Forget NuScale's Quarterly Numbers: Its TVA Deal Could Be the Biggest Nuclear Contract in U.S. History.

Over the coming decades, nuclear energy will be a $10 trillion opportunity. That's according to Bank of America analysts, who are particularly excited about a relatively novel method of producing nuclear power: small modular reactors, or SMRs.

"Amid surging electricity demand, driven in part by the rise in AI/data centers, nuclear energy offers a potential solution," Bank of America concluded in a recent report. "And new advancements in technology may now make the tipping point in sight for small modular reactors (SMRs) to reshape nuclear energy supply chains over the next decade."

NuScale Power (NYSE: SMR) is currently the only company in the U.S. approved by regulators to build an SMR system. On a recent call with investors, CEO John Hopkins stressed that the company remains "the only SMR company in the world to have earned U.S. Nuclear Regulatory Commission standard design approval," adding that it has "done it for two separate designs, our 50-megawatt and our 77-megawatt modules."

Many other companies are currently working through the approval process for SMRs. But NuScale has leveraged its early approvals to secure large deals, including a 6-gigawatt project for the Tennessee Valley Authority (TVA). If built, that system would be the largest SMR facility in the world by a large margin.

NuScale's second-quarter numbers are already in the books, and it's expected to report Q3 earnings on Nov. 5. Only one detail will likely matter from that announcement: Has a power purchase agreement (PPA) been signed with the TVA?

A power purchase agreement would essentially lock the TVA into buying power from the project. This financial commitment would allow NuScale to begin construction.

It's hard to understate how significant a PPA would be for NuScale's business model and stock price. Right now, the market seems skeptical that the TVA project will ever move forward, and NuScale's struggling stock price and market cap under $4 billion reflect that.

To gauge how much shares could spike with a signed PPA, it's important to consider NuScale's history of failed projects.

NuScale investors must remember this failed nuclear energy project

NuScale has signed major customers before, only to see them cancel the projects before major financial commitments were made firm.

For example, in 2019, it inked a deal with the Utah Associated Municipal Power Systems (UAMPS) to build SMRs to supply electricity to the utilities. The project's original scope called for six 77-megawatt SMR modules, generating a total of 462 MW. It was expected to enter service in 2029. Project delays and higher-than-expected costs led NuScale's utility partners to withdraw, which led to the cancellation of the whole project.

"[S]ubstantial cost overruns and delays from its originally scheduled 2026 operational date spooked utilities ... leading several to withdraw from a 2019 agreement to buy 200 MW from the reactors once completed," one industry report observed.

Before the cancellation was made public in late 2023, NuScale's stock price had already fallen by nearly 80% that year, signaling the market's lack of confidence that the deal would ever result in meaningful revenue, let alone profits.

Image source: Getty Images

"Although there were problems specific to that project, the financial challenges and cost trends witnessed in this case will afflict any small modular nuclear reactor project," one industry insider warned at the time. "In a rational world, no utility or government would invest another dime on these theoretical reactor concepts."

These fears have largely kept a lid on NuScale's stock price, even as the latest deal with TVA moves forward. A PPA would lift a large part of that uncertainty discount. And if NuScale's CFO is right, a PPA could be on the way as early as the company's next earnings announcement.

Bank of America is an advertising partner of Motley Fool Money. Ryan Vanzo has no position in any of the stocks mentioned. The Motley Fool recommends NuScale Power. The Motley Fool has a disclosure policy.