SMR Developer NuScale Lays off 40% of its Staff

According to reports in the Huffington Post and the Oregonian newspaper, NuScale laid off 40% of its over 500 employees on Friday January 5th.  (See update below for 01/08/24)

The Huffington Post cited a recording of a virtual meeting held with NuScale employees Friday morning and cited two sources with direct knowledge of NuScale’s plans which confirmed the details of the layoffs.  

According to the Oregonian, the company has been hard pressed to raise funds from key investors following the cancellation of its project in Idaho. NuScale was planning to build six of its 77 MWe small modular reactors for UAMPS, a consortium of utilities. The nuclear power station was to be located on a site at the Idaho National Laboratory about 50 miles west of Idaho Falls, ID.

NuScale and the UAMPS LLC intended to be the customer for the SMRs, received significant funding from the Department of Energy. In 2020, the Department of Energy approved $1.35 billion over 10 years for the plant, known as the Carbon Free Power Project, subject to congressional appropriations. The department has provided NuScale and other SMR developers about $600 million since 2014 to support commercialization of small reactor technologies.

The main reason for cancellation of the project is that it could not attract enough members of the UAMPS consortium to subscribe financially to the project to make it a viable endeavor. The target price for power from the plant increased from $53 to $89 per megawatt hour.

Last January UAMPS issued a report that inflation had rapidly raised the prices of key materials like concrete and steel forcing a steep rise in the overall cost of the project. In turn, the expected cost of electricity from the completed project soared making it uneconomic in terms of selling it to customers.

In 2022 NuScale entered into a special purpose acquisition company (SPAC) with the intention of going public to raise funds to expand the business. A SPAC is usually seen as a method to fund a merger between two firms or growth through acquisition.

Top investors read like a who’s who of large asset management firms. In 2023 the company’s stock tumbled from over $9/share last May to a market close of $2.62/share on 01/05/24.

The Oregonian reported that the company will continue to operate with a small core group of executives while it seeks new funding. In its latest quarterly earnings, NuScale’s CEO said last November it had about $200 million in cash reserves but some of the funds are allocated to specific work for customers and can’t be used generally to revitalize the firm. 

In recent months the company’s stock had been buffeted by short sellers and investor lawsuits. In a press statement, NuScale said the litigation was  “baseless and self-interested attack designed solely to drive down the company’s stock price.”

Paradoxically, interest in SMRs is rising in the US and globally. X-Energy, a developer of an 80 MWe HTGR, is one of several firms receiving hundreds of millions in cost shared funding through DOE’s Advanced Reactor Demonstration Program However,  X-Energy recently cancelled its SPAC plan and also laid off 100 employees to cut costs.

The Breakthrough Institute, a think tank, recently published a report that said that the effort to develop SMRs and advanced reactors was in trouble. It cited rising costs, problems spinning up supply chains, and the Nuclear Regulatory Commission’s regulatory constraints on innovation as some of the causes. The report also cited delays in developing reliable fuel supplies of high assay low enriched uranium fuel for advanced reactors (HALEU). TerraPower, a developer of a 345 MWe sodium cooled advanced reactor, has delayed its project by two years due to shortages of the fuel.

Wind Power Projects Fall on Rising Costs

NuScale’s nuclear plan to build six SMRs for UAMPS isn’t the only energy project hit hard by rising costs resulting in cancellation. Reuters reported on 01/03/24 European energy firms Equinor (EQNR.OL) and BP (BP.L) terminated their agreement to sell power to New York state from their proposed Empire Wind 2 offshore wind farm, citing rising inflation, higher borrowing costs, and supply chain issues. 

The two firms involved in the New York wind project said in a statement to the wire service, in an apparent reference to a new offshore wind solicitation launched by New York in November, “This agreement reflects changed economic circumstances on an industry-wide scale and repositions an already mature project to continue development in anticipation of new offtake opportunities.”

Reuters also reports that developers canceled contracts to sell offshore wind power in Massachusetts, Connecticut and New Jersey, and threatened to cancel agreements in other states, as soaring inflation, interest rate hikes and supply chain problems increased project costs.

Update: 01/08/24

Four days after notifying its employees of the layoffs, resulting almost immediately in local and national news media coverage, NuScale issued a press release  on 01/08/24 about its workforce reduction of 154 full-time employees. The layoffs affected 28% of full-time staff. Using these numbers, total employment as of last week, prior to the layoffs, was 550 employees.

In the press statement, John Hopkins, NuScale President and Chief Executive Officer, said. “Commercialization of our SMR technology is our key objective, which includes near-term deployment and manufacturing. NuScale is taking steps to transition from R&D to commercialization and aims to focus resources in key strategic areas as part of its growth and to strengthen its position going forward.”

What remains somewhat of a puzzle is why the company wasn’t more attuned a year ago to the  impacts of significant construction cost increases revealed in January 2023,  and their effects on the willingness of UAMPS members to subscribe to the project.

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