NuScale Power: Pioneering the Next Generation of Nuclear Energy

NuScale Power Corporation designs and markets the VOYGR SMR, a pressurized water reactor with all components factory-fabricated and assembled on-site. The company's primary product is the VOYGR-6 (6 modules, 462 MWe) and VOYGR-12 (12 modules, 924 MWe) configurations, offering scalable power output. NuScale generates revenue through engineering services, licensing and regulatory support, and future reactor module sales and fuel supply. Its target customers include utility companies, industrial energy users, and government entities worldwide. As of the latest data, the company is in its pre-commercial phase, with limited revenue but a substantial pipeline of prospective projects.

• Near-Term (1-2 Years): Focus on securing new U.S. customers following the CFPP termination, progressing international projects (Romania's RoPower, Poland's KGHM) through site permitting and licensing. Revenue growth will be driven by engineering services contracts, but material revenue from module sales is not expected until late in the decade.

• Medium-Term (3-5 Years): The company aims to achieve its first nuclear construction start, targeting a late-2020s operational date for an initial customer. Success in these deployments is critical to unlocking follow-on orders and establishing a recurring revenue stream from fuel and services.

• Long-Term Catalysts: Advancements in data center and AI power demand create a high-profile niche for SMRs, and NuScale is actively marketing to this sector. Government incentives under the Inflation Reduction Act, including production tax credits for nuclear power, enhance the economic case for its customers.

NuScale's financial profile is typical of a pre-revenue deep-tech company, with significant investment in engineering, regulatory, and business development activities. Revenue growth is projected to accelerate as new service contracts are signed, but the company will remain deeply unprofitable for the foreseeable future. The EPS of -$2.20 aligns with the FY2023 figure above, reflecting increased share count from capital raises. The company's ability to manage cash burn and achieve dilution-sensitive financing milestones will be critical for shareholder value.

The global nuclear energy market is projected to grow at a 3-4% CAGR through 2035, with SMRs expected to be a key growth segment. The SMR market alone is estimated to reach $150B by 2035, driven by decarbonization mandates, energy security concerns, and the need for firm, dispatchable power to complement intermittent renewables. NuScale faces competition from several international players, each with distinct technologies and regulatory statuses:

NuScale's competitive positioning is strongest in the U.S. due to its NRC certification, but international competitors may undercut on price and leverage their domestic utility relationships. The market is still nascent, and no company has yet deployed a commercial SMR, leaving the competitive landscape fluid.

NuScale's valuation is challenging given the lack of meaningful revenue and the early stage of the SMR market. A DCF analysis is not meaningful without reliable long-term revenue projections, but we can consider a scenario-based approach. On a bear-case basis, with a 20% probability of commercial success and $500M peak annual revenue by 2035, the present value of future cash flows, discounted at 12%, yields an intrinsic value of roughly $2.5B. A bull case, with 60% success probability and $1.5B peak revenue, yields an intrinsic value of $9.0B. Weighted by these scenarios, our base-case fair value is approximately $5.0B.

Comparable-company analysis is also challenging, but we can benchmark against other pre-revenue clean-tech developers:

Given the extreme uncertainty and the company's unique regulatory position, we believe a market-cap-based approach, triangulated with scenario-weighted DCF, is most appropriate. Our base-case fair value estimate is approximately $4.5B, implying a fair value per share of ~$11.00, roughly in line with the current price.

• Project Execution Risk: NuScale has no operating commercial reactor and has yet to secure a new anchor customer after the CFPP termination. Cost overruns, construction delays, or design changes could further erode customer confidence and delay revenue generation.

• Financing and Dilution Risk: The company is burning cash at a rapid pace and will require additional capital raises. Given the current market cap of $4.5B and EPS of -$2.20, future equity offerings could be highly dilutive to existing shareholders.

• Regulatory and Licensing Risk: While NuScale holds NRC certification, each new project site requires separate licensing, which can be delayed by local opposition, environmental reviews, or changes in NRC requirements. International projects face additional regulatory hurdles in host countries.

• Technology and Competition Risk: SMR designs are unproven at scale, and technical issues could arise during construction or operation. Competitors like GE Hitachi and X-energy may achieve certifications faster in some jurisdictions or offer more attractive economics, eroding NuScale's market share.

• Market and Sentiment Risk: With a beta of 2.31 and 18.40% of float shorted, the stock is subject to extreme volatility. Negative news flow, such as project cancellations or financing difficulties, could trigger sharp sell-offs regardless of long-term fundamentals.