Dive Brief

• X Energy Reactor Co., a developer of small modular nuclear reactors and fuel technology, is merging with a special purpose acquisition company backed by private equity firm Ares Management Corp., X-energy announced Tuesday. The deal would establish a combined publicly traded company valued at $2 billion.
• The company will receive about $1 billion in cash in the trust account of Ares Acquisition Corp., the SPAC, assuming no redemptions by shareholders. Investments and financing commitments include $75 million from Ares Management and $45 million from Ontario Power Generation and Segra Capital Management. 
• Demand for nuclear power is strong, X-energy said, citing its selection by the U.S. Department of Energy for $1.2 billion in federal funding as part of the Advanced Reactor Demonstration Program.

Dive Insight:

X-energy’s entry into public markets is expected to accelerate its growth strategy through additional investment and financial flexibility and “differentiated sponsorship” by Ares, X-energy said.

X-energy, based in Rockville, Maryland, is advancing nuclear generation through a high-temperature gas-cooled small modular reactor, or SMR, the Xe-100, and its fuel, TRISO-X. The reactor is engineered to operate as a single 80-MW unit and optimized as a four-unit plant delivering 320 MW.

With load-following capabilities, the Xe-100 can support intermittent renewables, such as solar and wind power, the company said.

X-energy intends to also provide project planning, regulatory support, assembly and construction coordination, procurement support and maintenance and operations services. And the manufacturer says its technology can support industrial uses with high-temperature heat and steam output.

Edwin Lyman, director of Nuclear Power Safety at the Union of Concerned Scientists, questioned the “fundamental economic justification” for SMRs.

“A small reactor is going to produce more expensive electricity than large ones,” he said.

Backers defend SMRs as benefiting from economies of scale, but that’s not been demonstrated, Lyman said. “It would require a large order book and experience,” he said.

Peter Manos, director of research for electric power and smart grid at ARC Advisory Group, said SMRs are “good business propositions” because they are more nimble and can ramp up and down quickly, improving the grid’s resilience and reliability.

NuScale Power Corp., which is developing SMR technology, went public in May, the first SMR developer to do so. It began trading on the stock market after merging with a special purpose acquisition company. Its share price rose to more than $15 in August, from $10.55 in May. Shares closed at $10.82 Tuesday. 

Cowen Equity Research analyst Marc Bianchi said in a Nov. 2 note that significant increases in nuclear power are needed to achieve decarbonization and energy security goals, “with increased urgency following Russia's invasion of Ukraine.”

NuScale is a “first mover with NRC approval, and we see catalysts over the next two years potentially validating the business opportunity and driving upside to the stock,” he said.

X-energy says 67 GW from SMRs will need to be installed by 2040 in the U.S., Canada and U.K. to offset the retirement of coal and other fossil fuel plants and meet expected increases in demand. Potential revenue for X-energy is pegged at about $500 billion by 2040 and is expected to increase to about $1 trillion by 2050, it said.

The World Nuclear Association said in May that SMR development is drawing private investment, indicating a shift from research and development led and financed by governments to the private sector and “people with strong entrepreneurial goals, often linked to a social purpose.”

“That purpose is often deployment of affordable clean energy, without carbon dioxide emissions,” it said.

At the closing of the deal, which is expected in the second quarter of 2023, the combined company will be named X-Energy Inc. and will be listed on the New York Stock Exchange.