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Just a few weeks ago, Oklo, a startup focused on advanced nuclear fission micro-reactor technology, made a significant splash with the announcement of its intention to go public through a SPAC backed by entrepreneur Sam Altman.
Altman, the founder of OpenAI, has become a high-profile figure in the tech industry, with ambitions stretching beyond terrestrial concerns and reaching the very potential of global artificial intelligence.
To realize this bold vision, Altman asserts that the world requires an exponential increase in our energy production—a demand he anticipates being fulfilled by the nuclear sector. At the forefront of Altman's investments is Oklo.
Oklo aims to address the energy demand by constructing a series of small, innovative nuclear reactors. The company's goal? To substantially decrease the cost of energy and ensure its reliable availability.
While the idea is intellectually compelling, can it translate into long-term commercial viability?
The Atomic Underdog
Founded in 2013, Oklo set out with a vision to completely reshape commercial nuclear energy. Traditional nuclear reactors have notoriously been slow and costly to construct, which has led to a stagnation of U.S. nuclear capacity over the past three decades, despite electricity consumption swelling by over 40% during the same period.
The growing gap between supply and demand is only anticipated to widen, driven by rapidly escalating computational and data storage requirements, a trend accelerated by the rise of artificial intelligence. Some Forecasts suggest that electricity demand could triple by 2050. Moreover, the existing energy grid, which is increasingly grappling with reliability issues due to aging infrastructure and severe weather events, is under significant strain.
Traditional nuclear projects are intricate, high-risk projects that demand astronomical investments and years to materialize, frequently falling victim to significant delays. A prime example is Georgia's Vogtle plant, which faced a seven-year delay and exceeded its original budget by a staggering $17 billion, making it the most expensive power plant ever built. In stark contrast, Oklo's innovative solution involves building much smaller nuclear reactors, capable of operating on fresh or recycled fuel for up to a decade before needing refueling.
These compact reactors promise steady power generation, and reliability not always offered by renewable alternatives like wind or solar energy. Oklo is positioning itself to power a wide array of facilities, including data centers, utilities, defense establishments, remote communities, and industrial sites. Oklo plans to operate the reactors themselves and sell the power directly to customers.
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Despite being relatively early in its journey, Oklo has taken several strides toward the commercialization of its compact nuclear reactors. In May 2023, the company inked a deal with the Southern Ohio Diversification Initiative to install two commercial plants in Southern Ohio, with the ambitious aim of bringing them online by 2030.
Another boost for the company came when it received approvals from the U.S. Department of Energy to construct a plant at the Idaho National Laboratory by 2027. Furthermore, the Idaho National Laboratory also approved for Oklo to use some of its spent nuclear fuel, providing a practical example of Oklo's innovative approach to nuclear energy.
Oklo is currently working on obtaining the necessary permissions to build a fuel-recycling facility. This ambitious project would allow the company to transform what is traditionally considered “used” fuel into a resource for its advanced reactor design.
However, Oklo's journey hasn't been without its challenges. In January 2022, the Nuclear Regulatory Commission—the nation's leading nuclear regulatory agency—denied Oklo's first application to construct and operate its innovative nuclear reactor, citing gaps in the application's information.
Despite this setback, Oklo remains undeterred and confident in its ability to rectify these issues. Oklo believes that its revised application should be approved by the end of 2024. Should Oklo navigate its way through the rigorous regulatory process, the company stands to significantly disrupt the current nuclear industry.
Financials and Valuation
Each of Oklo's 15 MWe powerhouses is expected to generate around $508 million in revenues over a 40-year life cycle, which is about $13 million per year. The company projects its expenses for these projects to be around $120 million, with an additional capital expenditure of $107 million. These estimates suggest that the company will have a free cash flow margin of around 55.4%.
The company's first 15 MWe project, the Aurora Powerhouse in Idaho, is scheduled for approval by the NRC in 2024 and is targeted to start generating electricity by 2026 or 2027. Oklo has also identified additional projects, including the construction of two more Aurora Powerhouses, each with a capacity of 15 MWe, which will be built after the first project is up and running.
However, before Oklo can get these projects online, the company anticipates racking up losses based on its operating expenses. The company expects it will spend about $19.5 million in 2024, and these costs are likely to increase to around $34.5 million by 2027 (these costs exclude the development costs associated with the plants).
The good news is that Oklo's merger with AltC Acquisition Corp through a SPAC deal is expected to bring in gross proceeds of up to $500 million. AltC has the largest trust among the deals announced in the last year, so even if there are large redemptions, Oklo should have enough funding to sustain its operations for the next 3+ years.
Oklo makes for an exciting SPAC debut, particularly given the potential disruption it promises within the nuclear energy sector. While there are challenges to navigate, particularly regulatory hurdles and the upfront costs associated with getting projects online, Oklo's innovative approach to small-scale nuclear energy has the potential to usher in a new era of affordable and reliable power generation. The company's ability to generate value will likely depend on how it can commercialize its operations.
Source: Atomic Aspirations