Cancer specialist Robert Peter Gale recently wrote on Bloomberg.com that “...Fukushima has become a reminder that uninformed fears aren't the same as actual risks.” In other words, nuclear fears are overblown. That, of course, means that a nuclear future is still both viable and probable. Investors have numerous ways to participate. The Real Damage
Gale, who co-authored Bloomberg the opinion piece with Eric Lax, is a scientist and physician who helped at both the Fukushima and Chernobyl events. He brings to the nuclear debate a very different perspective from the common man.
On the medical front, he notes that “Although the crippled nuclear reactors themselves still pose a danger, no one, including personnel who worked in the buildings, died from radiation exposure. Most experts agree that future health risks from the released radiation... are extremely small and likely to be undetectable.” So, medically speaking, Fukushima hasn't been and isn't expected to be a big issue.
From an economic perspective, however, Gale points out major changes: “Accustomed to large trade surpluses, Japan, in 2012, had a record $78 billion trade deficit, thanks to increased energy imports and a drop in exports as Japanese goods became more expensive to produce.” While just one of many headwinds, a changed perception of nuclear power was a big negative. How big?
“Since the earthquake, a powerful movement gained momentum to halt Japan’s use of nuclear energy.” Fifty two of the country's 54 nuclear plants remain shut. Further, Gale reports that 75% of Japan's electricity is now generated from fossil fuels. So, perhaps the biggest long-term impact of Fukushima will be environmental. Science and Facts
Like airlines, nuclear power has to deal with “big event” risks. Although nuclear power plants run without trouble every day throughout the world, one event—massive in scale—jaundices the view of the entire industry. However, if you can step back and look at the science and the facts, nuclear is a relatively safe and environmentally friendly energy source. More aggressive investors would be wise to include some exposure to nuclear in their portfolios. A Safe Distance
For investors who don't want direct exposure, General Electric (NYSE: GE) is a good option. This diversified industrial giant has been in the nuclear industry for well over 50 years. It delivers “reactors, fuels and services globally.” That said, this division is just one part of a much larger organization.
So, GE will benefit from increased nuclear spending, but it won't be the driving factor behind the company's overall results. On that front, GE has been proving to the market for several years that its near-death experience was a fluke as it refocuses around its industrial core. So far, management appears to be doing a good at regaining investor trust, making it a good choice for conservative investors. A Bit Closer to Home
In early 2012, the Nuclear Regulatory Commission's gave Southern Company and SCANA permission to build new nuclear plants. This is the first time in over 30 years that new nuclear plants will be built in The United States. With the push to close coal plants and increased use of natural gas fired plants, having a third notable fuel source will be a competitive advantage in the utility space.
This is particularly true since nuclear tends to be relatively inexpensive and reliable, particularly as a base load energy source. This makes it an ideal candidate to replace coal, which is also cheap and good for base load demand. Natural gas, though cheap today, has a volatile history and has long been used to meet peak demand and to complement alternative energy sources like solar and wind that aren't as reliable.
These two companies, along with Exelon (NYSE: EXC), the largest nuclear power generator in the United States, would be a way to gain direct exposure to a nuclear future. Exelon, which just cut its dividend, could be a good option for more aggressive investors looking to ride a turnaround situation. Into the Frying Pan
More aggressive investors, however, may want to consider Cameco (NYSE: CCJ). The company is the largest publicly traded uranium miner in the world. This isn't an investment for the feint of heart however, since the demand for and pricing of uranium is the primary determinant of this company's success. Still, if science wins over emotion, Cameco will be an important player in the nuclear industry and may provide investors with material upside. A Nuclear Future
It is hard to say just how long nuclear power will remain in the dog house. However, the negative view hasn't stopped progress, it's only slowed things down a bit. Nuclear companies have a bright future, if we can get past the fear and focus more on the science.
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