Talking Nuclear Infrastructure Investment with Nano Nuclear

Government incentives and environmental mandates are expected to attract investors to nuclear energy, and the technological advances and infrastructure upgrades needed to support it. Nano Nuclear Energy’s Jay Yu, founder, executive chairman and president, and James Walker, CEO and board member, join the podcast to talk about areas of opportunity in the sector and what’s ahead for nuclear energy development. Read a transcript of the podcast below.

MMG: Welcome to the Middle Market Growth Conversations podcast, I’m Carolyn Vallejo. The U.S. is currently the world’s leading producer of nuclear power, and it’s expected to move further towards embracing nuclear energy as federal tax credits start to make an impact. Joining us to discuss M&A in the sector and how policy decisions are driving infrastructure investment are Jay Yu, founder and chairman, and James Walker, head of nuclear development, both of Nano Nuclear Energy. Jay and James, welcome to the show. [Editor’s note: since the recording of this podcast, Yu’s title has changed to executive chairman and president, and Walker’s title has changed to CEO and board member.]

Jay Yu: Thanks for having us.

James Walker: Pleased to be here.

MMG: Jay, let’s begin with you to kick us off. Let’s talk a little bit about recent themes and trends you’re seeing in nuclear energy M&A. What deals are getting done and what’s drawing private equity to the sector here in the U.S.?

JY: Great question. One of the biggest recent M&A deals was Brookfield Renewable Energy and Chemical buying out Westinghouse. That was a huge one because it was close to an $8 billion M&A deal. That I think helped spark a lot of what’s happening now in the U.S. and also it’s almost a foreshadowing of the future of nuclear energy because if you have these big players in the renewable space, now entering and looking for advanced nuclear technologies—just like Nano Nuclear, we’re an advanced nuclear technology company—this bodes well for the future. And not only that, there’s been tons of SPACs that I’m hearing about. Some got done, some haven’t, because of Wall Street, but just hearing this M&A activity [in the] new nuclear technology space, it’s really got us excited.

JW: Yeah, and just to add to what Jay’s saying, on the acquisition side, we’re seeing institutions becoming much more interested in nuclear and that’s resulting in them buying up smaller consultancy firms to secure expert personnel because the number of them can be quite limited. And so we’re seeing quite a bit of that, almost like the institution trying to get ahead of seeing a shortfall in the labor supply for an anticipatory bigger industry coming in the next few years. Outside of that too, I think a lot of the private money is going into more advanced nuclear reactor types, like SMRs, micro reactors, rather than big civil power nuclear because that’s also anticipated to be more of the future of nuclear rather than the conventional power reactors that we’re historically used to.

MMG: So we’re seeing a lot of movement here, and we’re also seeing similar, if not even more advanced, moves to nuclear and renewable energy investment in the Canadian and European markets. Are there any observations there on M&A trends within those geographies? James, how about we start with you?

JW: I would say on the European markets, it’s slightly different in the sense that France never really denuclearized as it was, so they still have a lot of facilities and capabilities there. Some countries in Europe, they don’t need to build up their infrastructure quite as much as the U.S. is currently doing. They’re going to rely on, say, France to provide those services. But it’s really becoming more of a focus on which technologies are being pushed now. For instance, in the United Kingdom, Rolls Royce has received a big amount of funding from the government for the purposes of developing its SMR, its small modular reactor. And that seems to be the direction everybody’s going. In Eastern Europe, as an example, they’re looking at smaller reactors than Rolls Royce’s SMR, the micro reactor level, and they’re looking at them for the purpose of placing more micro reactors periodically throughout their grid infrastructure to create energy resilience or power resilience, so [if] they do have one knocked out, the others can pick up the slack. And that’s to compensate for aging electrical infrastructure and also just robustness generally to fuel a much more industrial base and an economy that’s growing a lot more quickly. So it does vary from European country to European country. And on the Canadian front, what we’re seeing here is again, there is money now being put in on a province basis and a national basis to push nuclear energy again. So Canada already has big can-do reactors, the big civil power plants, but places like Alberta, they’re looking at small modular reactors for industry. So they’re looking to power oil sands projects, industrial projects in remote locations that would have historically run on fossil fuels, and even remote mining projects. They’re looking to try and bring in technologies with a lot of prospects to power these projects instead, to reduce carbon emissions and also to reduce the need for very advanced logistics for remote locations to keep bringing in fossil fuels. So the country and its approach to this sort of resurgent interest in nuclear is very interesting, but it’s very variant on part of the location.

JY: I was just going to reinforce what James said about Canada. The mining sector has been red hot also with uranium prices skyrocketing recently. So all these junior mining companies are now being well-funded, especially in Saskatchewan, where it’s a prolific area for uranium mining. And that has kind of now gone across the U.S. as well. There’s been a lot more activity in the U.S. in terms of Wyoming, Nevada, Utah. So the uranium mining sector is also driving a lot of this momentum as well, because that’s part of the whole supply chain. We have to remember that the ore is the beginning and we have to focus on the mining to the enrichment to ultimately leading us to our reactor technology. Understanding the whole supply chain is really important throughout the world, not just Canada and the U.S., but Europe needs to face this. And also, you know, even Eastern Europe and into Central Asia too, where Kazakhstan has the largest uranium mine in the world. So we have to keep that into perspective too.

MMG: Now, Jay, nuclear energy may not necessarily have the best connotation to the average person, so is negative sentiment towards nuclear power still a challenge for growth in the sector?

JY: Oh yeah, we face this every day. Even on our social media, when we talk about our recent developments with our reactors, our micro reactors, there’s always been naysayers and people who just really don’t understand the new technology that’s at hand. But with films like Oliver Stone’s “Nuclear Now,” it kind of helps people understand that look, the new nuclear technologies are on the rise and it’s much safer than these big civil nuclear reactors, which is already safe, so imagine how much more safe. And James could actually get you into the more technical side of that, but the sentiment is always going to be there. But right now, I think the overwhelming sentiment with all of the climate activists now sitting in the middle of the roads or destroying paintings at museums, I think now there’s a different kind of feeling with climate change activists and the story is actually shifting over to nuclear because we’re a carbon-free energy solution for the world, right? So now this is all kind of bottling up and all the governments of the world at COP28, they’re now committed to tripling nuclear [by] 2050 as well. So everything is piling in and is causing this kind of perfect storm for nuclear and for people to realize that this is a safe technology and we need this for the future.

JW: Yeah, and just to support what Jay said too, even public sentiment has been steadily improving. I think it’s probably sitting at the best it’s ever sat, and it’s still probably not good enough because there’s still a lot of misconceptions about nuclear. Like, Jay and I regularly have to talk about safety issues with it because it’s one of the first questions to get asked. So the good part is we’re armed with the facts, and if we can just distribute them and get them widely known about, then that can reduce a lot of the fears surrounding it. As an example, if we point out that if you look at deaths per gigawatt hour, nuclear beats out everything, I mean wind, solar, absolutely everything. Even in terms of waste, that comes up too, but we can point out that actually the waste generated is an incredibly small component. If you were to take all the nuclear reactors that have ever operated in the United States and that includes the big aircraft carriers, all the submarines, all the way back to the 50s, the big civil power plants, you take all the waste and put it in one location, it still wouldn’t fill a football field. It generates an enormously small amount of waste. But it suffers from very bad PR. And if we’ve got the cleanest and the safest form of energy, it’s really incumbent upon us as a civilization to utilize it as best we can.

MMG: Now, potential investors in this space are going to want to know where the opportunity lies. And of course, one of those opportunities is in infrastructure upgrades and changes and maintenance and things like that. So, James, what are the kind of infrastructure upgrades that we will need to implement in the U.S. to enable a move toward more nuclear power?

JW: So the U.S. historically was able to get by on sourcing a lot of high-grade material from Russia and then sort of down-blending it to meet its domestic needs, whether that was public or military. But those sort of channels are really becoming shut off now and so there’s a lot of infrastructure to build back and some of the infrastructure that we’re going to actually build up now is stuff we haven’t seen before because the new generation of nuclear reactors need slightly different fuels. Currently in the U.S., there’s no way to enrich the commercial quantities of HALEU, the high-assay low-enriched uranium that we would need for SMRs and micro reactors; there’s one licensed company but they can’t produce the quantity needed, they’re very much below that. So infrastructure to support a massive increase in enrichment capability would be a big one to come in. We’ve seen the uranium mining industry atrophy, but there are big deposits of uranium in the states. So infrastructure projects to being those back online with conversion technology to take that ore and create yellowcake [uranium], that will need to come back online. And then after enrichment, we’ll have to look at building out new deconversion and fuel fabrication facilities in the country. These things aren’t in place currently, and even fuel transportation systems, they need to be put in place as well to move all this stuff around. We know that these issues have been identified because the Department of Energy has put out big funding opportunities to fund this big increase in nuclear infrastructure. They are working on it, but there’s a lot of building work ahead of us and it’s going to mean a lot of requirements for more nuclear engineers, more experts, and even a big increase in licensing personnel that we’re going to need for the Nuclear Regulatory Commission to license all this stuff. It’s going to be a big build-up over the next decade, two decades, three decades, and it’s going to keep going really until, as Jay said, 2050 when the aspiration of the world is to triple nuclear power. So that’s what we’re working towards.

JY: I think what James said, the U.S. needs to build back its nuclear capability. And I think right now, Congress and everyone in DC understands that our reliance on Russia has been kind of a thorn in our butt here. And I think with the passing of all these new funding opportunities, it’s going to give us that leg up in the coming decade, where we could rebuild this and Nano Nuclear wants to be part of this solution.

MMG: I do want to talk about DC but first, I also want to turn our attention to another potential area of investment for private equity and other types of investors, and that’s transportation in this space. So as far as transportation challenges, what kind of infrastructure investment will we need in order to move nuclear resources safely around the country?

JW: So I would say the big one for transportation is that the anticipated fuel type for most SMRs and micro reactors coming is HALEU and there’s currently no real commercial way to transport that around the country. And so as far as infrastructure projects go, there needs to be a basket and cask system designed for that HALEU fuel and it needs its own transportation company built up around that transportation technology. So that’s one big aspect of the transportation challenge is that we need to be able to make this stuff of course but then move it around and it becomes more complicated when you think, say, you’ve enriched the material, well, then it’s got to be transported to a deconversion facility, and after deconversion, it’s got to be transported a second time to fuel fabrication and after fuel fabrication, it’s got to be transported a third time to the nuclear [facility] to fabricate and to put into the reactor and there’s potentially a fourth transportation move where they’ve got to move the reactor and fuel to site. And so, without the transportation components, none of this really happens. The United States is a big country, there’s a lot of facilities spread out, the stuff needs to be moved. The big consideration around the transportation infrastructure is building that capability into the system now so we can actually start moving this stuff. Otherwise, the big enrichment companies will produce a lot of this fuel and it will essentially be stuck there or be able to move in such small quantities, it will be cost-prohibitive. So that needs to be built up. And another element of the transportation is there’s still going to have to be some amendments to the way we consider how things are licensed. Currently, you couldn’t transport a fuel reactor as an example by roads. With micro reactors, because they use such a lot less nuclear fuel in much smaller quantities, and the accident scenarios are far fewer, there might need to be some investment into modifying transportation regulations to allow for fueled micro reactors to move by road, by train, by shipping container. So that could be another element we see, just to try and facilitate the implementation of this new nuclear resurgence.

MMG: As I mentioned, I wanted to talk a little bit about Washington and recent regulatory initiatives here in the U.S., including the Infrastructure Investment and Jobs Act as well as the Inflation Reduction Act, have offered billions of dollars in tax credits for renewable energy projects. So, what are we seeing now in terms of how those initiatives have impacted nuclear power infrastructure investment and as a result, mergers and acquisitions activity thus far?

JY: I mentioned earlier all this government funding downstream has had a big effect. You see a lot of these established companies already, like for example Centrus, which is the only licensed uranium enrichment company in the U.S., they’re able to see a lot of the benefits of this. Because like I said, we need enriched uranium to fuel our reactors, to fuel all these future reactors, and having the government see that and funding the only licensed uranium enrichment company is very important to the overall ecosystem of nuclear energy in the U.S. On top of that, we’ve seen a lot of smaller grants and RFPs being deployed. One of the areas is called GAIN, which stands for Gateway for Accelerated Innovation in Nuclear, and that’s part of Idaho National Labs and they’re supporting companies like us and other advanced nuclear companies that are actually applying for this voucher program. And this voucher program kind of bypasses a lot of the bureaucracy. You’ll be able to deploy real research into testing nuclear materials and other aspects of your technology. So it’s a trickle-down effect right now, but obviously, this takes time. Once DC announces something, it takes six months to a year to start seeing that. So if we have more programs like GAIN that could actually be deployed faster and get it into the hands like Nano Nuclear or some of these other emerging technologies, I think that’s a big plus to the U.S. that the private industry is coming in and we’re also using our own capital as well. So side by side, that’s where private and public industry could really partner here and take it to the next level.

JW: I would say the tax credits we’ve observed for renewable energy products, and I’m considering other renewables here like wind and solar, you’re seeing that reflected of course in nuclear energy. I would actually say that at the moment, there’s much larger funding opportunities for nuclear than any other renewable. And I think that’s principally come about because there have been some observations about certain countries moving away from nuclear towards other renewables and that actually resulting in higher energy costs and an increased carbon footprint. I’m talking about Germany actually in this instance, where they downsized their nuclear industry and pursued more wind and solar but then didn’t have enough power for their own domestic needs. So they had to source power from Poland, which was generated by coal, and nuclear by France so their costs went up and their carbon footprint went up. I think because of that, that’s why you’re seeing these increased tax credits for nuclear in preference almost to the other renewable energy projects that we’ve seen in previous years get a lot of government support.

MMG: Rounding out our conversation today, we want to talk about how investment in this space will evolve and develop over the next few years. Jay, how about you start us off with that one?

JY: I think what’s going to happen is the capital markets and Wall Street will be able to see some of these companies start maturing and potentially listing on the public markets. So that will drive a lot of this institutional investment and the traditional investing into a nuclear energy company and building a $10 billion plus nuclear reactor and spending 10 years of work—I think a lot of that’s going to change with companies, especially like us, where we’re trying to be vertically integrated. We’re trying to be part of the reactor solution, the fuel solution, the transportation solution, and even the enrichment eventually. So we see the whole supply chain here and we want to be a part of the whole thing. So I think Wall Street, institutional investors, private equity, and you see a ton of VCs now investing into a lot of these just startup ideas of nuclear. I’m in a panel of judges for the national labs and I see a ton of new technologies emerging and it’s actually making me very happy because I’m seeing all these new entrepreneurs willing to take the risk. And then with that, you’re able to continue to market yourselves and eventually some of these are going to make it into Wall Street because they’ll have a business model where it makes sense and helps de-risk investors so they’re not just pouring billions of dollars and building a reactor. There’s actually business models where it could be in revenue sooner. And that’s the key here, is de-risking that supply chain and showing investors that all this capex money that’s going towards these reactors is also layered in with other support services or other transportation or other fuel generation needs. So I think that’s going to be the key in unlocking the next wave of big money.

JW: The only thing I would add to that is that I think industry will play an increasing part in funding these big nuclear projects too because a lot of them are obviously looking at—just take the tech companies as an example, they’re looking to increasingly power their more and more remote operations by nuclear because it’s a consistent form of power that doesn’t generate carbon and doesn’t need refueling so they don’t need to have logistical considerations. Big AI centers, data centers, they’re very energy-intensive. So you can see big companies like Microsoft already reaching out to nuclear to come up with solutions and they’re really at the point now where they’re looking for what is the most likely technology and company to win the race, essentially, and then we’ll get behind them and bring them on to power operations. So as we advance, I think industry will become an increasing investment arm of nuclear power and that’s going to come from not just the tech companies, but big industry chemical plants and mining companies, oil and gas companies, all of these sorts of groups are going to be bringing in increasing amounts of money for the nuclear industry to push it along. So at some point it’s going to go past the tipping point where its industry is self-propelling it rather than needing any of that government funding to kickstart it.

MMG: So a lot of growth opportunity there from an infrastructure standpoint, tech and software, and beyond. Jay Yu and James Walker from Nano Nuclear Energy, thank you so much for joining the Conversations podcast.

JY: Thank you so much for having us.

JW: No problem, thank you for having us.

The Middle Market Growth Conversations podcast is produced by the Association for Corporate Growth. To hear more interviews with middle-market influencers, subscribe to the Middle Market Growth Conversations podcast on Apple Podcasts, Spotify and Soundcloud.