Opportunities

• Rising Electricity Demand & Nuclear Energy’s Renaissance: The world is experiencing a step change in electricity demand growth driven by digitisation and AI, reshoring and electrification of transport and decarbonisation. Nuclear is re-emerging as a key contributor to meet this demand providing carbon free base power, it has Bipartisan backing in the US and technological advancements are reducing costs.

• Unappreciated Role of Listed Infrastructure: 65% of U.S. nuclear capacity is owned by listed utilities, making them a liquid and scalable way to invest in nuclear exposure. However, many are not fully recognised in passive indexes, highlighting benefit of active management in accessing this trend.

• U.S. Utilities: There is an earnings acceleration being experienced by U.S. utilities who are now guiding for 7% to 10% annual earnings growth, double their historical 3% to 5%. Valuations are attractive with U.S. utilities trading below their historical P/E average relative to the S&P 500.

• Diversified Infrastructure Growth: Even beyond nuclear, listed infrastructure offers exposure to multiple secular themes including energy transition, urbanisation & mobility and water & waste management.

Risks & Areas of Concern

• Nuclear Construction & Cost Risks: Large nuclear projects e.g. Hinkley Point C in the UK have faced massive budget blowouts and delays, raising concerns about whether new projects can be delivered efficiently. Long lead times and high upfront costs can create hesitancy to invest in new projects.

• Regulatory & Political Risks: Use of nuclear power is controversial with many people in the public and in government hesitant to embrace it. Because of this nuclear policy faces political risks from changing governments and regulatory risks increasing costs and timeframes to complete projects. Government support is key for the sector.

• Environmental & Safety Risks: Long term disposal of radioactive waste remains a major challenge, with no scalable permanent solutions in many countries. Nuclear accident risks remain; however, nuclear safety has improved since disasters such as Chernobyl and Three Mile Island.

• Demand Uncertainty & Technological Disruption: Electricity demand growth may end up being overestimated with efficiency improvements in AI from example reducing power needs. If renewables + storage is cheaper and more efficient this will also reduce the desire for nuclear investment.

Portfolio Implications

• The Resolution Global Listed Infrastructure Fund will provide a greater exposure to the nuclear opportunity with 31% of its portfolio companies having at least some exposure to nuclear energy, which is much higher than the infrastructure index which holds 16% in these companies. In addition, it invests in Constellation Energy, the listed company which is most exposed to nuclear power and is not in the broader infrastructure index.

• Most of these companies fall under the electric utilities sector which the Fund has a greater exposure to compared to the index. Electric utilities tend to be regulated, defensive in nature with stable and predictable cashflows that tend to be linked with inflation. This may result in a more defensive infrastructure exposure compared to the infrastructure index.

• The Fund also provides a higher exposure to US Utilities in particular which are guiding higher earnings growth compared to the past and have attractive valuation compared to the S&P 500, which may provide an opportunity to outperform the index.

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Economic Scenario Expectations

• Continued Economic Growth

  Nuclear exposed utilities should perform strongly from strong electricity demand growth and more likely government support for long term infrastructure projects. More broadly listed infrastructure should do well from stable regulated cash flows and higher earnings but would probably lag broader equity markets.

• Mild Recession

  Listed Infrastructure should remain a relative outperformer compared to broader equities, as earnings stability and dividends support performance. Utilities are essential services with regulated revenues, making them resilient to mild downturns.

• High Inflation & Rising Rates

  Utilities & infrastructure should hold up well compared to general equities but could underperform in the short term due to rate pressures. Inflation linked infrastructure such as regulated should perform better. Could be a delay with nuclear projects with higher costs.

• Severe Economic Downturn

  Defensive infrastructure should still outperform general equities, as energy utilities tend to be less economically sensitive. It is likely capex projects will be postponed or cancelled and industrial power consumption would decline impacting nuclear development.

Conclusion

Nuclear power, once deemed uneconomical, is experiencing a renaissance due to technological advancements, improved policy support, and its role as a carbon-free baseload solution. While construction risks, regulatory uncertainties, and financing challenges remain, listed utilities—many of which already own nuclear assets—are well-positioned to benefit from both repowering existing plants and potential new nuclear buildouts.

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