Nearly all advanced economies have ambitious goals and are taking action against climate change. Canada wants to reduce the use of fossil fuels and switch to zero-carbon alternatives. The federal government has pledged to reach net-zero emissions by 2050.
A company that could deliver clean energy for a low-carbon economy is NextGen Energy (TSX: NXE). The company uses uranium to produce clean, dense energy instead of natural sources like wind and solar. As of this writing, the share price is considerably cheap vis-à-vis its growth potential.
At $7.18 per share, investors are up nearly 20% year-to-date versus the TSX’s 5.99% positive return. But with the accelerating pace of decarbonization, the energy stock is poised for takeoff.
Nuclear fuel
Uranium could be the alternative to burning fossil fuels. After mining it, you can process the abundant metal to create nuclear fuel. Nuclear power stations would need small amounts to generate an equivalent amount of electricity in coal- or gas-powered stations (one kilogram of uranium = 2.7 million grams of coal).
Renewable energy companies depend on the weather to produce solar and wind power, not nuclear energy. Companies like NextGen can generate nuclear energy 24 hours a day. New-generation nuclear power stations have longer life spans (some are certified for 80 years of operation) than renewable installations and coal or gas-powered stations.
More importantly, nuclear is the second-largest source of low-carbon electricity globally after hydropower.
Back to nuclear roots
Ontario is home to 18 of 19 nuclear reactors in Canada. The provincial government recently announced the expansion of the Bruce Power facility. It would be the country’s first large-scale nuclear build in 30 years.
John Gorman, president of the Canadian Nuclear Association, said, “We are returning to our nuclear roots, and it couldn’t happen at a more important time. As global demand for clean energy soars, Canada is once again poised to be a supplier of nuclear reactors domestically and internationally.”
Gorman added that the new 15% refundable Investment Tax Credit (ITC) for Clean Electricity in the 2023 Federal Budget indicates strong support for nuclear power (all sizes). He said, “Nuclear is now recognized as a fundamental and necessary component of Canada’s low carbon energy system.”
Multi-bagger or speculative?
Some market analysts see NXE as a potential multi-bagger, although others say it’s a speculative investment. The $3.52 billion exploration and development stage company does not have revenues yet, only recurring operating losses. Nonetheless, NextGen remains a top clean energy stock.
Management also expects its elite global investor base to keep growing because of uranium and nuclear energy. Since nuclear is a zero-emission energy source, NextGen can live up to its promise of delivering clean air energy fuel to current and future generations.
The company is developing the Rook I Project, the world’s largest low-cost producing uranium mine. NextGen said the development stage uranium project would be highly cash generative in all pricing environments. Furthermore, management believes the elite generational asset will make Canada a global leader in delivering of clean-energy fuel.
Thus far, the energy stock has delivered an impressive 178.29% overall return in three years. NXE could be one of TSX’s top growth stocks soon.
