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Thursday
May102018

It’s time GE got out of nuclear business

An article in the investment publication  Seeking Alpha Pro caught our eye advising that it is a good time for General Electric Company (GE) to get out of the nuclear power business. In our view, that would have been a good idea in the 1960’s, but investment insight for the 21st century now demonstrates just how legible “the writing is on the wall." Don Beynon, who covers industrials, value and dividend growth investing, spells it out in “General Electric: Selling the Nuclear Business is Good for Investors.”   There are no new nuclear power plant prospects in the U.S. largely due to costs. More nuclear power plant closures are occurring despite operating license extensions. Market driven energy competition from new solar and wind power generation is outpacing both fossil and fissile generation. And, energy efficiency and conservation technologies are now a constant headwind to reduce electricity demand. There are smarter GE investments in areas like its wind turbine technology. All in all, investors should wise up and direct their company to dump its nuclear power albatross. The question is, as in the Monty Python skit, why would anybody want to buy a dead parrot?  

Beynon points out that GE, long partnered with Japan’s Hitachi Corporation, shares less than 1% of the corporate revenues of the joint GE Hitachi (GEH) business' take, $1 billion in 2017.  Taking a page from another US-Japan nuclear partnership, Westinghouse Electric and Toshiba was admittedly an “unrealistic” venture that ended in bankruptcy for Westinghouse brought on by risky new reactor construction in South Carolina and Georgia. The nuclear industry’s notorious knack for uncontrolled cost of construction and inability to complete projects on schedule resulted in the colossally expensive cancellation of the V.C. Summer nuclear construction project. The Georgia construction project, Vogtle units 3 & 4, continues to struggle with sinking delays and massive cost overruns.

GE has gone from a once upon a time builder of reactors to supplying fuel to its dwindling fleet and providing its closed reactors decommissioning services. New construction projects in Michigan and Virginia with federal construction permits for GEH’s advanced reactor design, the Economical and Simplified Boiling Water Reactor (ESBWR), remain frozen on their starting blocks in projected sticker shock. Virginia-based Dominion Energy’s North Anna Unit 3 project is estimated to cost in excess of $19 billion for a single reactor before the shove isl in the ground.

Given all  the facts, Benyond Nuclear concludes that “the nuclear business disposal would be positive” for its stockholders and employees. We agree.