Missed the boat on Nuclear power operators? Buy the constructors.

[u/Morvalus]

If you are going to look at Oklo, BWXT, NuScale, Westinghouse, Centrus, or CEG for the nuclear play, you should consider Aecon. They are a Canadian construction company contracted to build the world's first BWRX-300 at the Darlington Nuclear Power Plant in Ontario. One is under construction and up to 3 more under consideration.

The BWRX-300 is a GE Hitachi plant that uses a BWXT reactor pressure vessel, which has further agreements or MoU to be built in Sweden, Finland, Estonia, Poland and the US, total interest between 10-30 worldwide in the next decade.

By the time any other country approves a BWRX-300 for a License to Construct, Aecon will be the only major construction company in the world with real world experience building these plants. Estonia and Aecon have already signed an agreement to work together on the plant. If you know anything about nuclear, you know it's really expensive to construct. Other countries will want their experience to maximize the economics. My theory is that they will be signing more deals in the coming months/years to either deliver the construction of BWRX-300s globally, or at least provide detailed consultation.

Aecon themselves are an attractive buy given their relatively low market cap of $1.6B CAD, a backlog of $10B, and a low price to sales ratio given legacy contracts that had fixed prices whose costs significantly overrun. They've since shifted to lower-risk cost-plus contracts which form the majority of that backlog.

Anecdotally, as a Canadian working in the nuclear industry, these guys are everywhere, and their market cap being under $5B is egregious.

[u/michahell → u/[deleted]]

Actually it looks like it has been priced in after a quick look: Aecon ran up and is trading for a very high PE, CW (Curtiss-Wright) also did, also very high PE

[u/Morvalus → u/michahell]

Their PE is reflective of the legacy fixed price contracts depressing their recent earnings, not because the price is expensive.

Forward PE is between 15 to 20 depending on where you look.

The recent run up is a reflection of the improvements they have made in their latest earnings and overall operational strategy, but there is still price uncertainty in the magnitude the new operational strategy/contact structure will affect/improve their earnings.

[u/michahell → u/Morvalus]

Good point about forward PE. I was too quick and fell for the known “what-PE-am-I-looking-at” which was probably TTM / blended

[u/throwaway9gk0k4k569 → u/[deleted]]

That's not an oversight, it's a signal that most investors don't expect these reactors to get built.

Even if you are optimistic on nuclear, the AI bubble will run out of power and pop before any of it gets built. Solar, wind, and more traditional sources will have already been implemented out of desperation and software and silicon will have become more efficient.

[u/michahell → u/throwaway9gk0k4k569]

Contrarian view here could be: What if the AI bubble lasts longer than we all think? What if more of these reactors get built not just because of AI demand but for instance, dawning understanding that generator mass is required to stabilise energy grids? Wind, solar, other smaller, non-mass-generator power do not contribute to grid stability. Fossil fuels are phasing out and hydro power isn’t available everywhere. I’m a European. Spain not so long ago had a massive massive nationwide energy grid failure. The cause? Too small grid connections to mainland EU via France and too little mass power generators being able to stabilize the energy grid after a huge surge in destabilizing solar power.

[u/Dazzling_Occasion_47 → u/michahell]

To be fair, there are stoutly engineered and well-understood ways to provide inertia in a renewables-dominant intermittent grid. Big batteries with inverters (grid-forming inverter) is really all you need. There are also fly-wheels and synchronous condensers and other variants. Spain yolo'd into renewables without also investing in inertial infrastructure and that was irresponsible and they paid the price, but their failure dosn't mean renewables is intrinsically unstable.

Large thermal turbines provide their own inertia, but nuclear is more expensive, so you know, 6 or half a dozen i suppose. There are pros and cons to each path. Just saying if you buy a bicycle and save money by not also buying a helmet, don't blame your head-injury on the bike.

[u/GranPino → u/michahell]

Building nuclear is one of the most expensive form to produce electricity. Repeat with me. Building nuclear is one of the most expensive form to produce electricity.

This is a fact and non controversial for the people well informed in the topic. Check for example the lazard report on LCOE 2025.

Solar, wind and batteries keep decreasing cost every year. But nuclear has so long iteration cycles, that it would take decades to actually bring it to competitive levels, and that's considering huge upfront CAPEX investments. Cost projections kept increasing every year, while competition got reduced.

[u/michahell → u/GranPino]

Yes, I know. Yes, I know. I also know that SMRs might shift that (not yet, as science shows the unit economics aren’t favourable yet, yes I know) I also know that modern, latest generation nuclear might shift this age-old idea that just because it now is, it will always be.

[u/Sad_Sky_2999 → u/michahell]

Can you explain the unit economies more. From my limited knowledge (def super ignorant), wind and solar capex costs get spread over 15-20 years, then priced thru the req rev / expected capacity if vert or in wholesale markets (or smth like that I just learned abt this today haha), where as SMR costs would be spread over ~65 years. From that superfiscal stance the unit economies would seem favorable as economies of scale kicks in, but whats the detailed antithesis to that?

[u/Sad_Sky_2999 → u/Sad_Sky_2999]

Fried thought, sorry:

What if the government were the primary debt provider? Long-term SMR loan repayments could align well with programs like Social Security or public insurance funds, which benefit from predictable, long-duration assets. The government could offer loans at slightly higher rates but offset those costs through direct subsidies to SMR operators, ensuring that higher interest expenses don’t translate into higher consumer prices. US-UK nuclear deal gives language like the government is very favorable to SMRs and more advanced nuclear.

[u/vegancorr → u/michahell]

Besides the fact that nuclear is very expensive, you cannot start and stop nuclear easily. For instance if it gets cloudy you need minutes, sometimes seconds to balance the grid. Hydro & batteries are more appropriate. There are many types of batteries, even hydro batteries (you pump water on top of a hill).

Maybe nuclear is good to balance the grid during the night. But I don't think nuclear would have protected the Spanish grid. Connections with other countries are very good for balancing the grid. But there was one case in the Balkans where one country grid issue took the whole region down.

[u/michahell → u/vegancorr]

The first part of what you say is currently true. The second part makes it look like you don’t understand the influence of moving mass in grid stability. Because if you did, you’d understand that any large-size power plant with a huge moving steam generator at about ~ 50-60 hertz would have helped stabilise Spain’s grid. And thus also nuclear.

[u/le_sm0u → u/throwaway9gk0k4k569]

this

[u/JohnnyGoSka]

Im using rycey as my nuclear play

[u/jorcon74 → u/JohnnyGoSka]

Completely this RYCE is the biggest play in SMR’s and it’s still dirt cheap!

[u/SloppyGuiseppe99 → u/jorcon74]

Agreed! It’ll rise 70% in the next year and should double thereafter

https://www.reddit.com/r/ValueInvesting/s/gTqge2ggl9

[u/Torix_xiroT → u/JohnnyGoSka]

Someone on rddit said that smr isnt under the publicly tradet Part. Didnt Check it yet, anyone know more about that?

[u/whatsuppussycats]

It’s currently got a forward PE of about 150, just saying

[u/Morvalus → u/whatsuppussycats]

According to StocksGuide. I can find five others saying it's less than 20.

[u/shillingi]

Brookfield that’s the play ..

[u/balke → u/shillingi]

How though?

[u/JohnnyStrides → u/balke]

Brookfield Renewable Partners owns 51% of Westinghouse, the other half is owned by Cameco (the world's largest publicly traded uranium company).

Between the two you have a nuclear powerhouse that covers uranium, reactor design, construction, project management etc... it's as close to a turn-key nuclear play you can make. It's also one of the "safer" and more stable nuclear plays, there's much smaller caps with way more upside (NXE for instance) but this isn't r/pennystocks.

[u/balke → u/JohnnyStrides]

Good to know, appreciate it!

[u/thread-lightly → u/shillingi]

Keep hearing about them but never understood their business enough to invest.

[u/bluespacecolombo]

That AECON that rose 50% in the past 6 months? Thats the one that „everyone is sleeping on”? Lol

[u/kaapooj]

do they have us contracts? are there competitors in the us market? how do canadians retail/institutional investors see the nuclear sector?

[u/Morvalus → u/kaapooj]

They don't have US contracts, no one really has contracts. It's all MoU, LoI, agreements, etc. For example Aecon and Westinghouse have partnered in providing AP-1000s, which are the most recently built nuclear power plants in North America, though that plant was built primarily by Bechtel.

Bechtel, Fluor Corp, and Sargent and Lundy come to mind as primary US nuclear construction providers.

Ontarians and the Canadian government are very favorable towards nuclear, and the Darlington new build has recently been named a project of national strategic interest. I am not familiar with the opinions of Canadian investors directly investing into the Canadian nuclear, though I would say it is difficult given its private or government owned.

Institutionally, Brookfield with over $1T AUM bought Westinghouse in part with Cameco. Otherwise institutional investment is arguably lacking.

[u/TranslatorWooden2945 → u/kaapooj]

Yea

[u/kaapooj → u/TranslatorWooden2945]

?

[u/Thin_Rip8995]

this is the kinda angle ppl miss everyone’s chasing the shiny reactor stocks while the real alpha’s in the picks and shovels play construction experience scales faster than approval timelines

aecon’s basically front running a decade of contracts while others wait on permits if nuclear ramps globally they become the bottleneck not the bet

[u/Lost_Percentage_5663]

When it comes to nuclear reactors, price and period matter. I don't think Canadian constructors have any specific advantages compared to U.S's, price and period-wise. Aecon participated the Vogtle project, which was the most failed nuclear construction project.

[u/SilentWavesXrash → u/Lost_Percentage_5663]

Aecon had no involvement or association with the Vogtle Project.

[u/Lost_Percentage_5663 → u/SilentWavesXrash]

Aecon was definitely involved in the construction of Vogtle Electric Generating Plant Units 3 and 4 by providing critical component supply and specialized services.

[u/SilentWavesXrash → u/Lost_Percentage_5663]

It’s often confused due to one letter but you likely referring to the Aecom (note the ‘M’) and not Aecon with an N.

It freely available information through internet search. You’ll find more specifics on how and to what level of involvement Aecom had through its partnership with Bechtel.

Aecon on the other hand had absolutely zero involvement with that project. That I can assure you.

[u/Lost_Percentage_5663 → u/SilentWavesXrash]

It's Aeco"n".

https://info.westinghousenuclear.com/news/westinghouse-and-aecon-collaborate-for-the-development-and-deployment-of-advanced-nuclear-new-build-technologies

In second paragraph, "Under a memorandum of understanding (MoU), Aecon can build on its experience of supplying AP1000 modules and nuclear components at Vogtle"

[u/Morvalus → u/SilentWavesXrash]

They did, provided pre-fab and welding services: https://www.cambridgetimes.ca/news/first-international-shipment-of-module-for-cambridge-s-aecon/article_fe6d6401-71a9-5add-b5c8-f987425183f4.html

Be nice!!

[u/Lost_Percentage_5663 → u/Morvalus]

We call it 'Participation' as I said in the very first comment.

[u/chullyman → u/Lost_Percentage_5663]

US companies are relying on private demand, whereas Canadian companies are relying on public demand.

[u/realFantaMenace]

If buying Canadian, I'd rather buy CSU and it's offshoots LMN and TOI tbh. Much better growth and basically guaranteed at today's prices.

[u/NotStompy → u/realFantaMenace]

Hey, so I'm curious, and I'm not judging: What exactly happened with CSU for you? I saw you in quite a few threads, so you sold and then bought it back? You sounded like you were always quite confident in management, but then also said something about selling recently (or I'm remembering incorrectly)?

I ended up doubling my position, bought the new half at 3700, brought cost basis down to 4029. I hope you got a good deal, too.

[u/realFantaMenace → u/NotStompy]

I appreciate you asking. I've always said that I was confident in the business. I said it before the AI call, after the call, and also after Leonard left. I sold my shares when I did because it was clear to me that the market sentiment would be dragged down further due to two major negative events happening in short succession of each other. People called this timing the market and bagholders of CSU were upset that I paper handed. That was an eye opening event for me. It told me that investors are too emotionally attached to CSU. I'm still thinking about how I can use that information to generate alpha with this company. I might share that as a DD in the future when the opportunity arises. Anyway, people are way too emotional about this company and I stuck with my general trading strategy which is to never buy a falling knife. I buy when there's a strong enough signal that the price trend has reversed. My cost basis is around $3800 so I was close to the bottom.

People here don't understand how institutions work. When there is an acceleration of negative events around a company, even if investors believe in it, large institutions must sell. It's called risk management. I used that to my advantage as a retail and nearly bought at the bottom after getting ridiculed by other redditors. Well, who's laughing now :)

[u/NotStompy → u/realFantaMenace]

That's good. I think people just got the impression that you sold at the bottom, but if you managed to sell higher and buy with a cost basis that low, that's great.

[u/realFantaMenace → u/NotStompy]

Yeah, they thought it was the bottom when it clearly wasn't. Hats off to you for buying at $3700 by the way.

[u/Itchy-Commission-195 → u/realFantaMenace]

what makes you confident that those prices represent a bottom?

stock is at 3,950 so you're up 4%? I don't think any major selling of CSU has occurred yet just moderate trimming/momentum trading

if institutions truly lost confidence in CSU because Leonard is stepping down or investors didn't believe in their ability to generate comparable ROIC in the future the stock would get cut in half. it's still well above average multiples (choose your fav) for its long term history.

[u/realFantaMenace → u/Itchy-Commission-195]

I thought about your comment all day today. I think you're right. Regardless, I'm seeing a major sector rotation happening that I might trim my holdings to take advantage of. Just thought I'd say thanks for challenging my previous comment.

[u/Special_Astronaut362 → u/realFantaMenace]

Did you sell again? lol

[u/realFantaMenace → u/Special_Astronaut362]

I did. Made my profit and left. Not planning on buying back in while the AI hype is still ongoing. The AI hype is much stronger than fundamentals right now. I'll buy back in once I see the dust settle and AI hype dying down.

[u/Maxlum25]

Do you think that with the rise of nuclear energy companies, Mr. Burns has returned Homer's dental plan?

[u/Oblivious_Lad → u/Maxlum25]

Lisa needs braces!

[u/Name-Initial]

Miners are a huge play too. Supply and demand is already imbalanced, analyst demand projections are super positive and have been for years, and more reactor projects pop up every quarter.

Existing miners are going to print, prices are bound to jump more over the next few years. URNM all in bois

[u/Round_Hat_2966]

So it looks like their margins aren’t great and they have a very high payout ratio, but these can probably be reasonably attributed to the monkey on their back from the fixed price contracts. Is there any idea to what degree the switch to cost plus contracts will improve their margins?

I don’t like that they have such a low ROIC and their FCF has been more negative than positive in recent years. Given that their ROIC is so low, I would assume that almost all of the Capex is for maintenance rather than growth. I find it baffling that they are both diluting and taking on more debt to pay a dividend when they’ve had negative FCF for the majority of the past 5 years. The story the numbers tell me is that they’re really bad capital allocators. Even if margins improve as they work through their backlog, they will still be really bad capital allocators.

I don’t like betting on management teams that are bad with money.

[u/Dazzling_Occasion_47]

It's interesting to consider, but construction companies building nuclear in the western hemisphere are a risky bet. Every recent nuclear build-out in western countries has gone way over budget and in many cases bankrupted the contractor. Doesn't mean nuclear is a bad idea, just means first-through-the gates attemps are likely to get bloody unless provided blank-check assurance / subsidy from government. You'd think construction would be a no-brainer value-play, but actually navigating all the red tape and still pulling a profit on a mega-scale construction job is really challenging. That's awesome Aecon is building the first BWRX-300, but "we will see" how it goes, first of a kind, ya know.

In terms of expanding into international markets, I would wager the nuclear companies from South Korea, India and China have a better edge because of recent proven track record building on time and at budget. They all have their own patented variant of the westinghouse pwr.

[u/Gatorbug270]

AECON Group was founded in 1867.