Investing in U.S. Nuclear Infrastructure

A Presentation Based on the Analysis of Nucleus Infrastructure Partners

Part 1: Understanding U.S. Nuclear Infrastructure

This section provides an overview of the current U.S. nuclear landscape, covering:

The Nuclear Fuel Cycle & Supply Chain
Key Active Firms (Operators, EPC, Developers)
Geographical Locations of Nuclear Assets

The U.S. Nuclear Fuel Cycle: Front End

Key Stages:

Mining: Uranium ore extraction (conventional or In-Situ Recovery - ISR).
Milling: Processing ore into "yellowcake" ($U_3O_8$).
Conversion: Yellowcake to uranium hexafluoride ($UF_6$) gas. Critical bottleneck with limited U.S. capacity (Honeywell Metropolis Works, IL).
Enrichment: Increasing $^{235}U$ concentration. U.S. relies on imports; Urenco USA (NM) is sole commercial domestic producer.
Fuel Fabrication: Enriched $UF_6$ to $UO_2$ powder, pressed into pellets, and assembled into fuel rods.

Key Takeaway: Significant U.S. import reliance for uranium and conversion. Recent policies aim to boost domestic production for energy security.

The U.S. Nuclear Fuel Cycle: Back End & Key Firms

Back-End Stages:

Used Fuel Storage: Initially in pools, then dry cask storage at reactor sites.
Recycling (Reprocessing): Not widespread commercially in the U.S. for civilian fuel.
Waste Disposal: Major challenge. No operational long-term repository for commercial spent fuel (Yucca Mountain designated but unfunded). WIPP (NM) for defense TRU waste.

Key Fuel Cycle Firms (Examples):

Mining/Milling: Energy Fuels, EnCore Energy, Ur-Energy.
Conversion: Honeywell (facility), ConverDyn (marketing).
Enrichment: Urenco USA.
Fuel Fabrication: Westinghouse, Framatome, Global Nuclear Fuel.

Active Firms: Power Plant Operators & EPC

Major Nuclear Power Plant Operators:

Constellation Energy (largest U.S. operator)
Duke Energy, Vistra Energy, Dominion Energy, NextEra Energy, Entergy
Southern Nuclear, TVA, PSEG Nuclear, Energy Harbor

Leading Engineering, Procurement, and Construction (EPC) Firms:

Bechtel Corporation: Extensive global experience; built Vogtle 3 & 4; involved in TerraPower's Natrium.
Jacobs Engineering Group: Wide range of services including design, safety, waste management.
Fluor Corporation: Long history; operating plant support, decommissioning; majority owner of NuScale.

Active Firms: Advanced Reactors & SMR Developers

A new generation of nuclear technology promising enhanced safety, smaller footprints, and diverse applications.

Key U.S.-based/Active Developers:

NuScale Power: VOYGR SMR (first NRC certified SMR design).
GE Hitachi Nuclear Energy (GEH): BWRX-300 SMR.
TerraPower (backed by Bill Gates): Natrium reactor (sodium-cooled fast reactor).
X-energy: Xe-100 (high-temp gas-cooled); TRISO-X HALEU fuel facility.
Kairos Power: Hermes test reactor (fluoride salt-cooled).
Westinghouse: AP300 SMR, lead-cooled fast reactor.
Holtec International: SMR-160/300; involved in Palisades restart.
Oklo Inc.: Aurora microreactor.

Significance: Potential for new site types (smaller, co-located with industry/data centers).

Active Firms: Investors & Strategic Partners

Investment Trends:

Growing interest from Venture Capital (Alumni Ventures, Founders Fund, a16z), Private Equity, and Strategic Corporates.
Tech Giants (Amazon, Google, Microsoft, Meta) exploring nuclear (especially SMRs) for data centers & AI.
Fusion energy also attracting significant private funding (>$7.1B globally).

Motivations:

Need for large-scale, reliable, carbon-free baseload power.
Corporate decarbonization goals.

Key Investors/Partners (Examples):

Bill Gates (TerraPower), Fluor (NuScale), Samsung, Doosan.
Government Support: DOE Loan Programs Office (LPO), ARDP grants, tax credits.

Locations of U.S. Nuclear Assets

Operating Reactors: 28 states, concentrated in Eastern & Midwestern regions (e.g., PA, IL, SC, NY).
Fuel Cycle Facilities:
- Mining/Milling: Western states (WY, TX, UT, AZ).
- Conversion: Metropolis, IL (sole U.S. facility).
- Enrichment: Eunice, NM (Urenco USA).
- Fabrication: Dispersed, notable presence in Southeast (SC, NC, TN, VA).
Radioactive Waste:
- Spent Fuel: Stored at ~100+ reactor sites (pools & dry casks).
- Defense Waste: Hanford (WA), Savannah River (SC). WIPP (NM) for TRU waste.
Research Labs: INL (ID), LANL (NM), ORNL (TN), LLNL (CA), ANL (IL).
Key Trend for New Builds: Co-location or brownfield redevelopment (e.g., retired coal plants) leveraging existing infrastructure. DOE estimates 60-95 GW potential at such sites.

Part 2: Real Estate Analysis for Nuclear Properties

This section explores the practical considerations for analyzing and investing in nuclear-related real estate:

Land Ownership and Lease Structures
Risk Assessment and Specialized Due Diligence
Underwriting and Valuation Methodologies
Indemnity and Liability Protection Frameworks

Land Ownership & Lease Structures

Common Ownership Models:

Direct Utility/Operator Ownership: Traditional model for large plants.
Government Ownership: DOE land for research, national security, waste.
Third-Party/Investor Ownership: Emerging model, especially for SMRs.

Ground Leases for Critical Infrastructure:

Long-term (50-99+ years), often Triple-Net (NNN).
Tenant responsible for construction, operations, taxes, insurance.
Reduces operator's upfront capital; stable income for landowner.
Crucial for nuclear: must cover operations + extended decommissioning.

NRC Regulations:

Licensee must have authority over "exclusion area" (10 CFR §100.3). Absolute ownership preferred, but robust leases/easements may be acceptable.

Unique Risks in Nuclear Real Estate

Radiological Contamination: Potential for accidental releases impacting property value and use.
Decommissioning Obligations & Costs: Complex, multi-year, expensive process (up to 60 years post-shutdown). Funding adequacy is key.
Long-Term Stewardship (LTS): Ongoing monitoring and control for sites with residual contamination.
Security Mandates: Stringent NRC requirements influencing site design and costs.
Public Perception & Community Acceptance: Can impact property values and project feasibility.
Climate Change Risks: Vulnerability to extreme weather (heat, drought, floods, storms).

Due Diligence for Nuclear Sites: Beyond Standard

Requires a highly specialized and in-depth approach:

Specialized Radiological Assessments: Historical reviews, surveys, sampling (soil, water, materials).
IAEA Guidance: Site evaluation for geological stability, environmental impact.
ASTM E3429-24 Property Resilience Assessments (PRA): For natural disaster/climate risks.
Regulatory Compliance: NRC licenses (status, conditions), state/local land use, zoning.
Land Use Covenants (LUCs): Identify restrictions on future use for contaminated sites.
Decommissioning & Site Reuse: Understand plan (DECON/SAFSTOR), funding, ISFSI presence, redevelopment potential.

Team: Needs experts in nuclear engineering, health physics, environmental science, regulatory law.

Underwriting & Valuation of Nuclear Real Estate

Adapted Valuation Methodologies:

Cost Approach: Relevant for new builds or specialized facilities.
Sales Comparison: Limited by rarity of true comparables.
Income Capitalization: Key for leased assets; relies on lease terms, tenant credit, risk-adjusted cap/discount rates. Monte Carlo simulation for uncertainty.

Assessing Long-Term Financial Liabilities:

Decommissioning Trust Funds: NRC requirement; adequacy is critical.
Environmental Remediation Costs: Potential for unexpected cleanups.

Property & Casualty Insurance:

Operator Financial Protection: NRC mandates on-site property insurance (min. $1.06B via NEIL).
Price-Anderson Act: Two-tiered system for public liability (Primary: $500M private insurance via ANI; Secondary: ~ $15B industry pool).

Indemnity & Liability Protection

The Price-Anderson Act:

Limits liability for nuclear incidents, ensures public compensation. Extended through 2065.
Provides "omnibus" coverage, extending to "any other person indemnified" (e.g., contractors, potentially landowners).
Total coverage ~ $16.1 billion per incident.

Contractual Indemnification in Leases:

Vital for landowners. Operator-lessee indemnifies landowner for operational/environmental liabilities.
Must clearly assign responsibility for decommissioning, cleanup, compliance.
Backed by lessee's insurance and financial strength.

Landowner Liability Concerns (Post-Operator Default):

Potential CERCLA liability for cleanup if lessee defaults.
Mitigation: Robust due diligence, strong lease terms, financial assurances from lessee (bonds, escrows).

Part 3: Business Plan - Nucleus Infrastructure Partners (NIP)

Outlining the strategy for a new real estate and infrastructure investment firm dedicated to the U.S. nuclear energy sector:

Mission, Vision, and Objectives
Company Description and Niche Focus
Market Analysis and Opportunity
Investment and Operational Strategy
Financial Plan and Expected Returns
Risk Management and Exit Strategies

NIP: Mission & Niche Focus

Mission:

To be the premier specialized real estate investment firm providing critical land and infrastructure solutions to the U.S. nuclear energy sector, fostering clean energy growth and delivering stable investor returns.

Niche Focus:

Acquisition/development of sites for advanced reactors/SMRs (greenfield & brownfield).
Long-term ground leasing to operators, developers, industrial users.
Selective sale-leasebacks of land under existing facilities.
Investment in real estate for critical fuel cycle facilities.
Properties for nuclear R&D facilities.

Competitive Advantage: Deep expertise in nuclear regulations, specialized due diligence, innovative lease structuring, industry relationships.

NIP: Market Analysis & Opportunity

U.S. Nuclear Market Drivers:

Increasing Electricity Demand: Data centers, AI, industrial growth.
Clean Energy Transition: Nuclear is ~50% of U.S. emission-free electricity.
Energy Security & Reliability: High capacity factor, domestic fuel potential.
Government Support: Tax credits, loan guarantees (DOE LPO), R&D funding.

SMRs & Advanced Reactors: Key Growth Vector

DOE forecasts U.S. nuclear capacity could triple to 300 GW by 2050, largely via new tech.

Target Real Estate Assets:

Brownfield redevelopment (retired coal plants - potential 15-34% Capex savings).
Land at existing/retired nuclear sites.
Greenfield sites for SMRs (e.g., for data centers).
Sale-leasebacks of land under operating plants.
Sites for expanded domestic fuel cycle operations (HALEU).

NIP: Investment & Operational Strategy

Property Acquisition Strategies:

Direct purchase of strategic sites (brownfields, SMR-suitable locations).
Joint Ventures (JVs) with nuclear operators, developers, or end-users.
Sale-Leaseback transactions (land component of existing facilities).

Financing Mechanisms:

Dedicated Real Estate Infrastructure Funds (institutional investors).
DOE Loan Programs Office (LPO) financing (e.g., EIR Program).
Project-level and corporate debt.
Co-investment with strategic partners.

Lease Structuring for Nuclear Tenants:

Long-term (40-99+ years) Triple-Net (NNN) ground leases.
Meticulous risk allocation: environmental, safety, security, decommissioning.
Comprehensive indemnification by operator-lessee.
Fixed base rent with periodic escalations.

NIP: Financial Plan & Returns

Revenue Models:

Primary: Long-term lease income (NNN leases with escalators).
Secondary: Potential long-term land appreciation.

Expected Financial Returns:

Target Unlevered IRR: 7-9% (stabilized assets).
Target Levered IRR: 10-14%.
Indicative Cap Rates (Stabilized): 5.5% - 7.5% (varies by asset type/risk).
- E.g., Sale-leaseback (operating NPP): 5.5-6.5%
- E.g., Brownfield SMR site (pad-ready, stabilized): 6.0-7.5%

Funding Requirements:

Initial Seed Capital: $10 million (startup, initial deal sourcing, due diligence).
First Fund (NIP Nuclear Real Estate Fund I, LP): Target raise $250 million (acquisitions, development).

NIP: Risk Management & Mitigation

Specific Risks for NIP:

Market Risk (policy shifts, competing tech).
Regulatory Risk (changes in NRC, EPA rules).
Environmental Liability Risk (residual CERCLA, unknown contamination).
Tenant Default Risk (financial distress, failure on decommissioning).
Decommissioning Liability Pass-Through (costs exceed tenant funds).
Financing Risk, Physical Risks, Technological Obsolescence.

Mitigation Strategies:

Rigorous & specialized due diligence (environmental, radiological, regulatory).
Strong contractual protections in leases (indemnities, insurance, decommissioning funding covenants).
Specialized insurance for NIP (e.g., PLL).
Strategic tenant selection (creditworthy, experienced).
Proactive government & community relations.
Contingency planning & financial reserves.

NIP: Exit Strategies

Anticipates long holding periods, consistent with infrastructure assets.

Options for Long-Duration Investments:

Sale to Institutional Investors: Primary strategy (pension funds, insurance co's, sovereign wealth funds, infrastructure funds).
Sale to Specialized Infrastructure REITs.
Operator Buy-Out Option: Lessee purchases land at lease end or trigger point.
Portfolio Sale: Selling entire portfolio to a larger investor.
Refinance and Recapitalize (Partial Exit).

Liquidity Considerations:

Secondary market for LP interests in funds.
GP-Led Secondaries (Continuation Vehicles).
Direct assets are inherently illiquid; require bespoke sale process.

Key Conclusions from Analysis

Strategic Imperative: U.S. needs domestic nuclear expansion for energy security & decarbonization.
Evolving Investors: Tech giants, VCs, PEs entering the nuclear space.
Brownfield Focus: Redevelopment of existing energy sites is a key strategy for new nuclear.
Unique RE Needs: Nuclear demands specialized, long-term real estate solutions.
Expertise is Crucial: Navigating complex risks requires deep nuclear & RE knowledge.
Liability Framework: Price-Anderson Act + strong contracts are essential.
Financial Viability: Hinges on stable, long-term cash flows from creditworthy tenants.

Strategic Recommendations for NIP

Prioritize Brownfield & Co-location Sites: Leverage existing infrastructure.
Develop Hybrid Expertise: Combine deep RE finance with specialized nuclear knowledge.
Forge Strategic Partnerships: Collaborate with tech developers, operators, EPCs, offtakers.
Master Long-Term Lease Structuring: Meticulously address risk, decommissioning, indemnities.
Leverage Government Programs: Utilize DOE LPO financing and other incentives.
Implement Rigorous, Multi-Layered Due Diligence: Essential for risk mitigation.
Focus on Risk-Adjusted Returns & Long-Term Value: Attract institutional capital.
Proactive Stakeholder Engagement: Build trust with regulators, communities, industry.

Thank You

This presentation provided an overview of the U.S. nuclear infrastructure, real estate considerations, and the investment strategy for Nucleus Infrastructure Partners.

Further discussion and questions are welcome.