Dominion Energy D has recently signed a Memorandum of Understanding with Amazon.com AMZN to explore innovative new development structures for enhancing potential Small Modular Reactor (“SMR”) nuclear development in Virginia. This should further boost D’s footprint in the expanding power demand market in the state of Virginia by tapping into the less explored SMR technology.
The latest agreement should enable Dominion Energy and Amazon to promote SMR development and financing while reducing the possible risks to consumers and capital sources in terms of cost and development.
The Need for SMR Development
Utilities, state and federal authorities, as well as top technology companies are investigating SMR as a viable solution that would offer reliable, carbon-free power as the demand for electricity in Virginia and other U.S. areas has been rising at an unprecedented level.
Alike traditional nuclear, SMRs generate around-the-clock, carbon-free power, but with a significantly smaller footprint and lower upfront capital costs.
In Virginia, the need for power is predicted to double over the next fifteen years, with an annual growth rate above 5%. To support this remarkable expansion, Dominion Energy is creating an “all-of-the-above” mix of new power production sources, including innovative investments in offshore wind, solar, battery storage and natural gas.
To this end, Dominion Energy expects SMRs to be an essential component of this “all-of-the-above” energy mix in the 2030s. Against this backdrop, the latest MOU seems to be a strategically noteworthy decision undertaken by Dominion Energy to maintain its prowess in the electric utility industry.
Earlier, in July 2024, the company released a Request for Proposals, inviting proposals from top SMR nuclear technology companies to assess the viability of developing a SMR at its North Anna Power Station in Louisa County, VA.
D Stock’s Growth Prospects
The development of SMRs can be attributed to the growing desire to include nuclear energy in many countries’ clean energy mix due to its potential cost-saving benefits and adaptability.
According to a Wood Mackenzie report, published in March 2024, the SMR project pipeline reached 22 gigawatts (GW) in the first quarter of 2024, requiring an investment of close to $176 billion. This offers ample growth opportunities to utilities like Dominion Energy that are putting efforts to incorporate SMR technology in their infrastructure. The company’s latest agreement with Amazon is a bright example of that.
Another Utility Involved in SMR
Apart from D, another utility provider, Ameren Corporation AEE is set to take advantage of the growing SMR market.
Ameren Missouri, a unit of AEE, joined forces with Westinghouse Electric Company, seeking investment funds from the U.S. Department of Energy for two SMR projects. This funding included plans for the construction of a Westinghouse SMR at Ameren Missouri’s Callaway Energy Center.
AEE’s long-term (three to five years) earnings growth rate is 6.58%. The Zacks Consensus Estimate for 2024 earnings per share (EPS) implies a year-over-year improvement of 5.5%.
D’s Stock Price Performance
In the past three months, shares of the company have risen 18.1% compared with the industry’s 9% growth.
Image Source: Zacks Investment Research
D’s Zacks Rank & Stock to Consider
The company currently carries a Zacks Rank #3 (Hold).
A better-ranked company from the same industry is NiSource NI, which carries a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
NI’s long-term earnings growth rate is 6.95%. The Zacks Consensus Estimate for 2024 EPS implies a year-over-year improvement of 7.5%.
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