NuScale Power: Future Prospects for 2025

NuScale Power (SMR 0.63%) sees itself as a leader in the race to develop small-scale nuclear reactors, known as small modular reactors (SMRs). This position has significant implications for investors who are keeping a close eye on the company's progress.

The upcoming year will be crucial for NuScale, a period in which it may not finalize any reactor sales. However, several key developments are worth monitoring for both current shareholders and potential investors.

Understanding NuScale Power

Initially, NuScale primarily focused on research and development (R&D) to pave the way for the first commercially viable small-scale nuclear reactor. SMRs offer appealing advantages: they are more compact than traditional nuclear reactors, allowing for lower construction costs, enhanced safety features, and the ability to be situated closer to major population centers.

This adaptability makes SMRs a potentially popular option among utility companies and businesses, including data centers.

The anticipated demand for SMRs could be substantial. NuScale projects that energy requirements may increase dramatically in the next two decades compared to the previous twenty years.

With the clean electricity generated by nuclear energy, it is likely that nuclear power will play a pivotal role in the evolving energy landscape. Given the flexibility of SMRs in contrast to larger nuclear facilities, their demand seems poised to rise.

A central aspect of NuScale's advantage is its claim of being several years ahead of its competitors. One major reason is its reliance on well-established technology and existing supply chains for essential components, such as nuclear fuel. In contrast, many of its competitors are attempting to develop their technologies from scratch. Furthermore, companies that are adapting existing technologies have not progressed as far in the approval stages as NuScale has.

NuScale frequently highlights that it is "the only small modular reactor technology certified by the U.S. Nuclear Regulatory Commission." This certification is crucial, as the process can take several years, while competitors exploring new technologies face longer wait times—potentially a decade or more—before they can launch commercially operational plants. NuScale is targeting to have a functioning plant by the end of this decade.

What to Expect in the Coming Year

As we navigate through 2025, expectations for financial gains should be tempered, given that we are still several years away from significant commercial operations. However, a notable change occurred in 2024 when NuScale moved from an R&D focus to a more commercial approach.

This pivot is reflected in the company's operational expenses, which dropped 40% year-over-year in the fourth quarter of 2024. This downward trend in spending is expected to continue, helping to mitigate cash outflows.

On the financial side, the company executed the conversion of warrants at the end of 2024, which, while diluting existing shareholders, provided a cash boost of roughly $200 million to strengthen its balance sheet. However, monitoring cash burn remains essential.

Currently, NuScale has laid the groundwork for six reactors and is preparing some components that require longer lead times. Conversations with prospective clients have encouraged the company to place orders for components for an additional six reactors. While a potential agreement for the first six SMRs is in place, nothing has been finalized for the subsequent units, meaning NuScale is committing resources ahead of demand.

Perhaps the most critical developments to track over the next year are the expected approvals for updated reactor designs in mid-2025.

Even more significant is the anticipated final investment decision regarding a power plant in Romania, which is slated to feature NuScale's first six reactors. This decision is expected to arrive by the end of 2025 and could mark a pivotal moment for the company, pushing it closer to actual commercialization of its SMR technology.

Execution is Key

The next year will be instrumental in revealing whether NuScale Power's vision can transition from concept to reality. The management team must excel in various areas to achieve this goal. If successful, NuScale could solidify its position as the first major player in the SMR industry, giving it a considerable lead over competitors.

Investors should note that this high-risk stock requires careful consideration. Should any challenges arise—such as unexpected cash burn rates, delays in regulatory approvals, or the Romanian project failing to receive final approval—NuScale Power's future outlook could be adversely affected.

NuScale, SMR, nuclear