Deal opportunities in the growing US commercial nuclear decommissioning market

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Nuclear decommissioning: The fastest-growing niche

Decommissioning is the fastest-growing niche in the US nuclear power industry as plant owners plan earlier-than-expected shutdowns for many commercial reactors.1 We therefore expect significant deal opportunities for investors and vendors over the next 20 years.

But nuclear decommissioning is inherently a high-risk endeavor. And successful execution of these deals requires rigorous due diligence, along with a well-crafted deal execution strategy.

1. Joseph Sinicrope et al., ''The Expanding Niche in Nuclear Plant Deactivation,'' ASTM Standarizatoon News, March/April 2016.

The rise of license transfer deals

Given the highly technical nature of decommissioning work, plant owners have been exploring innovative strategies to shift decommissioning responsibilities to qualified service providers through license transfers.

Investors gain market entry via acquisitions

The growth potential of the decommissioning market has piqued the interest of institutional investors, and some have already entered the market by

  • Acquiring a key player of a segment of the value chain
  • Acquiring multiple small players in a segment of the value chain
  • Acquiring companies with existing commercial nuclear decommissioning contracts

This is good news for the industry as there is a high cost to winning decommissioning projects, so any potential capital investment is welcome.

Investment firms also possess sophisticated fund management capabilities and may be in a better position to deal with the nuclear decommissioning trust funds and create financial stability.

Future deals will likely focus on market consolidation

Due to the tremendous skill and intense capital requirements for a decommissioning project, the market is showing signs of consolidation.

Scale-based transactions

Some Tier 1 contractors are finding value in horizontal integration to bolster their market position in particular segments of the value chain.

Scope-based transactions

We are now seeing more joint ventures and merger and acquisitions – among D&D project managers; engineering, procurement and construction (EPC) companies; waste managers; and transport and logistics experts – to expand service offerings across the value chain.

Due diligence questions to ask before entering the market

The nuclear decommissioning market is unique with technical, financial, regulatory, and stakeholder risks and requirements unlike any other industry. Here are some sample questions to help traditional and new players determine if this is the right market for them.

  • Does the high-risk, high-reward nature of nuclear decommissioning fit my business model and investor goals?
  • Is the structure of my fund flexible enough to allow investments in hard asset investments as well as service-based segments of the value chain?
  • Do I have enough technical and regulatory knowledge to navigate this industry?
  • Do I want to take on a company that offers the full value-chain – which has the highest risk but also allows me to set margins?
  • Do I have strong stakeholder sensing mechanisms to understand (and potentially influence) the nature of public discourse?

  • Do I have the technical capability to perform some segments of the value chain (e.g., pool to pad)? Or should I turn it all over to a D&D specialist?
  • Am I prepared to deal with potential reputational damage and financial fallout should the license transfer vendor fail to successfully complete the decommissioning project?

  • Do I want to take on the risk of being a nuclear license owner?
  • Should I try to compete as a “one-stop” shop? Or team up with multiple players to spread the risk?
  • Do I have the financial capability to manage the nuclear decommissioning trust fund – or to make up the difference if it falls short?
  • Do I have strong stakeholder sensing mechanisms to understand (and potentially influence) the nature of public discourse?

Five key capabilities to look for in a deal partner

Our analysis of the nuclear decommissioning market shows that lead players seek deals where the buyer/target fills in the gaps or enhances one of the following five critical capabilities:

Relationship management. The decommissioning market, much like many other specialized industrial business-to-business services markets, features a strong relationship component. A strong partner/acquisition will bring with it relationship skills to deal with customers and stakeholders, federal, state and local agencies, NRC and project managers.

Operational expertise. This is especially important because of the specialized nature of the nuclear decommissioning market. Plant owners, in particular, want to see a strong track record of success and safety in waste management operations as the cost of failure is too high.

Contract management. Companies need to have experience managing contracts as service bundling contracts become more common. The ability to negotiate favorable terms can ideally lead to a win-win situation for all partners involved.

Integrated offering. Partnerships should enhance the capability to offer more and better services that each entity alone cannot offer.

Asset economics. Assets across the value chain should be complementary with little overlap so that they can boost productivity. These include: processing equipment, trucks and casks (containers used for disposal).

Contact us

Daryl Walcroft

Principal, Capital Projects & Infrastructure Leader, PwC US

Mile Milisavljevic

Energy Deals Leader, PwC US

Brooke Traynham Morrison

Director, Capital Projects & Infrastructure, Nuclear Energy, PwC US

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