KLD Expands Coverage of Nuclear Power Industry

What exactly is changing?

KLD Expands Coverage of Nuclear Power Industry

104 companies listed in broader coverage

Effective June 1, 2005, KLD Research & Analytics increased the number of industries it reviews for inclusion in its Nuclear Power Involvement Report, expanding its list of companies reported to be involved in producing electricity using nuclear reactors to more than 100. KLD, which covers all globally listed companies for involvement in the nuclear power industry, broadened its coverage in response to increased investor interest and public debate concerning nuclear power.

According to the Energy Information Administration (EIA), nuclear power provides 20% of the U.S’s electricity supply through 104 nuclear reactors. Over 400 reactors operate daily around the world. In March 2005, the United Nation's Growth in Nuclear Energy Industry Forecast predicted there would be over 500 nuclear power plants worldwide by 2020. Most industry leaders, including GE and France's AREVA Group (CEI), have global nuclear power industry exposure.

"We need a more comprehensive view of the nuclear power industry as the potential for the construction of new plants in the U.S. develops and investor interest develops with it," says Eric Fernald, Director of Research at KLD.

Increased coverage

KLD has increased its nuclear power involvement ratings criteria from three to six. The increased coverage better captures the different players in the nuclear design, construction and operations supply chain.

KLD will now cover six nuclear power involvement indicators:

1. Owners & Operators of Nuclear Power Plants
2. Construction & Design of Nuclear Power Plants
3. Nuclear Power Fuel and Key Parts
4. Nuclear Power Service Providers
5. Ownership of a Nuclear Power Company
6. Ownership by a Nuclear Power Company

KLD's Nuclear Power Involvement Report Analyst, Nelle Coady, reports the number of companies listed on the report increased from 69 to 104 companies based on the introduction of the new criteria released June 1, 2005.

Three driving forces for the nuclear power industry

"Three major drivers have increased public interest and debate about nuclear power in recent years," according to Fernald, "a bolder nuclear power industry, global environmental and energy concerns, and a friendlier regulatory and political framework."

According to a January 2005 article by Forbes magazine, the nuclear industry, via its lobbying arm, the Nuclear Energy Institute, and NuStart Energy, a newly formed consortium consisting of the major players in nuclear power, has mounted an aggressive campaign in the U.S. aimed at overcoming public and regulatory opposition to the building of new nuclear reactors.

"The NRC has been under intense industry and political pressure to facilitate the further development of nuclear power plants in the U.S.," according to Fernald.

Since 1999, 30 old reactors have been re-licensed, while the industry has consolidated from over 50 nuclear plant owners to less than 30. "The current industry strategy in the U.S. focuses on the NRC permitting process," adds Nelle Coady, "which could allow for new reactors to be built on existing plant sites." According to a May 20, 2005 MSNBC article, no new nuclear reactor plants have been built in the U.S. since the 1970's. The NRC has facilitated development by reducing approval timelines. For example the agency approved a new reactor design by Westinghouse in 2.5 years, compared to the traditional 7 years.

Another driving factor in the resurgence of the nuclear industry has been growing concern over global environmental and economic issues, including global warming, air pollution caused by emissions from fossil fuel-burning plants, the rising cost of oil, and increased energy demands from accelerated economic growth in China, India, and other Asian countries.

According to the January 31, 2005 piece in Forbes magazine, China alone has plans to build 30 reactors in the next 20 years to cope with accelerating energy demands.

Finally, the nuclear power industry has been assisted by the election of sympathetic governments in the U.S. and elsewhere. For example, in April this year the U.S. House of Representatives approved, by a vote of 249-183, the Energy Policy Act of 2005, which includes authorization of close to $3 billion for nuclear energy research programs over the next five fiscal years. According to a statement made in April 2005 by Wenonah Hauter, director of Public Citizen's Energy Program, the Act also includes subsidies and tax breaks of $6.1 billion to the nuclear industry.

Nuclear power still seen as controversial by social investors.

Nuclear power remains controversial for many in the socially responsible investment community.

Although the nuclear power industry argues that the current generation of nuclear power plants are the safest ever designed, the danger of a catastrophic accident resulting in a core melt down and the release of radioactive particles still exists.

KLD’s Senior Environmental Analyst, Andrew Brengle, cites other longstanding safety problems that remain unsolved, including the danger of radiation exposure to plant workers and local communities, and the disposal of radioactive waste.

Despite claims by the nuclear power industry that nuclear power would help to quickly address global warming within the context of slow development of alternative energy sources and the current U.S. dependency on non-U.S. based sources for oil, serious environmental concerns remain. According to the Citizens Awareness Network, nuclear power contributes to global warming through mining, milling, and enrichment of uranium. Additionally, there are greenhouse gas implications of transporting, reprocessing, recycling, and the storage of waste.

Additionally, the development of nuclear power plants makes the control of nuclear weapons proliferation more difficult.

Concerns about nuclear plants being targeted by terrorists were highlighted by renowned investor Warren Buffet on CNN's May 10, 2005 edition of Moneyline, where he spoke out against "lots of loose nukes around the world." Buffet considers biochemical nuclear terrorism the gravest threat presently facing the U.S.

About KLD

The KLD team of researchers covering these issues going forward include Utilities Industry Analysts: Andrew Brengle, Hollie Sarrazin, and Nelle Coady, with the Nuclear Power Report covered by Ms. Coady.

KLD’s Involvement Reports cover the globally listed universe of companies and identifies firms that have some level of involvement in areas of interest to socially responsible investors (SRI). KLD has covered Nuclear issues since its launch in 1988.

KLD Involvement Report: New Ratings
Nuclear Power Industry

What do I need to know?
Effective June 1, 2005, KLD Research & Analytics, Inc. has improved its Nuclear Power Involvement Report by expanding coverage of publicly traded companies beyond electric utilities involved in the nuclear power industry. The report now includes other nuclear power industry players such as plant designers and equipment suppliers.

What exactly is changing?
KLD is expanding the screening criteria for the KLD Nuclear Power Involvement Report to include the following:

Construction & Design of Nuclear Power Plants (NEW!)
Companies involved in the design & construction of nuclear power plants.
Nuclear Power Fuel and Key Parts (NEW!)
Companies producing nuclear fuel or key parts for nuclear reactors.
Nuclear Power Service Providers (NEW!)
Companies that provide maintenance and transportation services to the nuclear power industry.
Owners & Operators of Nuclear Power Plants
Now covers operators of nuclear power plants, namely:

KLD ratings are defined in KLD Research & Analytics, Inc. Social Ratings Criteria, 2005, available at: http://www.kld.com/research/ratings.html and as a PDF document in the Socrates - Company Profiles Tab.

What drove the change and why does it benefit KLD clients?
KLD has covered Nuclear issues since its launch in 1988. The report is updated regularly and criteria revised based on change in industry dynamics. Nuclear power is re-emerging as a concern for social investors. Debate over energy policy and investor appreciation of the threat of climate change has sparked the increase in interest. Some 30 countries produce electricity using nuclear power from 441 nuclear plants in operation, with another 27 being built.

Does this have any impact for KLD clients making historical comparisons?
No.

What resources does KLD use for its analysis?
KLD's proprietary process involves independent assessment based upon investigation of publicly-available company information, media and NGO reports and, most importantly, direct dialogue with the company. KLD resources include annual reports, regulator-required financial reports and other public documents published by a company; company websites; financial, business, and trade publications; publications and websites of non-government and government organizations; and corporate data providers. Most importantly, KLD analysts have the respect of companies and regularly dialogue directly with companies on research coverage issues.

Which companies are covered?
KLD's Nuclear Power Involvement Report covers all globally listed companies involved in the nuclear power industry. Companies listed in the US constitute more than double the next largest country, Japan with 17%. 21 different countries are represented in the nuclear report, ranging from Argentina's Petrobras Brasileiro SA (PBE) to Switzerland's Sulzer (SUN) and Japan's Hitchi Corp. (HIT). Most industry majors like General Electric (GE) and France's AREVA Group (CEI) have global Nuclear Power industry exposure. Nasdaq-listed Washington Group International (WGII) has interests in 13 reactors built in Taiwan, Switzerland, Spain, Mexico, Japan, and Brazil.

KLD Involvement Report: Nuclear Power Industry statistics (as of June 1st 2005):

• Coverage increased from 70 to 104 companies.
• US has vast majority of listed companies with 43, Japan second with 17.
• 21 different countries are represented.
• 17% of companies are Nuclear Power Fuel and Key Parts suppliers.
• 30 countries produce electricity using nuclear power from 441 nuclear plants.
• US nuclear industry provides 20% of electricity supply through 103 nuclear reactors.