming boom. Team17 is keeping up with the times and offers its games across a number of contemporary technology platforms. It has even flirted with the idea of non-fungible tokens (NFTs), a megatrend which could revolutionise the gaming industry. At a time where sceptics think online gaming will come off the boil following the ease of lockdown restrictions, Team17 keeps gamers coming back for more. You can find the original recommendation here.
Pod Point Group (LSE: PODP) – The UK’s inadequate (for now) electric vehicle (EV) charging network is threatening to bring the EV transition to a halt. By 2032, the shortfall of EV charge points in the UK is estimated to reach 250,000. However, Pod Point’s innovative range of EV charging solutions could go a long way in ensuring this deficit is reduced. The company’s charging technology is fit for homes, public charging bays, lamp posts and commercial buildings, and can ensure that the EV transition reaches all areas of the UK. In our view, Pod Point can unlock the potential of the UK’s EV charging network. You can find the original recommendation here.
Sam Volkering
Editor, Frontier Tech Investor
Elliott Playle
Analyst, Frontier Tech Investor
