Comeback of nuclear energy?

France uses modern reactors

Chernobyl and Fukushima were catastrophic nuclear accidents. In addition, nuclear waste must be stored. A complete solution to the problems has not been found for half a century after nuclear power was introduced as a safe and cheap way to produce electricity. The unresolved issue of final disposal and the Fukushima disaster in 2011 even called on the German government to start phasing out nuclear power, where the last reactor will be shut down in 2022.

In other parts of Europe, attitudes towards nuclear power are different. This can be most clearly observed in Germany's neighboring France. The country currently has more than 50 active reactors and plans to add more in the coming years. Around 70 percent of France's electricity comes from nuclear power. In mid-October 2021, the country's President Emmanuel Macron presented "France 2030", an investment plan to modernize French industry. It is planned to invest EUR 30 billion by 2030, of which EUR 1 billion will be invested in the nuclear sector.

The focus will be on small innovative nuclear reactors with improved safety, which will also reduce the costs of reactor construction and produce less radioactive waste. These innovative reactors will help France in the fight against climate change, support domestic industry, ensure low electricity prices and, in addition, make the country independent of the international political scene in terms of energy supply.

France is also a major supporter of nuclear power at EU level. There is also great interest in new nuclear reactors in other European countries. For example, there are plans to build new reactors in Bulgaria, Poland, Romania, Slovakia, Hungary and the Czech Republic. This also explains why many countries advocate that the European Union classify nuclear energy as a "green" technology.

Inclusion of nuclear power in the EU taxonomy

The issue of a comprehensive EU classification of nuclear energy as a "green" technology became particularly important after the implementation of the EU's climate and sustainability taxonomy. The EU wants to realize its "Green Deal" by reducing net greenhouse gas emissions by at least 55 percent compared to 1990 levels by 2030. This is an intermediate goal in Europe's path towards becoming the world's first climate-neutral continent by 2050. To achieve this goal, the as much investment as possible is channeled to the development of renewable energy.

However, it is not easy for investors to find out which investments actually meet sustainability criteria. The so-called green washing of investments disguised as "green" is a problem. This is where the European Commission goes in and provides a mechanism that makes it easier to identify green investments.

In February this year, the European Commission proposed the addition of parts of nuclear energy to the list of economic activities covered by the EU taxonomy. The selected nuclear activities are in line with the EU's climate and environmental goals and will enable Europe to accelerate the transition from hydrocarbons to a climate-neutral future. The Commission therefore considers that there is a role for private investment in nuclear activities during a transitional phase.

A climate-friendly and reliable form of electricity production

If you look at the carbon dioxide emissions for different energy sources, nuclear power is particularly attractive. According to the Intergovernmental Panel on Climate Change, emissions of nuclear power are 12 grams of CO2 equivalents per kWh of electricity. For wind power, the figure is 11 to 12 grams per kWh. Solar panels on roofs reach a value of 41 grams per kWh, while the value for solar parks is 48 grams per kWh. Furthermore, one must keep in mind that the wind does not blow all the time and the sun does not shine 24 hours a day. For this reason, it is extremely important to have sources of reliable base energy. In Germany, the basic energy consists primarily of coal-fired power plants. This is a particularly harmful energy source that emits 820 grams of CO2 equivalents per kWh of electricity.

According to the German Environment Agency (Umweltbundesamt), the 27 EU states produced a total of approximately 3610 million tonnes of greenhouse gases in CO₂ equivalents in 2019. The EU average per capita was 8.1 tonnes. France and Italy, with about 6.5 and 7.0 tonnes per capita respectively, tended to be in the lower part, while Poland had 10.3 and Germany 9.7 tonnes of CO₂ equivalents per capita were in the middle.

Vontobel Nuclear Energy Index

Vontobel's new Nuclear Energy Index is a way to invest in companies related to nuclear power. With the help of the strategic certificates on the Vontobel Nuclear Energy Index, private investors can easily invest in companies in the nuclear energy sector with a single transaction. Companies from both industrialized countries and emerging markets are eligible for the index. They must be involved in either uranium mining or nuclear energy. The corresponding classification is made according to the FactSet Revere Business Industry Classification System (RBICS).

The index consists of the 25 industry representatives with the highest market capitalization. If no suitable companies can be found, the remaining index values consist of companies that offer nuclear power-related technology or services, for example around the construction of nuclear reactors. The index values are equally weighted, and the index will be adjusted twice a year. A fee of 1.25% per year is charged to manage the index. Because the index is calculated in US dollars, there is a currency risk for investors who invest in another product currency. Investors in the strategic certificates bear the credit risk of the issuer (Vontobel), i.e., the risk that the issuer cannot meet its obligations under the certificates. There is no capital protection available.

Three examples of companies in the Vontobel Nuclear Energy Index

Cameco Corporation is one of the world's largest uranium producers. The Canadian company has the capacity to produce more than 53 million pounds of uranium concentrate annually and has more than 450 million pounds of proven and probable mineral reserves. In addition, Cameco is also a leading provider of uranium refining, conversion and manufacturing services.

The largest producer of uranium in the United States is Energy Fuels. The company is based in the US state of Colorado and aims to take advantage of growth opportunities in the nuclear energy sector. The focus is on three uranium-producing plants: White Mesa Mill in Utah, Nichols Ranch Plant in Wyoming and Alta Mesa Plant in Texas. Energy Fuels is also the largest conventional vanadium producer in the United States and is active in the extraction of rare earth metals.

Uranium Energy Corp. is one of the United States' leading and fastest growing uranium companies. The company is a pure uranium company and has several production-ready uranium mines in southern Texas and Wyoming. In addition, Uranium Energy Corp has other diversified holdings of uranium assets, including one of the largest physical uranium portfolios of U₃O₈ (a mixture of Uranium oxide) in stock in the United States and owns a larger stake in the only royalty company in the industry, Uranium Royalty Corp.

Conclusion

The subject of nuclear energy will remain a contentious issue. But if humanity is serious about reducing carbon dioxide emissions, we need to carefully weigh the advantages against the disadvantages of using nuclear power in a transitional phase. As a result, nuclear power could be an interesting area from an investment point of view.