• NuScale Reported to Plan to Go Public
• Saudi Arabia May Be Getting Ready to Release a Tender for Nuclear Reactors
• Sheffield Forgemasters Signs MOU with Rolls-Royce SMR

NuScale Reported to Plan to Go Public

According to a news media report by a S&P Global/Platts, NuScale has decided to go public by seeking a deal with a publicly traded investment fund, known as a special purpose acquisition company, or SPAC. The news service based its report on statements made last week by Guggenheim Partners, the company’s financial advisor, at a industry conference.

Speaking during a conference 12/08/21 on nuclear plant financing sponsored by the US Nuclear Industry Council, Guggenheim Partners’ Senior Managing Director James Schaefer said NuScale is going to go public through a SPAC. He said that Guggenheim, which Fluor, NuScale’s major investor, hired in May to explore alternatives for the company, is managing that process.

SPACs are publicly traded investment funds. They are created to raise funds for privately held companies by going public without the expense and extensive regulatory process associated with a conventional initial public offering (IPO).

A SPAC financial offering would likely be just the first of several rounds of fund raising as it is unlikely it could obtain all money it needs in one round. Investor confidence in the company’s future depends a lot on the number of orders it gets from new customers beyond the government subsidized project in Idaho. The wire service noted that it’s not clear whether funding from a SPAC deal would meet all of NuScale’s financing needs or if it plans to seek additional capital through other means.

S& P Global also reported that NuScale has raised $1.3 billion so far to fund its efforts to license the design of its SMR and establish the supply chain for fabricating the reactor modules, Chris Colbert, chief strategy officer and chief financial officers aid during the same conference.

According to S&P Global, and quoting NuScale’s Colbert, the Department of Energy has provided about $500 million in funding to NuScale, Fluor has provided $600 million, and outside investors, including Japanese and South Korean companies that are part of the supply chain for the reactor, have provided the balance.

Even so, NuScale will need billions of dollars to meet its future financial needs. In October 2020 the Department of Energy approved a $1.355 bilion cost-shared award to UAMPS to help cover its costs for the NuScale SMR installation in Idaho.

Equity Partners Will Build NuScale SMRs

The company won’t be building its own factory to manufacture its SMRs. A spokesperson for the firm told this blog that NuScale expects to have others manufacture NuScale Power Modules using their existing production facilities. This is possible for NuScale as the size, material and geometry of NuScale Power Modules are well within the capacity of a number of existing suppliers. DHIC, IHI, BWXT are companies that have formed relationships with NuScale for this purpose.

In May 2021 IHI announced will develop containment structures to enclose reactor cores, as well as other components. IHI has been producing nuclear reactor components for about six decades including reactor pressure vessels. The firm is also making a $20M investment in NuScale.

In April 2019, NuScale Power and Doosan Heavy Industries and Construction Co., Ltd. (Doosan) announced a $44M strategic cooperation to support deployment of the NuScale Power Module (NPM) worldwide. Doosan and its financial partners provided a cash investment in NuScale as part of this strategic relationship.

Doosan will supply long lead time components and other equipment. DHIC is expected to bring its expertise in nuclear pressure vessel manufacturing. Doosan also signed the ‘unit purchase agreement’ through which it will make a cash equity investment in NuScale with Korean financial investors. The terms of the equity deal were not disclosed but it will involve transfer of NuScale stock to Doosan.

The strategic cooperation between DHIC and NuScale is not limited to the USA, but will extend to global nuclear markets. DHIC and NuScale expect the value of equipment supplied through the contract will total at least S1.2 billion. Like the deal with JGC, the deal with Doosan is intended to place NuScale’s supply chain partners closer to future customers.

BWXT Canada Ltd’s facility in Cambridge, Ontario, has developed a comprehensive manufacturing plan for the upper reactor pressure vessel, along with manufacturing optimization reports, a detailed cost estimate based on the manufacturing plan, and a detailed manufacturing schedule, representing a benefit / cost and schedule certainty for potential buyers. Ongoing manufacturing process development work has involved developing and qualifying a specialized welding process to meet the manufacturing requirements of the NuScale vessels.

No Comment from the Company

NuScale declined to comment on S&P’s report.

“As we have previously stated, NuScale is in the process of evaluating strategic options to raise additional capital and accelerate the commercialization of NuScale’s groundbreaking small modular reactor technology. We have no update at this time,” Diane Hughes, the company’s communications vice president, said in an email to the Oregonian newspaper.

Fluor and its partners have said that they will continue to provide engineering services, project management and supply chain support to NuScale as part of any contemplated future projects.

Utah Associated Municipal Power Systems (UAMPS) plans to build a six-unit SMR plant using 77-MWe NuScale reactor modules. NuScale received design approval from the US Nuclear Regulatory Commission for its 50-MWe reactor module and is awaiting full certification of the larger design.

What is a SPAC?

SPACs as are public companies established without operations with a goal of acquiring or merging with private companies that can then quickly become publicly traded. They are a fast-growing category of investment on Wall Street, with an increasing number of SPACs focused on energy transition businesses.

SPACs have been around for decades, but their popularity has soared in recent years. In 2020, 247 SPACs were created with $80 billion invested, and in just the first quarter of 2021, a record $96 billion according to a July 2021 report in the Harvard Business Review.

Image: NASDAQ

SPACs allow public stock market investors to invest in transactions in the same way that private equity funds do. They are known as blank-check companies or shell corporations because at their inception they have no operations and no assets other than the proceeds of the SPAC’s initial public offering of shares.

According to a report in the New York Times 12/10/21 the Securities & Exchange Commission has concerns about SPACs and wants to tighten regulations to make them closer to Initial Public Offerings (IPOs) in terms of agency oversight and industry compliance. SEC Chairman Gary Gensler told the newspaper that SPACs are allowed to pitch potential investors using forward-looking business data that isn’t allowed in I.P.O.s. That loophole, he said, allows the financiers behind these funds to release rosy-looking numbers that mask the underlying health of the business they’re taking public.

The NYT article also reported that Gensler said that the people behind SPACs, including their sponsors, financial advisers and accountants, should be held more accountable for their due diligence on the companies these funds acquire, much as underwriters of I.P.O.s are.

A SPAC is Just the Beginning of the Firm’s Quest for Major Investors

The company intends to help UAMPS finance between $3.5 billion and $4 billion in costs to license and build the first plant because it is the first of a kind (FOAK), he said. NuScale hopes to have government support in the financing, he added.

Fluor CFO Joseph Brennan is quoted in the S&P report as saying on 12/02/21 in a conference call with analysts that the company had narrowed the options for reducing its stake in NuScale, but was not yet ready to make an announcement. “Internally, we’re starting to land on where we believe that value lies. And again, we look forward to being able to communicate that very shortly.”

NuScale was formed as a spinoff from Oregon State University in 2002. This month it named its reactor as VOYGR which seems to have a kind of Star Trek motif to it. The firm employs 450 people mostly in Oregon.

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Saudi Arabia May Be Getting Ready to Release a Tender for Nuclear Reactors

According to wire service reports, an article in Construction Week, Saudi based Nesma & Partners has inked an MOU with Frances EDF to build the Kingdom of Saudi Arabia (KSA) first nuclear plant. The deal was announced 12/01/21 at the World Nuclear Exhibition in Paris and also during a state visit by French President Emmanual Macron to Saudi Arabia.

The master agreement between France’s EDF and Saudi Arabia’s NESMA Construction is likely a positioning effort ahead of an expected Saudi tender for two full size nuclear power plants. By partnering with a Saudi firm, EDF hopes to address “localization” requirements that will likely be part of any nuclear reactor tender in Saudi Arabia. KSA has been quiet for some time as to when it would release the tender, but this action by EDF and NESMA, a domestic Saudi firm, indicates that it could be soon.

EDF would be expected to propose to be the vendor of its 1650 MWe EPR reactor and, also serve as the engineering, construction, procurement (EPC) project manager for the effort. NESMA would build the plant(s). The significance of this media latest report adds Bouygues Travaux Publics as a party to the MOU between EDF and NESMA (KSA construction firm.

Other bidders expected to show up in similar positioning moves could include China, Russia, South Korea, and Japan. No U.S. firms can participate in responding to a tender, either directly or with partners, due to the fact that KSA does not have an agreement on peaceful uses of nuclear energy with the U.S. under Section 123 of the Atomic Energy Act.

KSA has rejected signing on to one with the types of conditions accepted by the UAE for its construction of four South Korean 1400 MWe PWRs. The USA 123 agreement is touted by the U.S. State Department as being a “gold standard” for this type of commitment.

KSA has stated that it reserves the right to acquire uranium enrichment capabilities if Iran does not curb its nuclear program. As a practical matter, the KSA deal to acquire one or more commercial nuclear power plants would likely involve the supply of fuel for the plant(s) from either the vendor or a third party like Urenco.

KSA’s ability to pay for a commercial nuclear program depends very much on the price of oil. As of this 12/07/21, Brent Crude is priced at $76/bbl. KSA’s original ambitions in 2014 for nuclear power were a fleet of 16 reactors spread over three sites composed of 1000 MWe PWRs.

This vast project was based on the price of oil holding steady above $100/bbl. When the price of oil plunged to $60/bbl in early 2015, KSA hit the brakes on the entire program and only revived it a few years later for just two full size reactors. KSA would have to look at its budget to decide whether to proceed with enrichment capabilities and other elements of a nuclear weapons program.

KSA has also been working with South Korea on a 100 MWe SMR for use in sea water desalination at multiple sites to support release of natural gas for export that it has been burning at reverse osmosis plants to supply its cities with potable water.

It is unclear whether that effort would translate into a competitive advantage for South Korea to offer its full size PWRs (1400 MWe). South Korea’s success in the UAE is highly visible to KSA and that is a more likely factor that could weigh in for the country’s consortium of heavy industries that might submit a bid.

One limiting factor for South Korea is that it got the go ahead from the U.S. to include U.S. licensed (nuclear reactor design) intellectual property in the UAE contract because of the favorable terms in the UAE’s 123 Agreement. The UAE agreed not to develop its own enrichment capability and to not reprocess spent fuel to extract weapons grade plutonium from it.

South Korea would have to make the case that its bid to KSA does not include the intellectual property it used in UAE because there is no 123 agreement between the U.S. and KSA. This limitation does not affect China, Russia, or Japan.

In February 2019 KSA said at the Munich Security Conference that since it cannot get the U.S. to set aside its policies for 123 agreements that one of its options is to get reactors from China.

China is building its Hualong One (1000 MWe PWR) for Pakistan and the first of two planned units is scheduled to be connected to the grid next year.

KSA and Pakistan are close political allies. It is seen in some quarters that China’s export of the Hualong One to Pakistan is intended, in part, to give KSA a chance to “kick the tires” for one in anticipation of a tender from KSA for new plants.

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Sheffield Forgemasters Signs MOU with Rolls-Royce SMR

According to press statements by Rolls-Royce and Sheffield Forgemasters, the two firms signed a Memorandum of Understanding (MOU) in a move to explore a long-term collaboration.

The collaboration would see the Yorkshire based Forgemasters, which was passed in to public ownership this year following a deal with the Ministry of Defense, supply large forgings to the Rolls-Royce UK Small Modular Reactor (SMR) fleet.

The firm is one of a handful of British companies to fabricate safety critical castings and forged components within nuclear power stations. It also has ASME certification for its products.

The project directly supports the UK’s civil nuclear renaissance and the development of SMRs in the UK, with Sheffield Forgemasters able to supply the complex, nuclear-grade demonstrator forgings as part of the regulatory process.

The important components will benefit from the decades of experience Sheffield Forgemasters has built up and its world class delivery experience.

Tom Samson, Rolls-Royce SMR’s CEO, said: “Sheffield Forgemasters are world leaders in complex, safety-critical forgings and castings and we are incredibly fortunate to have their experience to support and enable our SMR programme.

“This agreement is the start of an enduring partnership and reflects our commitment to the UK supply chain as we look to re-build and re-energise the vital UK nuclear supply chain.”

David Bond, CEO of Sheffield Forgemasters commented: “SMR’s have the potential to become the standard for civil nuclear power generation and as an emerging market, fits extremely well with our long track record of supplying nuclear power components into the UK submarine programme.

“With a new investment fund of £400m to replace our defence critical assets, including the provision of a new 13,000 tonne forging line and 19 state-of-the-art machining centers, we will create much higher levels of manufacturing capability and efficiency, to the benefit of defence nuclear work, but with obvious cross-benefits for civil nuclear activity, including SMR’s.

The agreement was signed at Nuclear 21, the Nuclear Industry Association’s key industry event, which brings together stakeholders across the nuclear industry.

It follows the creation of Rolls-Royce SMR Ltd which has been established to bring forward and deliver the next generation of low cost, low carbon nuclear power technology.

Last month, Rolls-Royce SMR issued a Notice of Intention to submit its 470 MWe SMR design for entry to the UK’s Generic Design Assessment (GDA) regulatory process. The review of the SMR design, based on a small pressurized water reactor,  will begin in ernest once the government has assessed the company’s capability and capacity to successfully enter and complete the GDA process.

A Rolls-Royce-led UK SMR consortium aims to build 16 SMRs. The consortium includes Assystem, Atkins, BAM Nuttall, Jacobs, Laing O’Rourke, National Nuclear Laboratory, the Nuclear Advanced Manufacturing Research Centre and TWI. It aims to complete its first unit in the early 2030s and build up to 10 by 2035.

About 80% of the plant’s components will be sourced from the UK. The target cost for each station is GBP1.8 billion by the time five have been built, with further savings seen as being possible.

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