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Commodity Q&A: You'll Be Tempted to Speculate...With Matt Badiali, editor, S&A Resource ReportWednesday, January 14, 2009 Q: Do you think nuclear power is a good investment right now? – A.H.
A: I think right now, you can invest in just about any energy sector (coal, oil, etc.) and make money. So I like nuclear stocks, too... with some reservations.
As I've been telling you over the past couple months, you should make sure the energy companies you buy have low debt, low-cost operations, and sound management. And in the case of nuclear energy, you absolutely must buy current producers.
The government is reviewing plans for 26 new nuclear power plants with more to come if permits are granted. You will be tempted to speculate on a new power plant – don't do it.
First, new plants are looking at a decade of construction, permitting, and startup. That's the best-case scenario. The worst case is two decades of delays, cost overruns, and volatility in electricity prices. It's just too long to wait on a speculative position.
Second, I'm skeptical the nuclear industry will be able to maintain its new "clean energy" image.
Carbon dioxide is today's boogey man, like acid rain in the early 1980s or the ozone hole in the 1990s. And it's true, nuclear energy doesn't generate any carbon dioxide. But nuclear power does generate incredibly harmful waste. And it wouldn't take much to bring back the "no nukes" sentiment of the 1970s. If those problems resurface in the near future, they'll hit prospective nuclear plants a lot harder than current producers.
So if you're interested in adding nuclear power to your portfolio, stick to existing power plants. Those companies will benefit as the demand for electricity climbs and Obama fulfills his pledge to go after carbon producers.
You've got a handful of nuclear energy providers to choose from, and most pay a healthy dividend...
Good investing, Matt
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