BNP Manager Who Slammed ‘Meme-Like’ SMR Rally Is Now a Buyer

0k}opo95[4mv1cv))fe7m24]_media_dl_1.png Bloomberg

Article content

(Bloomberg) — A fund run by BNP Paribas Asset Management that’s outperformed 97% of its peers over the past year says it’s now moving into small-modular-reactor stocks after long shunning the sector as a “non-viable” investment.

Article content

Ulrik Fugmann, co-manager of the BNP Paribas Clean Energy Solutions fund, says he and his team have been looking at “recent entrants” in the nuclear power sector, and zeroed in on companies “that have lower operating risks due to their order book, backers, and capital-light model.” 

Article content

Article content

Article content

Less than a year ago, Fugmann described the sector as being prone to “meme-like” rallies that made it uninvestable at the time. Valuations were just way too high, he said in October. That’s around about when the selloff started. 

Article content

Article content

Stocks including Oklo Inc. and Nuscale Power Corp., whose share prices had more than doubled over the previous year based on bets they’d play a crucial role in powering AI data centers, have since plunged as investors grew wary of heady valuations attached to such nascent technology.

Article content

According to FactSet Research Systems Inc. data, Fugmann’s fund has invested in X-Energy Inc., which listed in late April. 

Article content

Fugmann confirmed the €1.2 billion ($1.4 billion) BNP fund, which amassed total returns of more than 100% over the past year, has just made its “first investment” in an SMR stock, while declining to identify the company by name. 

Article content

With a market capitalization of $10 billion, X-Energy was backed by Citadel Advisors LLC and Ares Management Corp. as of end-April, data compiled by Bloomberg show. Amazon.com Inc. signed a deal with X-Energy in 2024 to bring more than 5 gigawatts of new power projects online in the US by 2039.

Article content

Article content

Small modular reactors are quicker to build and cheaper than the large-scale nuclear plants of previous decades. They can be manufactured in factories and assembled on site, helping to keep down costs and speed up construction. But for now, the technology is commercially untested, and it may take years before any SMRs go into service in the US.

Article content

Other asset managers remain skeptical toward the technology. “With all the permitting, all the NIMBYism, it’s not easy,” said Yi Shi, a client portfolio manager at Pictet Asset Management SA.

Article content

“And then there is the levelized cost of energy, if you include upfront cost, it’s massive for SMRs,” he added.

Article content

What Bloomberg Intelligence Says:

Article content

Funding Remains Key Hurdle for Small Modular Reactor Developers

Article content

With limited or no revenue, NuScale, Oklo, Terrestrial Energy and X-energy may require additional capital before commercial deployment of their technologies. However, NuScale’s light-water reactor and Terrestrial Energy’s design likely face fewer fuel-related supply-chain risks because they rely on low-enriched uranium (LEU). NuScale, X-energy and Terrestrial Energy expect to generate revenue years before commercial operations through licensing, services and other predeployment activities.