Door Slamming Shut on Nuclear Power Plant

The headlines yesterday heralded the fate of workers and their families following the closure of the Fort Calhoun nuclear power plant. It was a stark message of lost jobs and piles of nuclear waste left behind by the plants owner, the Omaha Public Power District.  Despite years of uneventful and successful power generation, Fort Calhoun is no longer an economical power source. 

In Fort Calhoun’s neighborhood north of Omaha, Nebraska there are apparently numerous renewable alternatives that are more competitive.  The area is blessed with strong winds, numerous sunny days and ample natural gas under the prairie soil.  Nebraska is littered with wind turbines and solar panels and has over 20,000 natural gas pipeline running across the state.  Despite regular maintenance and upgrades with shiny new equipment, Fort Calhoun’s numbers just do not add up anymore.

Fort Calhoun is not an exception.  There are sixteen other nuclear power plants around the U.S. already undergoing decommissioning for a variety of reasons.  More are expected to follow as power generation companies rebalance portfolios as renewable power sources continue to achieve lower unit costs.

Nuclear power has not been fortunate in finding cost savings.  The industry has not seen a major breakthrough in design or technology in decades.  The post “So Far So Good” in March 2016, discussed the progress made by Lightbridge Corporation (LTBR:  Nasdaq) in commercializing a new nuclear fuel technology.  According to Lightbridge management, its novel fuel rod design would give nuclear power plants a 17% power uprate for existing pressurized water reactors and 30% power uprate for new power plants.  The fuel rods represent the first chance for significant improvement in nuclear power plant economics in decades.

Indeed, the Lightbridge fuel rod could make nuclear the low-cost alternative to add incremental power to the electricity grid.  The potential to change the economics of nuclear power might be one of the reasons that Areva NP, the world-class nuclear power equipment supplier, entered into a joint development agreement with Lightbridge to bring the fuel rod to market.  Areva is contributing is ample engineering expertise in nuclear fuel and nuclear power generation to the joint agreement.  Four U.S.-based utility companies  -  Dominion, Duke Energy, Southern Company and Exelon -  have already expressed an interest in the fuel rods in letters to the Nuclear Regulatory Commission, which must eventually approve Lightbridge’s fuel rods.

Unfortunately for the loyal employees at Fort Calhoun, the Lightbridge fuel rod is still probably four years away from reaching the market.  There is considerable testing and proving of the fuel rods that must be completed.  Lightbridge has relationships at facilities in Canada, Norway and Sweden to complete tests and gather data.  Even after all the kinks are worked out before the company can begin fabricating the fuel rods it must get regulatory approval.     

In recent months Lightbridge has made some headlines of its own, but most of those are part of its investor relations effort.  Lightbridge management has been making the rounds at investor conferences, telling the story and laying the ground work for the next capital raise.  At the end of June 2016, Lightbridge had $1.5 million in cash on its balance sheet, that balance of capital raise in August 2016 from the issuance of $2.8 million in convertible preferred stock.  Lightbridge also has options to enter into agreements for equity lines totaling $20 million. 

Neither the author of the Small Cap Strategist web log, Crystal Equity Research nor its affiliates have a beneficial interest in the companies mentioned herein.