The nuclear industry might not look like an obvious source of private equity deals at the moment. Two years after the Fukushima crisis, many governments remain dubious about nuclear power, while some have cancelled plans to build new capacity altogether. Regulation and taxation are still subject to fast-changing political winds.
Yet some managers seem unfazed by these concerns. Take Paris-based Astorg Partners. The mid-market firm had been looking into the nuclear industry for more than three years, after an unsuccessful bid for radiation detection business Mirion Technologies. In March, it sealed its first deal in the sector by acquiring Canberra, the measurement subsidiary of French nuclear giant AREVA, in a transaction understood to be worth roughly €300 million.
“We’d been following Canberra for more than a year, and submitted an unsolicited bid to AREVA in early 2012 – so when the group finally decided to sell the business, we already knew it very well,” says Joel Lacourte, a partner at Astorg. And there was a lot to like, he explains: as an international business-to-business company, with a leadership position across more than 50 percent of its revenues, Canberra ticks many of Astor’s favourite boxes.
Most importantly, however, says Lacourte, the company is surfing a very promising trend within the nuclear industry. “The nuclear sector as a whole is growing at three to four percent, which in itself is not that great. But there are some niches within it, including anything linked to increasing safety, which are now growing very fast.”
This, he says, is due to a government-led surge in new safety requirements. That’s partly a response to the sector’s recent woes (Canberra has grown 20 percent since the Fukushima crisis, for example). But there’s also a more general need to upgrade the developed world’s ageing facilities – which is proving a resilient source of growth for nuclear-related services. “There are a lot of sites where bringing safety up to modern standards will require new investment, whether we like it or not.”
The search for less-carbon intensive energy sources should create even more opportunities, says Charles Currier, a partner at law firm CMS Cameron McKenna. “In places like the UK or emerging markets, there is an understanding that new nuclear power stations are needed as part of the balance of power generation. And there’s a very strong political desire for the country where these are being built to benefit from the work to help build them. So the whole gamut of nuclear services businesses, whether it is construction companies or engineering, should be able to benefit.”
Investing in nuclear will continue to involve significant risks, he admits. Contractors can be subject to fines if projects suffer delays, which is often the case. Nuclear continues to attract unfriendly reactions from local populations, a PR challenge private equity firms may have little appetite for right now. And with governments ever more concerned by proliferation issues, there is still much scope for regulatory interference.
But a good number of firms clearly remain undeterred. Urenco, a nuclear fuel maker soon to be privatised by the British and Dutch governments, has reportedly attracted interest from groups including Apax Partners, Kohlberg Kravis Roberts, and TPG. And that’s despite counting AQ Khan, the scientist behind Pakistan’s nuclear bomb, as a former employee.