The nuclear energy company won more government contracts, but will burn more cash.
Start-up nuclear reactor builder Oklo (OKLO 0.65%) jumped 2.2% through 11:55 a.m. ET Wednesday after the Department of Energy (DOE) named the company to yet another set of nuclear pilot projects.
Oklo, which specializes in compact nuclear reactors, has already been awarded three contracts for test versions under the DOE’s Reactor Pilot Program. Now the agency has chosen the company to also work on building a supply chain producing fuel for nuclear reactors.
Image source: Getty Images.
What’s Oklo up to now?
Oklo is the only publicly traded nuclear energy company alongside three private companies: Terrestrial Energy, Triso-X, and Valar Atomics. The DOE says Oklo will build advanced nuclear fuel lines to reduce reliance on foreign sources of enriched uranium. Specifically, it will build and operate three fuel fabrication plants to support its Aurora and Pluto compact nuclear reactors, and “possibly other fast reactors.”
But the DOE clearly says each of the four companies listed above will be responsible for the costs of construction, operation, and decommissioning of their fuel fabrication plants and must “manage the sourcing of nuclear material feedstock.” That appears to mean Oklo gets no government subsidies under this particular contract.
Is Oklo stock a risky buy?
This means that more than ever, investors need to keep an eye on Oklo’s cash burn rate. While winning DOE pilot-project contracts is great, the lack of government subsidies makes cash management paramount for the company.
The good news here is that, with more than $530 million in the bank and a current cash burn rate of $53 million, Oklo is in no immediate danger of running out of money. The bad news is that analysts see cash burn accelerating as its projects get underway, to roughly $1.5 billion over the next five years.
Investors need to expect stock dilution at Oklo sooner or later.
Rich Smith has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
