Unlocking Energy & Business Opportunities through Nuclear with James Walker,

Uh it is effectively true. So the reactors you get at universities, and there's a couple dozen I think in the states, like colleges, universities that have these reactors, they're usually called test reactors. And the universities have them for things like, well, training students, that kind of thing, also radiating materials, studying isotopes, that kind of thing. But this was only ever done really for non-commercial purposes. The difference now really is that for the first time I think in the US's history we're looking at deploying very small, small reactor systems commercially, and that's the big difference here. But it's something we know can be done, it's been done before. In fact, we were recently chatting with MIT and they have a test reactor there that's more powerful than the reactor that we plan to produce. So it's really not a matter of can it be done, we know it can, but we're just going to do it at a larger scale here and we also sell to industry, mining projects, things like that this time.

So I think there's several reasons. So in the past, for something like a test reactor, it wouldn't need to undergo the sort of same licensing process as a big nuclear reactor, and that's because it was essentially a test reactor. It could come under a different NRC regulatory framework, and so you could just sort of push it through this sort of process and get it out to industry. So there was a licensing difference. Whereas when we're going to commercialize a micro reactor now for industry, it would undergo a different licensing process to those test reactors at a university. So that's one thing. The other thing too is that with micro reactors, the smaller you make a reactor, the less economies of scale you get. So what we're targeting will be remote things like island communities, military bases, remote industry, remote habitation, these kind of areas where there's diesel generators, and diesel generators have no competition from other energy sources. So if you do that and you shrink the reactor right down, you can compete with the costs of remote diesel because it's extremely expensive. But micro reactors probably cannot compete with big nuclear, small modular reactors which are still a much larger system, or gas, coal, things like that. And so for that reason no one's really targeted these new devices for these remote locations before. But if you once you start looking at how big that market is, it becomes very commercially appealing, like hundreds of thousands if not millions of these remote locations that use these diesel generators that we could effectively with mass production of these micro reactors beat the cost of that diesel.

The licensing agency, the regulator wouldn't allow you to do that unless you said it's a university reactor on my island. Yeah, University of Branson. Yeah, it's the University of Branson. Maybe if you engineered it that way you could maybe get away with it. But for a commercial one, you obviously you would have to show that you're going to do experimental work or that kind of thing to trick them.

Well the reason why is that it's just a very heavily regulated industry. And actually, a lot of the reason why nuclear power in America was more expensive than everywhere else was because traditionally the licensing time was so long that it would accrue a huge amount of capital costs. And what was happening is because the upfront capital cost was so great, partly because of development but also very much so because of very expensive, long licensing times, the financing cost around the capital cost was so large it could be 70% of the whole project. So companies started, actually industry really started looking at smaller modular reactors so they would be able to produce more of these things, produce them faster, require less infrastructure, have more passive cooling systems built into them, so you could deploy more, deploy them more quickly and get them through the licensing process faster. And that way you could make cheaper nuclear energy. But so you can't get around the regulator. The only, and this is not something I advise you do, but if you wanted to build your own reactor and not fall foul of any regulator, you could put the reactor in international waters and run the power cable back to your island and you could maybe get away with it. I think there's some people who have been thinking about little solutions like that to get around the licensing process. Maybe we'll do the same, maybe we'll build a micro reactor before it's licensed, we'll just anchor it in a sort of semi-submersible vessel under the water where there's no waves, can't get to it, and then we'll just run the power cable.

Look, he's, you know, if he needs my number he should reach out.

Well that's a very interesting one because Jordan Peterson has a sort of humanitarian angle to a lot of the things he does. And one of his big concerns is that at a time when there's a lot of focus on going after big energy sources for humanity in the name of cutting carbon emissions and things like that, the knock-on effect of that is that less power means a decrease in quality of life for people, because quality of life is very much dictated by energy supply. And so his angle really was that he was looking at companies that were trying to address the shortfall of energy that we're going to expect, especially because the higher the quality of life gets, the more the energy requirement is, and as the world is industrializing the energy that's going to be required is huge. So he had a humanitarian angle, and because of that when we connected with him first, he was predominantly interested in this from how can this benefit mankind, like how can you get power systems out to remote locations, and then you know you have desalination, you can have vertical farming, you can have medical facilities in areas where that wasn't possible before. And nuclear power in general he's just very in favor of because it can be put anywhere, it's a high baseload energy, we know it works. So he has a sort of academic interest as well as this humanitarian interest too. So that was honestly the biggest podcast I've ever done as well. So like, it was very surprising and I obviously I knew of him before that so it was quite a surreal thing just chatting with him as well.

It is a fine beard, thank you, thank you.

Kairos, a little bit more. I think Radiant are also doing a micro reactor like us. I don't know a lot of the detail of what their sort of design is, but certainly Kairos is, they're producing a small modular reactor. So just very quickly, the industry is sort of split between micro reactors and small modular reactors. So a micro reactor is really anything sort of under 20 megawatts of power output, whereas a small modular reactor could be from 20 megawatts to like Rolls-Royce's 480 megawatts. So it's a big range of power. So Kairos are doing a much larger reactor to us, so they're not a competitor. And actually some of the scientists are actually working with some of, we have the same sort of scientist but working on a different project. So I might be a bit more familiar with what they're doing.

Yeah, I think I'd be guessing from memory, I think they're in the sort of 300 megawatt range. And if Kairos are listening to this, I'm sorry Kairos if that's wrong.

So I would say a micro reactor, it's producing 1.5 megawatt electric or 5 megawatt thermal, say something like that. A micro reactor say it runs for 20 years, you could power a couple thousand homes, you could power a couple thousand homes for 20 years. So in terms of remote communities or island communities, military bases, these kind of systems are perfect for those kind of deployments. Now Kairos, if they are producing 300 megawatts which I think they are, they're targeting powering bigger places like towns, cities, big tech centers, data centers. They could do smelters, big foundries, like chemical plants, things that need a huge amount of energy. So there's actually not as much competition between SMR and micro reactors as you think. They sort of target very different markets.

No, no. If we put out nano reactor we're just trying to tie up the name, but effectively in the industry a micro reactor is really the sort of the name that the industry understands. But they're just so small you could call them a nano reactor and people would know what you meant.

So first of all on the public company, that was, it was an executive decision, but the reason why we went that route, and look there was a lot of financial incentives to stay private and you also wouldn't have to deal with the public markets and everything that comes along with that. So we had to look at it like, how it's going to be a very capital-intensive business. How have companies managed in the past? Actually it's been very difficult for a lot of them unless they've got a billionaire backing them, like Bill Gates backing TerraPower or something like that. So a lot of these companies can become very reliant on government grants to make work, especially for significant capital investment, or they're continuously going around trying to get capital on a private level. If you do that you can lose a lot of control of your company. So it was a tactical decision, we had to turn down a lot of private money. We came out public very early and the intention was to try and grow with the public so that when we needed to raise incremental amounts more cash we had access to the capital market. So back in July, the stock was doing very well, we raised just a small amount, just $20 million, and in nuclear that's kind of a small amount. And the idea here is that as we build and we have increased credibility and the stock does appreciate, and we have a tight structure and a small float, we'll go out and raise more capital and we'll just keep doing that along the way. So we can meet our capital needs and that's a big advantage over being private where maybe you're locked up, maybe you've gone to a venture capital fund at the beginning, they've got first right of refusal, you don't know what the, and you don't know how easy it's going to be to raise privately. It can be very competitive. But if the stock is doing well they'll always be interested in raising capital from equity investment groups, banks, all those kind of things. So it was strategic but that's the reason why we did it and why we're a bit different as well.

So the founder of the company, Jay, he actually had a background as a capital markets guy, he was a banker. Yeah. And when he was actually, this was before the resurgent interest in nuclear energy, but when he was, and I was number two in the company after him, but when he was analyzing the market, he realized that energy was going to become an increasingly difficult thing to source and there was going to be a lot of money in the future. But when he analyzed everything, wind, solar, geothermal, hydro, he came to the conclusion very quickly that it had to be nuclear because it was a high baseload energy, it was consistent, and it was zero carbon. So it met those requirements and it could be put anywhere and this was an advantage it gave nuclear over everything else. And he called it correctly. And so I did actually meet him through some of my capital market connections, I had been involved in a couple of IPOs in the past and I'd run a couple, I'd run a public company, so...

Yes, so I had a bit of experience in that realm, not as much as Jay obviously. And yeah, I looked at his background, I messaged him and stuff before the interview. So yeah, he's got a big background there. And even in New York at the moment, and even walking down the street here, you get accosted by bankers who know him. So I think he's semi-famous in that world. And so he's obviously very good at that. So through that network I met him when he reached out to me. He said I want to build a nuclear company, I said that's crazy, like you know how capital-intensive that is. It's a very high bar to entry, there's big players in that space. But when we examined where we could fit in the market, there was a big spot for us in the micro reactor realm, not SMRs. It was much more uncontested, it was much less developed, and we saw that actually with the right technical teams and the right financing structure, it was an area we could pull out into the market very quickly. So we went in that route.

So it's interesting because, I hope they don't mind me mentioning them, but when we first started working, Oklo were designing micro reactors and they were systems about one megawatt as well. But when they got interest from Sam Altman, from Y Combinator, they changed a lot of their design work to manufacture reactors that were a lot larger. So they're now looking at 50 megawatt systems, and you know we're on good terms with them so I'm sure they won't mind me saying this, but they were targeting more data centers, tech centers, by upscaling their power. So they shifted the market essentially from what they were originally looking at, and what we're still looking at, to a different area, because that's where the money was leading them to.