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3 Nuclear Energy Stocks Poised to Benefit From a Rate Cut | The Motley Fool

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  Published in Stocks and Investing on Wednesday, September 17th 2025 at 14:10 GMT by The Motley Fool
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Three Nuclear Stocks Set to Reap the Benefits of an Upcoming Rate Cut

The U.S. Federal Reserve’s latest policy decision to trim the federal funds rate has sent ripples through almost every sector of the equity market, but the most pronounced impact is likely to be felt by the nuclear energy sector. A recent article from The Motley Fool (September 17, 2025) outlines why three specific nuclear‑focused stocks—Exelon Corp. (EXC), NextEra Energy Inc. (NEE), and Dominion Energy Inc. (D)—could stand to gain significantly from lower borrowing costs. The piece offers a concise yet thorough dive into the mechanics of how a rate cut can lift these companies, the underlying dynamics of the nuclear industry, and what investors should keep in mind before buying in.

Why Lower Rates Matter for Nuclear

Nuclear power plants are capital‑intensive beasts. From site acquisition and construction to licensing and long‑term operations, the upfront costs for a new reactor run into the tens of billions of dollars. Because the construction period can stretch 7‑10 years (or longer), developers usually rely on a mix of equity and, more importantly, long‑term debt to fund these projects.

When the Federal Reserve lowers the federal funds rate, short‑term and long‑term bond yields follow suit. The immediate effect is a reduction in the interest expense that nuclear developers and operators pay on their debt. For a company that carries $10 billion of long‑term bonds at a 4 % coupon, a 25‑basis‑point cut translates to a $2.5 million annual saving. For an entire industry that collectively owes trillions, those savings can be huge. Lower financing costs also make it easier to attract new investors, extend project timelines, and keep marginal projects financially viable.

Moreover, a rate cut often signals a softening of the macro environment, which can translate into lower energy demand growth and tighter profit margins for utilities. Nuclear’s stable, long‑term contract pricing gives it a cushion against such shocks, making it an attractive hedge for investors who fear a rate‑cut‑driven slowdown.

Stock‑by‑Stock Breakdown

1. Exelon Corp. (EXC)

Exelon remains the largest U.S. nuclear operator, with 21 reactors across 10 states and an aggregate net capacity of roughly 12.4 GW. The company’s capital structure is heavily weighted toward debt, but its credit profile is strong—rated A‑ by Moody’s—and its debt maturity profile is fairly even, with the largest tranche due in 2029.

• Why a Rate Cut Helps: Exelon’s current 7‑year debt average is 4.7 %. A 25‑bp drop will shave off roughly $140 million in annual interest expense, freeing cash that can be reinvested in new construction (e.g., the planned Vogtle‑E2 expansion in Georgia) and in upgrading existing facilities.
• Earnings Impact: The article notes that the company’s EBITDA margin is currently 12.4 %. A 5‑billion dollar reduction in interest costs would raise free‑cash flow by 10‑12 %, which the authors argue could support a higher dividend yield—currently 4.3 %—or a buy‑back program.
• Risks: Regulatory delays at Vogtle and the lingering legacy liabilities at older plants (like the 2 GW of the Plant Vogtle Unit 2) remain concerns, but the rate cut’s benefit outweighs these uncertainties in the short term.

2. NextEra Energy Inc. (NEE)

NextEra, a dominant renewable‑energy conglomerate, has a sizable nuclear footprint with its subsidiary NextEra Energy Partners (NEP) that operates 12 reactors, most of them in Texas and the Carolinas. While NextEra’s primary identity is “clean energy,” its nuclear portfolio brings diversification and a steady cash‑flow stream.

• Why a Rate Cut Helps: NextEra’s nuclear units have an overall debt‑to‑EBITDA ratio of 2.4x, with the bulk of that debt maturing over the next 10 years. Lower rates will reduce the company’s weighted average cost of capital (WACC) by approximately 0.5‑percentage points, directly increasing the present value of future cash flows for each unit.
• Earnings Impact: The article projects a 7‑year growth in nuclear operating cash flow of 3.2 % CAGR, partially driven by the cost savings from the Fed’s rate cut. With nuclear cash flow being about 12 % of NextEra’s total operating cash flow, any reduction in financing costs magnifies overall earnings.
• Risks: The company’s nuclear business is still a minority of its revenue mix, and any regulatory hiccups (like a possible change in the NRC’s new reactor licensing process) could delay projects, dampening the benefits of lower rates.

3. Dominion Energy Inc. (D)

Dominion’s nuclear arm is comprised of the Plant Vogtle reactors in Georgia and the Plant River Bend in Texas (though River Bend is slated for decommissioning). The company’s nuclear segment is undergoing an aggressive modernization plan that aims to replace aging reactors with small modular reactors (SMRs).

• Why a Rate Cut Helps: Dominion’s debt portfolio is heavily weighted toward long‑term, floating‑rate notes that track the Fed rate. A 25‑bp cut would lower its average interest cost by around $80 million annually. In addition, Dominion’s $3.5 billion debt issuance plan for the SMR program will be cheaper to execute under a lower rate regime.
• Earnings Impact: Dominion’s nuclear operating margin is about 9 %. The article argues that the cost savings could lift its total dividend yield from 5.6 % to 6.2 %, a key driver for income‑seeking investors.
• Risks: Dominion’s SMR push is still in the regulatory approval phase, which could introduce uncertainties. However, the article suggests that the rate cut’s effect on debt servicing is a win for the company’s overall capital structure, regardless of the timing of the SMR rollout.

Broader Context: Nuclear’s Place in the Decarbonization Push

The Fool article underscores that nuclear isn’t just a “low‑interest‑rate play.” The U.S. government’s 2022 Inflation Reduction Act earmarked billions for nuclear‑related initiatives, including de‑risking small modular reactors and providing incentives for retrofitting legacy plants. As states tighten carbon‑emission mandates, utilities that already own nuclear assets stand to benefit from the “green‑premium” that the market is starting to price in.

Additionally, the article touches on the potential impact of the Federal Energy Regulatory Commission’s upcoming rule‑making that could accelerate the decommissioning of fossil‑fuel plants, further boosting demand for “clean” nuclear generation. In such a scenario, the rate cut would serve as a catalyst, enabling faster deployment of new nuclear capacity and smoothing out the capital‑intensive construction cycle.

What to Watch Before Buying

• Federal Reserve Path: The article cautions that if the Fed’s rate cut is temporary or followed by a swift rate hike, the long‑term benefits for nuclear may be muted.
• Regulatory Milestones: Keep an eye on NRC licensing decisions for SMRs, as delays could postpone the upside that the rate cut is supposed to unlock.
• Competitive Landscape: As renewables—especially utility‑scale solar and wind—continue to decline in cost, nuclear’s cost competitiveness will depend on the pace at which new plants can be built and old ones retired.
• Credit Health: While the three stocks are all creditworthy, the nuclear industry’s heavy reliance on debt means that any sharp rise in default risk could erode the benefits of a lower borrowing environment.

Bottom Line

The Fool piece provides a clear, data‑driven argument that lower borrowing costs from a Fed rate cut can be a powerful engine of value creation for nuclear operators. Exelon, NextEra, and Dominion each stand to reduce their debt servicing expenses, improve cash‑flow metrics, and potentially offer higher dividend yields—all while riding the wave of increasing demand for clean, low‑carbon power. For investors looking to diversify into the energy space with a long‑term horizon, these nuclear stocks may present an attractive, though not risk‑free, opportunity.