Microsoft Data Center Deal for Nuclear Three Mile reopen

[ChuckGeb]

Microsoft Long-Term Deal Reopens 3 Mile Island:
North American markets awoke today to news that Microsoft and U.S. utility giant, Constellation Energy (CEG) have agreed to a long-term deal wherein Microsoft has agreed to purchase all of the power from Constellation’s 880MW Three Mile Island (TMI) reactor over a 20 year period at prices rumored to be above $100 per MWh to power its data centers. This deal calls for a restart of TMI unit 1 by 2028 (it was shut down in 2019) and an investment of $1.6B for its revival.
Famously, in 1979, TMI reactor unit 2 suffered a meltdown. This event was a major contributor to the anti-nuclear sentiment that pervaded for the decades to follow, despite the fact that the radiation had been contained properly and nobody was injured. TMI unit 1 continued to operate until 2019 when it was shuttered due to the availability of cheap fossil fuel electricity and the inability of CEG to secure the necessary contracts to keep it open. How quickly things change.
We have been writing for well over a year that we believe the uranium long thesis has transitioned from a “supply constrained/slow growth case” to a “supply constrained/sustained growth of demand case.” We have also been very vocal about the fact that AI data center demand was a gamechanger and that Big Tech was not likely to be a “plodder,” but would rather take bold steps. Today we believe is only Chapter 1 of this new side of the uranium demand growth story. Stay tuned.
In recent days, Larry Fink (Blackrock), Larry Ellison (Oracle) and Elon Musk (Tesla, SpaceX, “X”) have all made it clear that power is the limiting element of the AI buildout. Today’s Microsoft deal is only the first move by Big Tech, and certainly won’t be the last to address their power needs as nuclear power stands to be a major beneficiary as opposed to other sources that cannot match its reliable 24/7 baseload power.
Importantly, this deal provides a new template where utilities – Constellation in this case – through arrangements like this can be certain that the needed CAPEX can be recovered and provide acceptable IRRs. It is clear from the price for power that Microsoft has agreed to that they are willing to pay a big premium to get this plant back as fast as possible. It goes without saying that securing nuclear power from existing plants becomes extremely valuable because it's both baseload and clean.
When Hyperscalers are willing to pay over $100 per MWh, for as much power as they can get vs. electricity markets that have been paying nuclear plants $30-60 per MWh, you can see how desperate and strategic Big Tech views access to power for their growth needs. And, this will not solely be a U.S. story because other sovereigns will be involved in this “arms race” to build out AI data centers and will be faced with similar power challenges.

[dan_s]

On a much smaller scale, take a hard look at Solaris Energy Infrastructure, Inc. (SEI)

[ChuckGeb]

Agree Solaris Infrastructure has made a move that if all goes according to plan will be huge for its investors. I’m in. But I am all in on all energy plays including uranium, oil, gas, coal, copper, pipeline, grid buildout companies. As Doomberg says “Energy is Life” and I don’t care what the climate shamers are saying as they board their private jets!

[dan_s]

"Energy Is Life" is an opening line that I am now using in my presentations. On October 16 at 8AM I will be speaking at the Skyway Capital Markets conference in Southern California.

[ChuckGeb]

There you go. Good luck convincing those in Southern California but it’s a mantra we should never forget.

[moke]

You could get a standing ovation if in your conclusion you mentioned you were raised in a middle class family.