As the AI ​​boom continues to surge, the demand for AI infrastructure on power is increasing. According to media reports, some of the world's largest private equity asset management companies are actively preparing to provide financing and invest in nuclear power plant projects.

Sources familiar with the matter told Bloomberg news that The Carlyle Group Inc. has been in contact with nuclear-related credit investments, while Brookfield Asset Management is considering increasing its investments in the nuclear power industry. It has been reported that Apollo Global Management Inc. is negotiating financing for the under-construction nuclear power plant at Hinkley Point in the United Kingdom.

Analysts believe that by providing financing for nuclear energy projects, alternative asset management companies such as private equity can invest large amounts of cash in assets with stable returns and demand growth. Climate goals, economic electrification, and the rapidly growing demand for large AI computing power are increasing investors' interest in this stable, low-carbon power source.

AI power demand is booming, and private equity funds are entering the market one after another.

Previously, due to years of stagnation in nuclear energy investment in the United States and Europe, some nuclear reactors closed due to the prosperity of shale gas, low natural gas prices, and the impact of wind and solar power prices. In addition, private equity is often troubled by delays in nuclear project construction and cost overruns.

However, the huge energy demand of the AI ​​industry has led to a series of recent transactions. Last month, Microsoft announced an electricity agreement to restart the Three Mile Island nuclear power plant; Amazon and Google are also investing in the development of small modular reactors.

Andy Champ, project leader responsible for the GE Vernova and Hitachi Ltd. joint project on small modular reactors in the United Kingdom, stated,

"We are seeing more and more private equity firms interested in nuclear energy. Companies like Google, Meta, and Amazon need stable electrical supply, and wind and solar energy alone cannot meet this demand."

Qian Pu also stated that nuclear energy can provide investors with regulated, rewarding, and secure investment opportunities that are attractive. UK's nuclear power plants enjoy government-protected prices or returns, and small modular reactors may receive similar treatment, helping to reduce costs and accelerate deployment.

However, despite the growing investor interest, challenges remain. Safety issues continue to impact public support for new nuclear projects, and cost overruns and delays in nuclear projects are notorious. For example, Southern Co.'s Vogtle nuclear power plant, the first newly built nuclear reactor in the United States in over 30 years, is expected to be completed in 2024, seven years behind schedule and over budget by over $20 billion.

At the same time, the demand for electricity from technology companies has raised concerns about its impact on other businesses and households. Amazon recently purchased a $65 million data center campus in Pennsylvania and signed a long-term power agreement with a nearby nuclear power plant, sparking dissatisfaction within the local community.

US federal regulators will hold a meeting this week to discuss the potential risks of power shortages and infrastructure costs associated with locating data centers near power facilities. If the investments necessary to support these expansions result in undue costs to other consumers, so-called technology "megascalers" may face resistance.

Long project cycles, predictable returns, favored by private equity

According to a report released last week by Apollo's chief economist Torsten Slok, by 2020, the energy demand for "megascalers" enterprise data centers will be equivalent to adding the power consumption of three New York Citys to the US grid.

Apollo partner Robert Bittencourt stated that since new projects take time to come online, existing power plants can expand capacity to fill temporary power gaps. "If the US nuclear energy new construction market does indeed evolve, its cash flow and long-term investment nature align very well with our capital pool primarily for retirement funds."

Ben Higson, a partner in the M&A and Capital Markets team at Vinson & Elkins law firm, also believes that the private equity funds' interest in nuclear energy is partially attributed to "abundant idle funds" and clear investment expectations, even if the returns are lower than usual projects.

"We expect that in the coming years, private equity and other funds will be more willing to adopt this long-term perspective."

However, the world's largest private equity firm, Blackstone Inc., believes that building new nuclear power plants takes ten years or longer, with excessive waiting time, therefore the company does not hold an optimistic view towards the nuclear energy industry. An anonymous executive at the company disclosed to the media that Blackstone is still seeking opportunities in other nuclear energy sectors, including existing assets and service providers.

However, investment managers seem more optimistic. The Range Nuclear Renaissance Index, used to track the performance of companies related to advanced reactors, public facilities, construction, and fuel industries, has nearly doubled in the past year.

Currently, private capital has entered the nuclear energy sector, investing in some startups developing new technologies. Ares Management Corp. invested in X-energy, which recently reached an agreement with Amazon, and the venture capital firm Terra Talent invested in Kairos Power.

Brookfield Infrastructure Partners LP is seeking new nuclear energy investment opportunities in response to the increasing commercial acceptance of such projects in the market. David Krant, Chief Financial Officer of Brookfield Infrastructure Partners LP, told the media that the "biggest obstacle" in the nuclear energy sector is financing and risk sharing, with large-scale enterprises also participating in creating new frameworks for obtaining electric power.

Editor/Lambor