The Catalyst Is Coming. Here's Why Smart Investors Are Buying NuScale Power Before 2027.

Everything could change for NuScale Power (NYSE: SMR) this year. Last September, the company announced a landmark deal with ENTRA1, a privately held energy developer, and the Tennessee Valley Authority (TVA), one of the largest electric utilities in the U.S. The deal called for NuScale to build a 6-gigawatt small modular nuclear reactor (SMR), with ENTRA1 handling most of the financing and construction execution.

If built, this 6-gigawatt SMR would be the largest in the nation and perhaps the world. NuScale Power's stock rose sharply when the deal was announced. Since then, however, scant additional details have emerged, casting doubt on when and how the project might be completed.

In the coming months, all this could change. In fact, there's one pending announcement that could send this nuclear stock soaring.

Image source: Getty Images.

This could be NuScale Power's biggest growth catalyst yet

In October, ENTRA1 was selected by the U.S. government to receive $25 billion in funding to scale new energy infrastructure. The package was part of a $550 billion agreement between the U.S. and Japan to "serve fast-growing energy demand from AI data centers, manufacturing, and national defense."

There is still considerable uncertainty about whether ENTRA1 will ultimately take delivery of these funds. Politico reported in February that ENTRA1 "is largely unknown in the nuclear industry, never completed a nuclear project and, according to the address listed on its website, is headquartered out of a WeWork office in Houston." That's a concern for NuScale, as it relies on ENTRA1 to fund its project with TVA.

Politico observes:

Energy experts say it has become more common for big nuclear companies to outsource the kind of work ENTRA1 is offering. But its lack of experience in this space, the dearth of information about its operations, and threadbare staffing make it a risky choice, some Wall Street investors and nuclear experts warn -- for both the White House and Japan.

This funding uncertainty has kept a lid on NuScale's stock price. Earlier this week, however, NuScale CEO John Hopkins revealed that he expects a power purchase agreement (PPA) to be resolved by the end of 2026.

While this catalyst would trigger a sizable milestone payment from NuScale to ENTRA1, it would clear up the project's timeline and viability significantly, given a PPA agreement is typically a highly structured, legally binding contract, with TVA committing -- potentially for decades to come -- to buy power from NuScale's SMR system at a pre-negotiated price.

In short, by the end of this year, NuScale could gain critical clarity of the future of its biggest project. That matters, given execution uncertainty involving its partners remains a drag on the stock. With that weight lifted, conditions could improve rapidly for NuScale.

Ryan Vanzo has no position in any of the stocks mentioned. The Motley Fool recommends NuScale Power. The Motley Fool has a disclosure policy.