Where Will NuScale Power Be in 1 Year?

NuScale Power (NYSE: SMR) believes it is well ahead of the competition to build small-scale nuclear reactors (also called SMRs, for small modular reactors). There are multiple reasons for this and major implications for investors.

The next year will be an important phase in the company's development, even though it still won't have sold a single reactor in the next 12 months. Here's what investors need to watch if they own or are considering buying NuScale Power.

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What does NuScale Power do?

For a long time, NuScale was largely about research and development (R&D) as it looks to create the first commercially available small-scale nuclear reactor. These types of reactors are highly attractive for a few reasons.

Their relatively small size means they can be built at lower costs than a large nuclear reactor. The reduced size and technology upgrades make them safer to operate. And they can be placed exactly where they are needed and closer to large populations.

These are huge benefits that could make SMRs the go-to technology for utilities and other businesses, like data centers.

Image source: Getty Images.

The potential demand here could be huge. According to NuScale, power requirements could multiply sixfold over the next 20 years versus the last 20 years.

Given the clean power provided by reactors, it seems reasonable that nuclear power will be a key part of the rapidly developing energy mix. And given the flexibility of SMRs relative to large-scale nuclear power plants, it seems likely that SMRs will also be in high demand.

The key story, however, is that management believes it is years ahead of the competition. The key reason is that its technology is based on current standards. Many of its peers are trying to create something from scratch, end to end, while NuScale plans to use existing supply chains for key aspects of a nuclear plant, like the fuel. And those that are using scaled down versions of existing technology aren't nearly as far along in the approval process as NuScale.

As often as it can, the company says that it is "the only small modular reactor technology certified by the U.S. Nuclear Regulatory Commission."

To be fair, that's a big differentiation. Getting certification is a years-long process, and it believes the companies seeking to use newer technologies, like a different type of nuclear fuel, are a decade or more away from having a commercially available power plant. NuScale thinks it could have a plant up and running by the end of the decade.

What's going to happen in the next year?

Given that this is 2025 and the end of the decade is still more than four years away, investors shouldn't get their hopes too high for 2025 on the financial front. That said, there was an important pivot in 2024 as the company shifted from an R&D focus to a focus on commercialization.

To that end, the company's operating expenses in the fourth quarter of 2024 dropped by 40% year over year. The trend for lower expenses should continue, which will help stem the outflow of cash.

On the cash front, the company forced the conversion of warrants at the end of 2024. That resulted in an increase in the share count, diluting existing shareholders, but providing a cash infusion of around $200 million. That should give the company added breathing room on its balance sheet, though keeping an eye on its cash burn remains vital.

SMR Average Diluted Shares Outstanding (Quarterly) data by YCharts.

Right now, the company effectively has the foundations for six reactors in the queue, as it works to build some of the items that require longer lead times to make. But its discussions with potential customers have given it enough confidence to place orders for similar components for an additional six SMRs. While the company does have a potential deal for the first six SMRs, it doesn't yet have anything signed for the next six, so it is spending ahead of demand.

That said, the biggest steps to watch over the next year are the hoped-for regulatory approvals of the company's upgraded reactor plans in mid-2025.

And even more crucial is the final investment decision on the power plant in Romania that is contracted to take NuScale's first six reactors. That final investment decision is expected come at the end of 2025. And that could be the true inflection point for the business. If this project gets the green light, the company will actually move toward commercialization of its SMR technology.

A lot of solid execution is needed

The next 12 months will basically help determine if NuScale Power just has a good idea or if it has a commercially viable idea. Management still needs to execute at a high level on multiple fronts to get there. But in a year it could be the undisputed first mover in the SMR space, which would give it an important head start on the competition.

This high-risk stock is not for the faint of heart. If anything goes wrong, including a more rapid cash burn than expected, failing to get the expected regulatory approvals, or the Romanian project not getting the final nod, NuScale Power's outlook would dim.

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Reuben Gregg Brewer has no position in any of the stocks mentioned. The Motley Fool recommends NuScale Power. The Motley Fool has a disclosure policy.