Look To Asia For Nuclear Gains

By Aaron Levitt | December 14, 2011 AAA

The nuclear power industry took a huge hit this past March, when Japan suffered the double disaster of earthquake and tsunami. The resulting meltdown at the Fukushima Daiichi nuclear power plant resulted in a variety of developed nations to reconsider and reevaluate their power portfolios. Many analysts and investors considered the sector "dead money," as both citizens and policy markers debated the safety of the power source. However, while the developed world continues to argue over nuclear's future, the emerging nations in the Asia-Pacific are moving forward with their atomic plans.
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Still Seeing Growth
As Germany begins its 2022 nuclear phase-out, emerging Asia is under-going a massive building binge. According to the International Atomic Energy Agency, more than 65% of all nuclear plants currently under construction are being built in Asia and data from the World Nuclear Association shows that Asia is the main region in the world where nuclear electricity generating capacity is growing significantly.

With some analysts calling for Asia's power demands to nearly triple by 2030, governments on the continent continue to expand towards the power source. Both China and India have adopted aggressive nuclear plans, in addition to their alternative energy ambitions. China's latest national plan calls for around 80 GW worth of nuclear generation capacity by 2020. This will require the nation to add an average of 7,000 MW per year. The Asian dragon currently has 25 reactors already in construction. Currently, India operates around 17 nuclear plants or about 4,000 MW worth of capacity. However, the nation has plans to expand up to 200,000 MW within 20 years. (For related reading, see The Economic Reasons Behind Nuclear Power.)

Elsewhere in Asia, the story is similar. Nations within the ASEAN, such as Malaysia, Thailand and Vietnam, have begun the initial planning stages and will add nuclear power to their energy mixes within the next decade. Thailand will begin construction on a 4,000 MW plant in 2014. South Korea currently receives around 35% of its electric needs from atomic energy, but wants to expand that percentage to 59%. Severe blackouts in Indonesia have convinced the government to spend more than $8 billion for two nuclear reactors and the country has been aggressively training technicians and scientists in anticipation of its nuclear ambitions.

Playing Asia's Nuclear Ambitions
With emerging Asia continuing to add reactor capacity at a rapid pace, investors may want to consider the sector. The regions tightly packed populations make it a perfect choice for the power source. As Germany, Switzerland and few other European nations have begun to wind down their nuclear programs; stocks within the sector have been left for dead. Now could be a great time to add a dose of nuclear energy to a portfolio.

The Market Vectors Uranium+Nuclear Energy ETF (ARCA:NLR) offers a broad play on the sector. The ETF tracks 25 different firms across the entire nuclear spectrum, including miners, reactor designers and operators. Top holdings include utility Central Vermont Public Service (NYSE:CV) and miner Denison Mines (NYSE:DNN). The fund has continued to drift lower since the Fukushima disaster, but represent an interesting value play. Similarly, Global X Uranium ETF (ARCA:URA), which bets on a basket of uranium miners, is nearly $14 off its 52-week high.

As the go-to name in uranium mining, Cameco (NYSE:CCJ) has seen its share price implode over the last year. However, the firm recently reported an increase in adjusted earnings for the third quarter, due to higher uranium sales and improved prices. Shares of the miner now offer a 2.1% dividend, as well as some gold production exposure. The company's recent bidding war with Rio Tinto (NYSE:RIO) for Hathor Exploration, highlights the continued need for new sources of supply. Junior miners like Uranium Resources (Nasdaq:URRE) and Uranerz Energy (NYSE:URZ) could see their share prices rise as consolidation continues.

The Bottom Line
While the developed world continues to abandon their nuclear ambitions, Emerging Asia is going full steam ahead. As power needs in the region soar, so are the number of reactors being built. For investors, the recent downturn in nuclear stocks offers a perfect opportunity to add some exposure to the energy source. The previous firms, along with South Korea's Korea Electric Power (NYSE:KEP), make ideal selections. (For related reading, see 4 Clean-Energy Alternatives To Uranium.)

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At the time of writing, Aaron Levitt did not own shares in any of the companies mentioned in this article.

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