Shares in the company, which is designing so-called small modular nuclear reactors (SMRs), have surged nearly 140% over the past month on Big Tech’s growing interest in nuclear power. SMRs are designed to produce cheaper, faster, greener energy than traditional nuclear facilities.
“A nuclear power renaissance is underway with nuclear increasingly viewed as a solution which solves both the increased need for baseload power and the need to decarbonize,” wrote Craig-Hallum analyst Eric Stine in a recent note to investors. Baseload power refers to the day-to-day energy demand on an electrical grid.
Stine said Google and Amazon’s investments are “truly just the beginning of a multi-decade megatrend.”
Goldman Sachs estimates that global data center power consumption will grow 160% by 2030, driven by demand from artificial intelligence. Meanwhile, separate data from the International Atomic Energy Agency shows nuclear power production in North America potentially doubling by 2050.
Stocks of other firms making similar tech to Oklo’s, such as NuScale (SMƒR) and NANO Nuclear Energy (NNE), also surged following news of Google’s and Amazon’s investments on Oct. 14 and Oct. 16, respectively, before paring gains this week.
“The opportunity is so massive here in the market that there’s going to be a good number of folks that are successful,” Oklo CEO Jacob DeWitte told Yahoo Finance.
In fact, the SMR market could grow to $300 billion by 2040, according to research cited by Citi analysts.
Sam Altman owned a 2.6% stake in the company, according to a regulatory filing in June. He became chair of Oklo in 2024 after serving as its CEO for three years.
Sam Altman, co-founder and CEO of OpenAI as well as chairman of Oklo, speaks during the Italian Tech Week 2024. (Stefano Guidi/Getty Images) ·Stefano Guidi via Getty Images
While Oklo was founded in 2013, well ahead of the AI boom, the energy needs of artificial intelligence have been a boon to the firm as it builds its client book, DeWitte said.
“AI does make [up] the bulk of our order book that we’ve talked about,” DeWitte said in an interview. That includes clients in the chip sector as well as data centers, he added. Publicly, the company has said it’s working with hyperscalers Equinix and Prometheus Hyperscale. It has yet to disclose any deals with Big Tech firms.
But Wall Street analysts caution that the company and its competitors face regulatory and supply chain hurdles before they can produce anywhere near the amount of power needed to run artificial intelligence data centers.
Nuclear projects have been subject to stringent regulations in response to high-profile global nuclear meltdowns at Three Mile Island in 1979, Chernobyl in 1986, and Fukushima in 2011. On average, it takes the US Nuclear Regulatory Commission 80 months to approve nuclear plant construction in the US, compared to an average of 54 months in the UK, according to research cited by Canaccord Genuity.
While a number of companies are developing SMRs — including Bill Gates’ TerraPower — none have been deployed in the US to date, and long licensing processes mean profitability isn’t exactly on the horizon.
In Oklo’s first earnings report since going public on Aug. 13, the company reported a net loss of about $53 million for the first six months of the year, wider than the roughly $9 million loss it posted in the year-earlier period.
Mockup of Oklo’s Aurora powerhouse. (Courtesy of Oklo, Illustration by Gensler) ·(Gensler)
Fuel is also an issue for companies in the space: Many SMRs, such as those of Oklo, NuScale, and TerraPower, require a specific type called high-assay low-enriched uranium, also known as HALEU, which is imported from Russia. There’s little to no domestic supply since the West at large has avoided developing a HALEU supply chain. That’s because enriched uranium is used in nuclear weapons, according to Canaccord Genuity.
“A developed Western HALEU supply chain is absent, particularly given efforts to limit enrichment due to concerns over proliferation,” wrote Canaccord Genuity analyst George Gianarikas in a note to investors early this year.
Citing supply constraints and long and difficult licensing processes, Citi’s Vikram Bagri recently reduced his price target on Oklo stock from $11 to $10.
“There are too many ‘ifs’ in this process,” Bagri said. “The new technology and new nuclear installs, it seems like, will happen only after 2030. After 2030, it remains to be seen who gets successful and how successful they get, how many nuclear reactors we see.”
But Seaport analyst Jeffrey Campbell sees Oklo having advantages in the burgeoning market, pointing to its ability to use “much cheaper” recycled fuel.
Whereas a traditional nuclear plant can take billions of dollars to build, Oklo has said the cost of bringing one of its SMRs online is a few hundred million dollars.
For his part, DeWitte is optimistic about the future of the market — and Oklo’s place in it. DeWitte cited mounting bipartisan support to reduce regulatory hurdles and enhance the domestic supply of HALEU. He said Oklo is unique because the company is looking to own and operate its facilities and sell energy directly to customers, rather than the traditional model of licensing its technology to utilities. DeWitte believes this will enable the company to bring its reactors online faster.
Oklo CEO Jacob DeWitte, joined by Lynn Martin, NYSE group president, rings the Opening Bell after Oklo IPO. (Courtesy of Oklo) ·NYSE
“In the world today, where this opportunity is so massive — diverse customers that need different things, want different things … you’re going to see a diverse ecosystem evolve,” he said. He added, “You’re not going to see one winner take all.”
Laura Bratton is a reporter for Yahoo Finance. Follow her on X @LauraBratton5.
The EU was quick to hit Russia with sanctions after Vladimir Putin launched the invasion of Ukraine — but it took time and an escalation of measures before Moscow started to feel any real damage.
Since the war started in late February last year, November was the first month when the value of EU imports from Russia was lower than in the same month of 2021. Until then, the bloc had been sending more cash than before the conflict — every month, for nine months. More recent data is not yet available.
The main reason behind this? Energy dependency on Russia and skyrocketing energy prices. But that’s not the whole story: Some EU countries were much quicker than others to reduce trade flows with Moscow — and some were still increasing them at the end of last year.
Here is a full breakdown of how the war has changed EU trade with Russia, in figures and charts:
U.S. gas companies will be urged to up their exports to Europe via the U.K. under a new transatlantic energy partnership agreed by Rishi Sunak and Joe Biden.
The new “U.K.-U.S. Energy Security and Affordability Partnership” announced Wednesday includes a commitment from the White House to “strive to export at least 9-10 billion cubic metres of liquefied natural gas (LNG) over the next year via U.K. terminals,” No. 10 Downing Street said. The aspiration includes both gas for U.K. consumption and gas that might be re-exported to mainland Europe via pipeline.
The U.K. has three LNG terminals — two in Milford Haven, Wales and one in Medway, Kent — and has become a major hub for LNG supplies to Europe from the U.S.; a vital lifeline as the Continent has sought to replace Russian pipeline gas since Moscow’s invasion of Ukraine.
The new partnership between the U.S. and the U.K. mirrors in many ways an existing U.S.-EU task force that also focuses on energy security. It will be led by a “joint action group” consisting of senior White House and U.K. government officials, Downing Street said, with the first virtual meeting to be held on Thursday.
Alongside helping to guarantee U.K. and EU gas supply, it will work on global investment in clean energy and efficiency, plus the promotion of nuclear energy, including small modular reactors, in third countries. British Prime Minister Sunak and U.S. President Biden discussed the partnership at the G20 summit in Indonesia last month.
“This partnership will bring down prices for British consumers and help end Europe’s dependence on Russian energy once and for all,” Sunak said. “Together the U.K. and U.S. will ensure the global price of energy and the security of our national supply can never again be manipulated by the whims of a failing regime. We have the natural resources, industry and innovative thinking we need to create a better, freer system and accelerate the clean energy transition.”
The LNG commitment will be dependent on U.S. gas exporting companies. As is the case with its task force with the EU, the U.S. government will likely play the role of encouraging companies to direct their cargoes to the U.K.
The two sides will “proactively identify and resolve any issues faced by exporters and importers,” Downing Street said, adding: “We will look to identify opportunities to support commercial contracts that increase security of supply.”
Adam Bell, a former U.K. government energy official and now head of policy at the Stonehaven consultancy, said there was a “diplomatic upside” to the U.K. facilitating gas flows to the EU: “Especially this winter when we’ll want pipes to flow the other way; Europe has the stores that we don’t.” The U.K. would also benefit from shipping charges as the gas passes through its network, Bell added.
The EU is under immense pressure to cap the price of imported natural gas to contain energy costs — but many of the companies making a fortune selling cheap U.S. gas to the Continent at eye-watering markups are European.
The liquefied natural gas (LNG) loaded on to tankers at U.S. ports costs nearly four times more on the other side of the Atlantic, largely due to the market disruption caused by a near-total loss of Russian deliveries following the invasion of Ukraine.
The European Commission has come under fierce pressure to sketch out a gas price cap plan, but some countries, led by Germany, worry such a measure could prompt shippers to send gas cargoes elsewhere. The Commission is also reluctant, and its proposal issued Tuesday sets such demanding requirements that they weren’t met even during this summer’s price emergency.
But a large part of the trade is in European hands, according to America’s biggest LNG exporter.
“Ninety percent of everything we produce is sold to third parties, and most of our customers are utilities — the Enels, the Endesas, the Naturgys, the Centricas and the Engies of the world,” said Corey Grindal, executive vice president for worldwide trading at Cheniere Energy, rattling off the names of big-name European energy providers.
Cheniere, which this year saw 70 percent of its exported LNG sail to Europe, sells its gas on a fix-priced scheme based on the American benchmark price, dubbed Henry Hub, which is currently at about $6 per million British thermal units.
On average, the price across all Cheniere contracts is 115 percent of Henry Hub plus $3, Grindal said. That works out to about €33 per megawatt-hour. For comparison, the current EU benchmark rate, dubbed TTF, is €119 per MWh.
It’s a big markup for whoever is reselling those LNG cargoes into Europe’s wholesale market, profiting from fears that there may not be enough gas to last the winter.
Despite fears that any EU cap will send gas to higher bidders in Asia and result in bloc-wide shortages, Grindal gave a resounding “no” when asked if a cap would have any impact on how Cheniere does business with European companies.
“Our balance sheet is underpinned by those long-term contracts,” he added.
Translation: If buyers choose to trade their precious cargoes away for higher profits beyond Europe once they receive them, that’s their decision.
Blame game
“The United States is a producer of cheap gas that they are selling us at a high price … I don’t think that’s friendly,” said French President Emmanuel Macron | Ludovic Marin/AFP via Getty Images
The difference between U.S. and EU gas prices hasn’t gone unnoticed by European politicians — but most of the finger-pointing has been at American producers rather than the resellers closer to home.
“In today’s geopolitical context, among countries that support Ukraine there are two categories being created in the gas market: those who are paying dearly and those who are selling at very high prices,” French President Emmanuel Macron told a group of industrial players last week. “The United States is a producer of cheap gas that they are selling us at a high price … I don’t think that’s friendly.”
Macron’s dig conveniently ignored that the largest European holder of long-term U.S. gas contracts is none other than France’s own TotalEnergies.
At the company’s latest earnings call last month, TotalEnergies CFO Jean-Pierre Sbraire trumpeted the fact that the firm’s access to more than 10 million tons of U.S. LNG annually “is a huge advantage for our traders, who can arbitrage between the U.S. and Europe.”
“And now, given the price of LNG, each cargo represents something like $80 million, even $100 million. So, when we are able reroute or to arbitrage between the different markets, of course, it’s a very efficient way to maximize the value coming from that business,” Sbaire added. “Cash flow generation of this order of magnitude marks the start of a new era for the company.”
Spain’s Naturgy — which has some 5 million tons of U.S. LNG a year from Cheniere under contract — has also earned nearly five times more trading gas so far this year compared with 2021 thanks to “the increased spread between [Henry Hub] and TTF,” it wrote in its half-year report.
Long-term contracts with the U.S. weren’t always so profitable. In fact, from 2016 to at least 2018, buyers were mostly losing money on the fixed deals, leading some to sell them off.
In 2019 Spain’s Iberdrola, for example, pawned off its 20-year Cheniere contract to Asian trader Pavilion Energy, which is now benefiting from selling into a high-priced global market.
In the U.K, Centrica tried — and failed — to sell off its LNG portfolio in 2020 when government-ordered lockdowns drove real-time prices through the floor. That included a 20-year fixed Cheniere contract set to run through 2038.
Now that real-time prices have shot back up, Centrica — part of Shell-owned British Gas — is reaping the rewards and eagerly snapping up more long-term contracts, most recently a 15-year deal with U.S. LNG exporter Delfin beginning in 2026.
“This is a really important profit stream for us,” Centrica CFO Chris O’Shea told investors on a Friday trading update call.
Unlike some producers — for example in the Middle East — which restrict the final destination of the LNG to consumers in Asia and prevent it being sold onward at a higher price, American gas changes ownership the minute it’s loaded onto a ship and comes with no strings attached.
That leaves buyers free to redirect the precious supply wherever it’s most profitable — sometimes at the expense of their downstream clients, if it’s cheaper to break those pre-existing domestic delivery commitments.
“We can only control what we can control,” said Cheniere’s Grindal. “U.S. LNG is destination-free.”
But as far as getting it on the ship at previously agreed prices, “our focus is being that reliable supplier, being committed to the obligations that we’ve made to our customers, and we’re committed to doing everything that we can to help the EU in this situation.”
China’s President Xi Jinping has some good news for Europe — his country’s draconian zero-COVID policies aren’t likely to be dropped.
That’s a relief for European buyers of liquefied natural gas, as China’s economic slowdown has freed up LNG cargos crucial to replacing the Russian gas that used to supply about 40 percent of European demand.
“Regardless of what you think about the Chinese zero-COVID policy, simply looking at it only from the perspective of European gas supplies, it would be very helpful if China continued this policy,” said Dennis Hesseling, head of gas at the EU’s energy regulator agency ACER.
Xi took to the stage Sunday to kick off the week-long 20th Communist Party congress, and he doubled down on the zero-COVID approach, calling it a “people’s war to stop the spread of the virus.”
The once-in-five-year summit is “mostly a political meeting for within the party itself” but it does send crucial signals, said Jacob Gunter, a senior analyst at the China-focused MERICS think tank. So far it indicates China plans to “stick with [zero-COVID] for a while,” he said, adding that’s partly because government pandemic messaging has so spooked the population that lifting it would cause “chaos,” while Chinese vaccine hesitancy also remains high.
Since the outbreak of the pandemic in 2020, China has ruthlessly pursued its policy of crushing the coronavirus, involving snap lockdowns of entire cities accompanied by mass testing, surveillance and border closures. The slowdown in growth and depressed demand led to China’s LNG imports sinking by one-fifth, or 14 billion cubic meters, year-on-year for the first eight months of 2022, according to Jörg Wuttke, president of the EU Chamber of Commerce in China.
China and the EU each imported around 80 million tons of LNG in 2021, but China’s imports will fall to 64 million tons this year, according to data by market intelligence firm ICIS. That’s helping the EU buy gas on the global market and using it to fill the Continent’s storages ahead of the winter heating season.
“Europe is lucky that China has a severe economic downturn which will last well into 2023,” said Wuttke, adding that the drop in demand from China — historically the world’s largest LNG importer — is “roughly equivalent to the entire annual LNG imports of Britain.”
2023 worries
China’s President Xi Jinping | Anthony Wallace/Pool/AFP via Getty Images
With EU gas storage now over 90 percent full, the conversation in Brussels has already begun to shift to securing enough supplies for next year. At last week’s summit of EU energy ministers, International Energy Agency chief Fatih Birol warned that “next winter may well be even more difficult.”
As things stand, Beijing’s LNG imports are likely to rise back to 2021 levels next year, according to senior ICIS gas analyst Tom Marzec-Manser, with deliveries typically increasing around the winter season and then likely to ramp up again next summer.
China has already ordered its state-owned gas importers to stop reselling LNG to the EU to preserve stocks for the winter season at home.
But if the zero-COVID policy is scrapped, that could lead “to a step-change in growth again,” said Marzec-Manser.
European countries are well aware of this risk.
In a presentation given by ACER during last week’s informal Energy Council, ministers were told that “China’s COVID-driven demand decline in LNG volumes is currently being absorbed” by the bloc. “This raises questions as to when China’s LNG demand may turn back towards normal growth rates,” it added.
Although Russian shipments have fallen to less than 9 percent of EU demand, some Kremlin gas is still getting through. But “that may not be available at all next year,” said ACER’s Hesseling, adding that if there is no Russian gas and Chinese demand comes roaring back, more radical energy-saving measures would be needed in the EU.
EU leaders will meet later this week to discuss further measures to tackle sky-high energy prices in Europe, including measures for next year such as joint gas purchasing.
According to one senior EU diplomat, “competition from Asia [is] mentioned constantly,” adding that “it’s quite evident” a change in Beijing’s lockdown policy “may raise global demand and raise prices.”
“China is indeed a competitor and that needs to be taken into account whatever we might be doing,” they said.
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