SPACInsider contributors Anthony Sozzi and Sam Beattie this week compiled their three favorite potential SPAC targets among companies set to see increased demand among elevated energy prices. We look at why they are compelling and why each could be a fit for a blank-check merger.
As discussed in last week’s Top 3, oil prices look set to be over $100 per barrel for the foreseeable future and natural gas prices similarly up 89.9% on the year. Aside from being expensive, many developed countries have newfound motivation to cut back on fossil fuels to avoid having to buy them from their major supplier, Russia.
Nuclear also got a big bump last month when the European Commission officially declared it to be allowed as a “transitional” green power source within its energy Taxonomy legislation. This Taxonomy is set to be the guide for what types of energy investment will be incentivized or de-incentivized as the EU attempts to hit its goal of being climate neutral by 2050.
Opponents had sought to keep nuclear out of the Taxonomy and even remaining in will require some operational changes to how European plants operate and dispose of their spent fuel. This version of the Taxonomy could also still be blocked, but it is considered unlikely at this stage and the regulation is expected to come into effect in January 2023.
Considering that the development process for each nuclear plant can take decades, any European country hoping to include nuclear as a part of its climate neutrality goals by the 2050 deadline will need to get moving quickly.
TerraPower may be among the most-ready to meet these stringent new-age demands. Most reactor designs are decades old with modern tweaks, but it has come up with its new Natrium design that puts out 345MW of power.
Before, each nuclear project held its own burdens. But, the news of the day plays heavily and today’s Ukraine-Russia war may trump the Fukushima disaster for many.
Bill Gates has already invested in Terrapower’s Wyoming plant and it has also received over $120 million in federal grants to fuel its ascent. And, smaller and more nimble reactor designs are the current talk of the town. Spring Valley (NASDAQ:SV) is coasting comfortably above trust value at a $10.14 Thursday close having announced a combination with small reactor developer NuScale.
TerraPower has also taken on lots of SPAC-friendly cash as it has developed with Khosla Ventures joining its Series B in 2010. But it has also since taken on $121 million in successive grants from the US government that both validate the business and present an opening for financiers looking to expand the company beyond government contracts.
Commonwealth Fusion Systems
Massachusetts-based Commonwealth Fusion Systems (CFS) has been working since 2017 to perfect the next stage of nuclear for a broader client-base. Beyond nuclear, fusion is the logical next step in the energy future and CFS has been trodding that path for quite some time,
It raised a whopping $1.8 billion in December to fund its capex, but there is good cause to make its base of capital public at a time of such energy uncertainty. Again, nuclear projects are expensive and long-term. So, much like Metals’ (NYSE:MTAL) acquisition of Glencore’s CSA copper mine, there’s always financing for moves that bring in assets with recurring revenue.
CFS could itself bring that to market. It has both the upside of an early energy play with one more wrinkle that the market has been waiting to see – SPARCs. This is not a Bill Ackman initiative, instead, CFS adopted its acronym for its design for a high-field fusion device that could provide 50MW to 100MW of power.
M3 Brigade III (NYSE:MBSC) could be a candidate for CFS as it has been searching for a renewable energy target since its $300 million IPO in October 2021. It has until October of this year to complete a transaction, but may extend.
In the “beyond nuclear” field, SPAC teams also have Helion Energy to consider.
It has developed a plasma-accelerator technology that could be the thing that engineers have dreamed about for years – a reactor without radioactive waste and risk of catastrophic collapse.
It has already heated plasma to 100 million degrees Celsius, which is an important milestone in commercializing the technology. But, there is still a long way to go. But, like quantum computing companies, which have generally traded well after SPAC deals, the market likes new exciting things.
Perhaps the most emblematic company in this vein is QuantumScape (NYSE:QS), which has fallen mightily from its post-deal peak of over $132 per share in December 2020. But, it still sits at $16.52 as of yesterday’s close and still presents a stable for bulls in its particular twist on EV battery technology.
Helion, for its part, expects to achieve net energy efficiency in its reactor designs in 2024, which in prior SPAC cycles would have been plenty of reason to buy. If the market is now turning slightly in SPACs’ favor following Powell’s concrete comments, then fusion should rationally be a part of the picture.
Project Energy Reimagined Acquisition Corp. (PEGR) could be a player in bringing Helion to the public markets as it has already raised $250 million in its October 2021 IPO and its CEO Srinath Narayanan previously tagged investments in Tesla (NYSE:TSLA), SpaceX and Chinese telecom Quectel (SS:603236).