Westinghouse Could IPO at a $50 Billion Valuation. Cameco's Stake Alone Would Be Worth $24.5 Billion.

Nuclear services giant Westinghouse Electric is reportedly seeking a valuation of more than $50 billion for its upcoming initial public offering, according to a Bloomberg report. That IPO could come as early as October. That proposed valuation would be a boon for Cameco (NYSE:CCJ), which owns a 49% interest in Westinghouse. It implies Cameco's stake is worth over $24.5 billion. Cameco's co-owners, which include Brookfield Renewable (NYSE:BEPC)(NYSE:BEP), would also see a significant uplift in value if Westinghouse prices its IPO at or above the desired valuation.

Here's a look at what this valuation would mean for the nuclear energy company's owners.

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A valuable partnership

Cameco and Brookfield Renewable formed a strategic partnership to acquire Westinghouse Electric from Brookfield Business in Oct. 2022. That Brookfield entity bought it out of bankruptcy in 2018 and turned it around. The Cameco-Brookfield partnership closed in late 2023, with Cameco taking a 49% stake while Brookfield and its partners acquired the other 51% interest in a deal valuing Westinghouse at $8.2 billion (including $3.8 billion of debt). Brookfield Renewable acquired an interest through its investment in the Brookfield Global Transition Fund, while its institutional partners own the remaining interest.

The deal brought together Cameco's expertise in the nuclear industry with Brookfield's know-how in the clean energy sector. They believed that by joining together, they could create a powerful platform to pursue strategic growth across the nuclear energy industry. Cameco believed its investment fit perfectly within its strategy as it would enhance its ability to meet the growing needs of its existing customers by complementing its uranium and fuel services businesses with Westinghouse's operating plant services capabilities.

The valuation math

Cameco paid $2.1 billion for its 49% equity stake, while assuming its proportionate share of Westinghouse's debt. At a $50 billion valuation, Cameco's investment is now worth $24.5 billion, including debt. To put that into perspective, Cameco's current market capitalization is around $40 billion. Meanwhile, the current carrying value of its equity investments is only $2.9 billion, implying that its Cameco investment is significantly underappreciated. The IPO would unlock substantial value for Cameco shareholders.

Brookfield Renewable also holds a meaningful stake in Westinghouse. It initially invested $442 million for a 10.1% interest in the business when the Cameco partnership closed in late 2023. Brookfield subsequently invested another $38 million into Westinghouse in late 2024, increasing its stake to 10.8%. At a $50 billion valuation, Brookfield's interest would be worth $5.4 billion.

However, there is a bit of a wrinkle that could dilute these values. Last year, Cameco and Brookfield formed a transformational partnership with the U.S. government, which will arrange financing and facilitate the permitting and approvals for at least $80 billion of Westinghouse-built reactors in the U.S. As part of that arrangement, the U.S. Government secured a participation interest entitling it to 20% of any cash distributions that Westinghouse makes to its investors in excess of $17.5 billion. If this participation interest vests, which requires that it finalizes its investment decision and signs definitive construction agreements, and if Westinghouse goes public at a valuation of $30 billion or more by January 2029, the cash flow right instead converts into a warrant. It would have the option to purchase equity equal to 20% of the value above $17.5 billion. So, at a $50 billion valuation, the claim works out to roughly $6.5 billion, meaning Cameco and its co-investors would share a slightly lower value.

Is Westinghouse really worth $50 billion?

Westinghouse is a key beneficiary of the global nuclear power resurgence. Electrification, digitalization, and AI data centers are driving a surge in power demand. That's leading companies and governments to turn to nuclear to help meet their rising power needs.

The company's deal with the U.S. Government is one example. The U.S. Department of Energy has since conditionally committed to providing $17.5 billion in loan facilities to finance the long-lead equipment needed to build up to 10 Westinghouse AP1000 reactors in the U.S. The government wants to have 10 reactors under construction by 2030. Cameco and Brookfield are pricing the IPO based on the expected future value to be generated as Westinghouse builds reactors for the U.S. government and other customers.

However, that valuation might be more difficult to achieve, given the current market conditions. There has been a wave of nuclear stock IPOs this year. X-Energy and Standard Nuclear completed IPOs in April and July, respectively. They haven't fared well since making their debut. X-Energy stock is down more than 55% from its IPO high, while Standard Nuclear has tumbled 22% from its peak. Meanwhile, once red-hot nuclear energy stocks like Oklo and NuScale have cooled off considerably, tumbling around 80% from their 52-week highs. This nuclear stock slump has already caused Holtec Nuclear to cancel its planned IPO.

An interesting catalyst to watch

Westinghouse Electric's IPO could unlock significant value for Cameco and, to a lesser extent, Brookfield Renewable. That makes it an interesting catalyst to watch as it potentially moves forward with an October IPO. However, there's no guarantee it will complete its IPO (see Holtec) or price at even close to its desired valuation, which is why investors shouldn't bet on Cameco solely on the Westinghouse IPO catalyst.

Matt DiLallo has positions in Brookfield Renewable and Brookfield Renewable Partners. The Motley Fool has positions in and recommends Cameco. The Motley Fool recommends Brookfield Renewable, Brookfield Renewable Partners, and NuScale Power. The Motley Fool has a disclosure policy.