US Expands Threats to Iran Energy, Water Even as It Hails Talks

23:58Carol Massar:You do see less people. Florine, so great to have you in town. Thank you so much. Florin Iyelpo, he is head of macro at Lombard ODA Investment Managers, joining us here in New York. Stay with us. More from Bloomberg Businessweek Daily coming up after this.

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25:52We'll see you next time. You're listening to the Bloomberg Business Week Daily podcast. Catch us live weekday afternoons from 2 to 5 p.m. Eastern. Listen on Apple CarPlay and Android Auto with the Bloomberg Business app. Or watch us live on YouTube. Well, building a next generation nuclear reactor, it's a long and slow process. It involves private companies working with government regulators. And that's exactly what's going on today. The NRC, it's the Nuclear Regulatory Commission. It's updating its rules so they work for newer types of nuclear reactors, not just the old ones. And I imagine James Walker would say, it's about time, or this is a long-time company coming.

26:29He's CEO of Nano Nuclear Energy, Carol. It's a$1 billion market cap nuclear energy company. It's working on small modular reactors. Shares down about 20 % so far this year.

26:38Carol Massar:James, so good to have you back with Tim and myself. So how do you guys get closer to building and deploying something real? How does this become a reality? It's a good question, because I think there's probably a great big filter process between companies that love the idea of one day doing it and actually going forward with it. What I can say about us, what very nice thing I can say about us is that we're about to finish our construction permit application to the NRC. And I think that will make us only one of five commercial companies that have put in for a construction permit to actually build one of these things.

27:14So it's almost like a handful of companies that are really taking this forward with the NRC to really build one of these systems. This is how we want to do it. We want to build it full scale, demonstrate it works, work out the kinks of how this thing gets constructed. And then that system that will be fully completed, constructed, power outputting, licensed in 2030. After that, we want to mass manufacture those systems and then just start, you know, deploying them as far away across the country as we can and internationally, too.

27:46Carol Massar:Hey, got to ask you, you said demonstrate that it works. Do we not know that it works yet? Yeah, you're right. I should be careful with my language because we know it works. Like the thing is, we're using a high temperature gas reactor. High temperature gas reactors have been used for decades across many different countries. I think the only real novel thing that is happening now is that it's old tech. and it's being paired with new fuel, like Triso fuel. And the reason why that's happening and most of the leaders in the industry are utilizing that advanced new fuel type is because it essentially gives all the fuel its own containment system.

28:19So it eliminates the worst accident scenarios that might be possible with like a big conventional reactor like meltdown, that kind of thing. So it is working tech. We know it works. It's just being paired with new fuel.

28:31Carol Massar:How can it eliminate it 100 %? Like nothing's going to be 100%, right? Accidents happen. We know that, the reality. Well, the thing is, I mean, I'm always reluctant to say 100%. But the truth is that, like, if you take our reactor as an example, the operating temperature of this thing is sort of 600, 650 degrees Celsius. But the melting temperature of the fuel is almost 2 ,000 degrees or 1 ,800 degrees. There's no way for the fuel to really even get that high. And this is the reason why this fuel is being utilized. Like, Three Mile Island, when people think of that, you've got a fuel melt or Fukushima.

29:05you get a core melting because of depressurized system, coolant loss. But if the fuel is contained, then the biggest accident scenario does get eliminated. And you'd have to really break the laws of physics in our reactor to get to that kind of scenario. Hey, James, one thing that Carol and I were talking about a little earlier is this idea that there are dozens of nuclear submarines that the US has. And each one of these nuclear subs has what essentially is a nuclear reactor on it that powers it. why can't we just take that technology and plop it next to a data center? So I got my start in submarine reactors.

29:42And believe me, if that was possible, I know enough about them where I could kind of design them myself at this point, having worked on them for so many years. But it's very different. Like they use a type of fuel that civilian companies are not allowed to use, highly enriched uranium. Like it's enriched over that sort of 90 percent barrier. And really, as a commercial company, you're capped at about 20 or just below, like 19.75 % enrichment. And so the type of reactor that goes into a submarine, you can't directly take that outside of the military without a complete redesign. Is that for national security purposes?

30:18You wouldn't want that in the wrong hands? Yes. So there's a lot of laws governing the handling of nuclear fuel, particularly around something like proliferation, because it's OK for the military to have highly enriched uranium. But for civilian companies to be handling that kind of enrichment, it's never been done before. So there are limits on what you can enrich up to as a civilian company. And if you suddenly have that enrichment barrier, then you need to make a more optimized design around that level of enrichment. And then that's where you get Nano's reactor. So the layperson understanding this answer would, the basic understanding is you can't have a material that is enriched high enough to be powerful enough to power something that small outside of a submarine or outside of defense department purposes.

31:14Yeah, so it's really just that limit on what you're permitted to as a civilian company. Other than that, though, other than that, the design. Well, if you gave me permission, I think if you gave any civilian company permission, then they would probably take the HEU because they would mean all sorts of things. They would mean longer term. HEU meaning highly enriched uranium. Okay. Highly enriched uranium, so that 90 % plus enriched stuff. Then you would have longer periods between refueling. You would have more powerful output. Sure. But I think the limits are sensible. I wouldn't go beyond actually what they permit for currently, that 20%.

31:53I think that's a perfectly reasonable limit. So you can make a very good civilian reactor because the fuel that you need to go into the civilian reactors is sufficient for what we need. And these reactors that say nano will be making, already the enrichment levels will be higher than the conventional big sort of the Homer Simpson nuclear power plant. A bit higher enrichment than those. But that allows us to make them smaller, more compact, and that extra sort of power density.

32:19Carol Massar:I do love when Homer Simpson is a reference point. But we all get it. We all get it. James, one thing, though, going back to what Tim was talking about in terms of, you know, naval reactors and naval vessels. I'm just wondering, though, the safety element of what goes on in a naval, you know, a nuclear sub versus how we think about. I mean, obviously, you have to be very, very safe. I mean, you're talking about folks on a submarine, a lot of them. Like, what have we learned about safety there that might be really useful in terms of nuclear reactors out on Earth? Because you do know certainly the feeling in the United States, maybe not elsewhere around the globe, but there is certainly a pushback.

33:02Carol Massar:and maybe with good reason because of some of the accidents we've seen. You're right. I mean, it's always, as a nuclear engineer, obviously, I'm always going to sound quite bullish. But what the naval program demonstrates is that you can operate dozens of reactors for decades and still have no fatalities as a result. I mean, that's one good thing you can point to. Actually, in the United States in general, there's never been an accident that's resulted in a death from nuclear energy. really if you were to look at deaths per gigawatt hour it's safer than everything safer than solar safer than wind everything and like the new generation of nuclear with the new fuel that we were talking about where it's encapsulated and it's contained even safer still so technically by metrics the safest form of energy ever devised made safer still so i know i but i i really do believe that a lot of the fear around nuclear came out of the cold war because, you know, there was the threat of nuclear Armageddon and that has a psychological impact.

34:03And, you know, it's got nothing to do with nuclear energy. It's a very different technology, very, you know, a nuclear reactor can't blow up, you know, as an example, it's not, you know, basic things that people just don't know. Well, they can melt down. Yeah. They can melt down. Yes. But even then, Fukushima through Mile Island, you have a cleanup operation. Chernobyl. No one's going to die. Chernobyl. Yep. But like, that's also just, it's not really a good example because that's a reactor where they said shut down all the safety systems try and break the reactor under test conditions i don't know it's it that would i mean that kind of thing is very weird you know you would never get anything like that in any other country so you know one thing that carol constantly brings up is is what you do with the nuclear waste and you mentioned the highly enriched uranium that the military has access to what you would not have access to and what civilians would would not have access to one of the benefits of that is you don't have to replace the fuel as frequently.

34:55But what about your fuel? And when you replace it, where does it go when it's spent? So, I mean, the nice thing at the moment in the US is that spent interim storage facilities in Texas and New Mexico are being built. Really, like this is kind of a big thing, because ultimately, when you take the fuel out of a reactor and you call it used fuel, most of that fuel is actually fresh, like the burn up of the actual good fuel and reactor over the lifetime of that fuel cycle is maybe like three, four, five percent, something in that region, which means that like 95 percent of that fuel could be taken out theoretically and put into a new reactor form.

35:35So if you were to take all of the nuclear or nuclear waste, really spent fuel in the United States, you could run the country for hundreds of years on just the spent fuel. Why don't we do that? What's the cost of doing that? Well, the reason why we don't do that is the U.S. currently doesn't permit to do that. But if they change the rules one day and allow companies to reprocess that spent fuel.

35:58Carol Massar:But why don't we let them do that if it makes sense? It's the same as that HEU reason is that there's proliferation concerns around it. So they don't allow for reprocessing, but one day they probably will allow for it. And then all of that spent fuel that gets put into storage, we can take back out. And I can tell you, Nano would love for that one day to happen because that means all of our spent fuel cores, all of that sort of stuff, we could go get that fuel back out. It would be essentially almost free fuel that we could build, you know, umpteen generations of reactors with. No, it's interesting.

36:34Carol Massar:And I think, you know, the problem is bad actors, they're out there. So we've got to be super careful. James, thank you so much. Really fun to touch base. James Walker, CEO of Nano Nuclear Energy. It's a$1 billion market cap nuclear energy company joining us on this Monday. Stay with us. More from Bloomberg Businessweek Daily coming up after this.

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38:27We'll see you next time. LLC. You're listening to the Bloomberg Business Week Daily Podcast. Catch us live weekday afternoons from 2 to 5 p.m. Eastern. Listen on Apple CarPlay and Android Auto with the Bloomberg Business app or watch us live on YouTube.

38:45Carol Massar:All right, everybody, we've got just about 18, 19 minutes to go until we wrap up the trade on this Monday holiday shortened trading week. As you know, it is Good Friday on this coming Friday. And of course, the markets are closed. Having said that, we do get a jobs report, so it's going to be interesting. Our team here certainly on it as that news breaks and crosses the Bloomberg at 8.30 a.m. Wall Street time on Friday. Having said that, today, right now, we are just coming off our lows of this session, still down 1 % on the NASDAQ 100, and we're down about just shy of 0.6 % on the S &P 500, so just coming off our worst levels of this session.

39:20Carol Massar:But a bit of a risk off trade. But having said that, dig inside the S &P 500. And you've got almost an even split between winners and losers, gainers and decliners in today's trade, Tim. Well, let's see what Rob Hayworth has to say about it. He's Senior Investment Strategy Director at U.S. Bank Asset Management. Joins us from Seattle. Rob, good to have you on the program. Down six-tenths of 1 % on the S &P 500. It follows declines from last week. It looks like March is going to be the worst month in years for the S &P 500. Have your clients started to call yet? Are they having questions yet? Absolutely, they have questions.

39:54And I know it has to do with how long is this going to last and where should we hide, right? And I think that's the challenging. I'm sorry. What do you tell them? It's been challenging because there hasn't really been any place to hide. The one place we liked to start the month that has actually worked out for us a little bit is global infrastructure with master limited partnerships in that component doing fairly well. But otherwise, unless you own energy this this quarter, there's not been a lot of places to hide.

40:22Carol Massar:How much have you would you suggest to a client to shift or change around their portfolio so far this year and kind of almost in a reactionary move? Or, you know, do you feel confident that there are some longer term trend plays out there that you can kind of make the bet on right now? Yeah, no, it's a it's a great point. I think as we entered, really, the economic outlook and the economic backdrop has been fairly constructive, especially here for the U.S. And I think as long as this, really, and frankly, it's the closure of the Strait of Hormuz, as long as that doesn't go on for too much longer, say longer than another month, this is an economy where both the consumer and businesses are looking really resilient.

41:05And as we look through in the longer term, artificial intelligence remains a major play and the U.S. economy and U.S. stocks should continue to do very well. I think the question for us as we think about the damage that's being done to the global energy complex over the next couple of weeks is what does that do to energy prices and who does that hurt? And I think the epicenter of that right now is more Europe and Asia, those major oil importers rather than an oil exporting and an energy exporting economy like we have in the US. So before we get to the AI trade, which I want to get to, I just want to sort of tie things up up here.

41:46And if we think about it, your view, as long as the Strait of Hormuz does not stay closed for another month, then we should be in okay shape and at least consumers should be able to absorb this. What happens if that's not the case? If when the Strait of Hormuz does open again, there is not$60 a barrel oil. What if it's$85 a barrel? Well, and certainly, right, you look at the futures market curve. I mean, the futures market is telling us we're going to have$70 a barrel oil for the next year or so. So I think there is a bit of a cost to this economy, and it's going to dampen the consumer a little bit.

42:24But as long as we don't see jobless claims tick higher, meaning people have jobs, and as long as we don't see that a faltering in retail sales, that people are really adjusting what they're doing, I think we'll survive, right? And I think that's the thing for a solid equity market here. We just need decent U.S. growth, not great U.S. growth, meaning if we can hang around here at this 2 % average level, maybe it's one and a half, maybe it's two and a half, wherever we end up, The market will generally be OK, even though it's a little painful for many consumers.

43:00Carol Massar:So do you think markets are at all being complacent? And I ask that, you know, knowing the moves that we've seen, certainly down in the S &P 500, the NASDAQ 100, MAG 7 is down 16 percent year to date, down about 17 percent from the high back in late October. So we have certainly seen, you know, corrections maybe even more so when you look at individual names or certain sectors. But having said that, is there some complacency where an environment with so much uncertainty or whether or not these energy prices create higher inflation and global central banks that are either leaving rates as is or even raising them because of concerns about inflation that, you know, you add that all up and it creates kind of an uncomfortable environment?

43:46Well, I think it's definitely uncomfortable. I think it's not a complacent market as much as it is a patient market. Right. Early in the year, we were reacting to fears that AI was going to lead to job losses and disrupt software business models. So that was the early hit to this to this market. We saw investors rotating because we still saw good economic growth. So we saw them rotate into small cap. We saw them rotate into the cyclical sectors. and now they're wondering when this is over because the president has certainly talked a couple of times about being very close to the end of this conflict and close to reopening the Strait of Hormuz.

44:25And with it being that short, right, investors came in constructive and they're looking to get constructive. I think today's action, as we start to flirt with a 10 % peak to trough kind of decline in the S &P 500, indicates there is some nervousness out there that this is taking much longer than it should as we start to touch correction territory on the S &P 500. So I don't think the market is complacent. They've just been hopeful that we're not disrupting the positive underlying fundamentals behind this market. We're touching correction territory. We're not in there yet on the Nasdaq 100. We are buying opportunity, though, for you?

45:06I think this still hinges on the straight of Hormuz. I think once that gets reopened, I think we'd say yes, as long as the data is holding in, which it looks like it is. And of course, as you teased earlier, Friday jobs report is going to be very important in telling us a bit of that story because that is the heart of what is driving consumer behavior here in the U.S. So I think if the consumer is OK, yes, it becomes a buying opportunity, but we need a little more evidence. And really, it is hinging on that binary event of getting oil out of that straight.

45:39Carol Massar:New money. Someone has some new money to put to work in this environment. Where would you put it? Well, I mean, certainly, as Tim highlighted, stocks are certainly cheaper. It's something to start working your way into. We would look, we'd say there's an opportunity to manage your risk by owning some global infrastructure, which is a heavy utilities component. There's still that drive coming from artificial intelligence, the energy demand from that investment cycle that is going to help utilities along with the sector writ large. On the fixed income side, I think the great news is you're getting fabulous yield opportunities that you haven't seen in a decade.

46:17We would look to things with a little more protection behind them, like structured credit, non-agency residential mortgage-backed securities, things that are not connected to the business cycle, like reinsurance or task-free bonds, where you're still getting very attractive yields. I think there are places to start working in this market to build your diversification and still get invested in what is a very uncertain time.

46:40Carol Massar:Rob, thanks so much. Be well. Rob Hayworth, he's Senior Investment Strategy Director at U.S. Bank Asset Management, joining us here on Bloomberg Business Week. This is the Bloomberg Business Week Daily Podcast, available on Apple, Spotify and anywhere else you get your podcasts. Listen live weekday afternoons from 2 to 5 p.m. Eastern on Bloomberg.com, the iHeartRadio app, TuneIn, and the Bloomberg Business app. You can also watch us live every weekday on YouTube and always on the Bloomberg Terminal.

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