Bret Kugelmass
We're here today with Adam Rodman and Art Hyde, who are the Founders of Segra Capital, and who I've known now for a few years, but I'm so excited to get on the show. It's been a while since we've spoken, but welcome to Energy Impact, guys.

Adam Rodman
Thanks for having us.

Art Hyde
Thanks for having us.

Bret Kugelmass
Maybe we can take some time, before we get into what you do today, and just learn a little bit about you. I don't know who might want to go first. But if you're willing to just kind of share a little bit about your story and your career and how you got here today, I'd love to just hear from each of you.

Adam Rodman
I can kick it off. Well, actually Arthur and I met in college. We were randomly selected as freshmen roommates and we've pretty much been thick as thieves ever since then. And both, I think, went kind of the traditional finance route out of college. Remember, this was like 2006, 2007, we were doing our summer analyst work like Wall Street was booming. And I think some of our peers that were few years older than us were telling us what they were making, and how great everything was, and Arthur probably knew a little more about Wall Street than I did, but the numbers all sounded good to me. So, went headfirst and then of course, it was perfect timing for the subprime mess, but that actually coincided pretty well because I actually hated banking. Some great people, but hated the work and the environment, and probably started interviewing like four weeks into my gig. And again, it was kind of tough times for everybody, but I ended up at a wedding in Dallas and sat with a group of guys that ran a firm called Corientte Advisors. Mark Hart ran that fund. And among other things, they were very prescient in in calling the subprime crisis and a few other big macro calls at the time that affected markets. When they were regaling me with all those, I was like, If I can work for you, I'll do anything. And was fortunate enough to get a placement there, which brought me down to Texas from New York. Mark, then, backed me in cyber capital, I guess, five or six years later, after joining that firm, and then Arthur and I stayed in touch and talked about investments the entire time. I did a lot of commodities in emerging markets focus stuff, I'm sure we'll get into. He had a specific and helpful skill set as well and it was a good marriage, in addition to being best friends. That's kind of the short and dirty.

Art Hyde
Yeah, so post-Amherst, I did the banking route as well. I joined JPMorgan, I was there for eight or nine years. Didn't exit quite as quickly, but probably had the same issues with big bureaucratic institution. Throughout my time at JPMorgan, I focused on mostly credit and debt markets, which is a little bit of a different background from focus on emerging market and commodity focused equities. I think it was a really good training ground, because I got to cover things like public infrastructure, I covered public utilities for a while. And I think that, just in terms of like a background to set the stage for your career, learning from the credit side is always helpful, because as a credit investor, kind of your best case scenario is that somebody does what they said they would do, right? They pay you back, they pay you interest, you don't get screwed on anything, and they're in a contract, and you walk away with your capital again. You kind of always approach investing with one eye over your shoulder, a little worried that you're gonna get cut out of a deal or something's gonna go wrong. The problem with that is that it's just not a very fun way to go through life. Equities give you that upside. They give you that participation in growth and changing markets. Anyway, when Adam formed Segra, and I had the opportunity to kind of shift focuses a little bit, I jumped at it. I think I joined in 2014. Between college and me joining Segra, Adam was the best man in my wedding, I went on to be the best man in his wedding. I think there's good and bad to it, right? We never really leave the office seven days a week, 365 a year, we're good friends and work-

Bret Kugelmass
You mean, there's good and good to it, then. Not leaving the office is a bad thing. But if you love what you do, it's great.

Art Hyde
Exactly. Yeah, it, it makes what's already a hyper cyclical business more emotionally cyclical. But I think that what we've done well, so far, when you invest with somebody that you know this well, you kind of know when they're being truthful to themselves and when they're not. I think we can call each other out.

Bret Kugelmass
I'm so glad you brought that up, that is such an important trait just to be able to, I mean, there are impediments to communication in any workplace. And honestly, just knowing if somebody is being honest to themselves sometimes is an impediment of communication. But if you guys have that, like, sixth sense with each other, boy, I bet you accomplish a lot.

Adam Rodman
Yeah, we both worked obviously, in other places, and truer in a big bureaucracy, like a bank, more than anywhere, but it is actually very difficult to speak your mind honestly. And then in a hedge fund structure, where you're kind of basing everything off in front of probabilities, nothing is an exact science, there are a lot of implied politics behind how you interact with your senior staff about how you feel about a position, and it's not always the truth, because of the other the other things. Whereas, I think we get to have a hyper honest dialogue. It's a small firm to begin with, but as Arthur said, kind of left and right hand in this. It's very natural.

Bret Kugelmass
Amazing. And before we go on too much further, I should also give a shout out to Chris Keefer and the Decouple podcast. That's where, I know we had spoken a while ago, but I saw your name pop up, I think, Art, you were on that one recently?

Art Hyde
Yeah.

Bret Kugelmass
I saw that pop up and I listened to the podcast, and I was like, oh, man, I got to talk to these guys again. Anyone who wants to just pause, go to that podcast and get some more of the background, please do and then come back. This is great. Maybe you guys can introduce a little bit of the thesis of the fund and what you were thinking?

Adam Rodman
Yeah, absolutely. As Arthur kind of pointed out, we were kind of cyclical investors. And we like to be contrarian. We recognized what we thought was an opportunity in the nuclear fuel cycle. I think Arthur and I, both just from our respective vantage points and markets, were big believers in nuclear for a long time, and actually had kind of covered it in different ways going back to those 2007, 2008 years.

Bret Kugelmass
Tell me the different ways that you covered it, dive into that for a second.

Adam Rodman
Well, me more probably from the commodity side. I did not know anything about the uranium fuel cycle out of college or in banking. But when I joined Corriente, we had a rather large commodity book and a few select uranium mining companies and one fuel cycle company were in the portfolio. I kind of inherited coverage of that at that time, which my first view into things. As I say, you're better lucky than good. We were far exited from that when Fukushima hit, but obviously a lot of that work in that contact network remained in the background. And Arthur-

Art Hyde
Well, at JPMorgan, at least part of my role was to cover again, public markets, infrastructure and public markets, utilities. And so, not only did we have utilities that had nuclear exposure, but also I think there was lending out to the Vogtle plant, at that point that would have been probably around 2010, '11, '12, so kind of right post-Fukushima. From my perspective, more understanding the role that nuclear power plays within an energy system, what it kind of does differently for an energy system, and kind of how utilities think about it in the context of the broader generation portfolio.

Bret Kugelmass
And does this include international public traded companies, or just US public traded companies?

Art Hyde
in that role, I was in the US, and I was public utilities.

Art Hyde
Maybe just backing into kind of how Segra thinks about opportunities and why nuclear kind of fit within the framework we've tried to put together at the firm, we very much take what we refer to as a white paper approach to investment. We were both liberal arts students at Amherst and from our perspective, the whole goal was to come up with a thesis which we thought we could actually add value to. We think there's a lot of talent in public markets investing, a tremendous amount of very well-funded very well-researched firms and for two guys in a room to come in and justify charging a fee structure, we had to explain what we were going to do differently. And that led us to focus on markets that were either underfollowed, misunderstood, kind of baby out with the bathwater type situations.

Bret Kugelmass
Public utilities, sorry that's what I meant.

Bret Kugelmass
When you say a fee structure, just explain to our audience, what's happening is you're raising funds, so you're taking other people's money and you're going to invest it, but you have to live, you have to eat while you are investing. The money doesn't all happen on day one, so you collect, out of that pool of money, some percentage of it goes to pay your salaries, that's the fee structure.

Adam Rodman
The general, both the management fee, which you just alluded to, but then also obviously sharing in the profits with our investors. I just wanted to clarify, we're actually not here to sell anything. That fund is raised and closed. We're more kind of doing a recap of the last couple of years. In general, you are you are correct.

Art Hyde
Yeah, I guess when I say add value, I think our point was more, we're not going to get in a room and then come out and say, we think you should invest in Apple, right? We want to look at underfollowed, misunderstood industries where we can actually have an asymmetric risk reward based on information that we have that others we think don't or don't understand, right?

Bret Kugelmass
Right. And the whole point, I think this is what I want to illuminate for our audience, is you're not the only guys out there saying that you can invest other people's money and make them rich. And so there's a marketplace and you're competing for those dollars. You have to essentially pitch yourselves as unique and differentiated from the other groups of guys and girls who are out there asking to invest people's money. This is your unique angle, essentially.

Art Hyde
Yeah, I think like any industry, you have to argue for why you are doing something different. What is the value proposition of the firm? Segra, again, was always looking. We kind of have this this running joke of, if we're bringing you an idea, and you've heard it before, we're not doing our jobs. And certainly, when we were developing the nuclear thesis - I think we started really focusing on in earnest in about 2016 - we raised the current fund, which is a dedicated vehicle only focused on nuclear and the fuel cycle, again in mid 2018. I wouldn't say we're laughed out of the room by allocators, but we certainly had some conversations where, as analysts, we kind of looked like we had tinfoil hats on.

Bret Kugelmass
Why is that? Especially when it comes to, you're saying fuel cycle, you're talking commodities, you're talking buying uranium, right? Buying trading uranium, essentially?

Adam Rodman
And there's a few reasons we were laughed out of the room. One, commodity markets in general were in the dumps. Then you want to whittle through your opportunities that show once you get past the guys who know gold well, and who know copper well, and other base metals, uranium has always been kind of a niche pocket. But the real kind of insult to injury in our view at the time were that kind of people thought nuclear was going away in the West, which is obviously where we are. In the US, if you walked in with an allocator, they would say. Why would you be spending time looking to invest in any industry that will be gone in five or 10 years? However misinformed that was.

Bret Kugelmass
Even those people, even though they're in the West, they didn't understand that the commodities market is international, and that there might be growth in Asia or other places? They just didn't think like that? Did they not care or did they literally not know what was happening in other parts of the world?

Adam Rodman
Didn't know, didn't care.

Art Hyde
You would think that markets were more efficient than they really are. I mean, I think that every investor has biases and one is just regional bias. If you're in the US, the headlines you've been seeing about nuclear power for the last decade are around plant delays and issues, right. It's actually been funny when we would go try to pitch an allocator in Hong Kong, for example, we would spend very little time on the pitch for nuclear. It was almost self-evident that nuclear was going to be a growing industry. What we would spend our time on is how we were going to execute the thesis, by what companies we buy and how. And so what we noticed was, you get these massive regional biases based on who you're speaking with. We think that's changing a bit, but two, three years ago, it was certainly the case that, especially for European investors and US investors, it looked like we were trying to do something crazy.

Bret Kugelmass
Interesting. Okay, and then so does that mean that you just kind of left out the guys from the West and focused on the guys in the East or what happened?

Adam Rodman
I think it just ended up being more of a slog. We were fortunate to come across what I guess we'd characterize as some forward-thinking and open-minded pools of capital who thought that our work was good, because - if we have the time to get into it - this wasn't a kind of a finger in the air, broad thesis about the idea that nuclear would come about or that we even needed a renaissance in terms of generation, it was, as Arthur alluded to, just an industry that had no institutional investors looking at it. And so again, it was just the gut reaction of, Oh, you want me to look at a commodity that's related to nuclear? Nuclear is dead, that commodity cycle is over, don't even need to look at the numbers. And we obviously spend a tremendous amount of time kind of forensically dissecting commodity supply demand, cost curves, all sources of supply, both primary and secondary in the market to get what we think was a pretty true and fast kind of base case on where prices have to go into the future and kind of maybe more important even than the prices in the fuel cycle, what the capital cycle in this sector had done to kind of the future prospects of meeting the various scenarios that we outlined. And again - sorry to be long-winded about that - there were a few pools of capital willing to hear us out, did a bit of a proctology exam with them running through our numbers and why we were quote, unquote, smarter than then the basic consensus that you heard out there, but we got them over the hump.

Bret Kugelmass
And what are the unique characteristics of a market where there isn't much institutional activity? Is it just less frequent trading? Or what's going on?

Adam Rodman
It's less efficient in a lot of ways. I'm sorry, Arthur, go ahead.

Art Hyde
I just want to pull back and maybe mention one thing before we answer that question, which is, we were not pitching a nuclear renaissance. The story, we were big believers in technology, but in investing, you make a lot of your money when something goes from absolutely hated to it might be okay. It's a rate of change business. And so our argument was that one, climate change is going to be more and more of a focus and we need solutions to deal with it. We were very clearly of the view that wind, solar, batteries is not, in and of itself, the solution. You're going to need everything we've got and nuclear is going to be part of that solution. But we didn't pitch to some crazy Western renaissance or advanced reactors. We just pitched the idea that nuclear was going to have a place. And if expectations for wind and solar were here and expectations for nuclear were here, we were probably going to end up somewhere like this. But that rate of change is going to be way more impactful for the nuclear industry and the investments that we outline, than a slight downgrading of what wind and solar will end up doing for the grid at large.

Bret Kugelmass
And again, for those who are audio only, the motion that you did with your hands was you showed a small decrease in expectations for other renewables, a small increase. But what I'm assuming that you were implying there was that, even though the magnitude of those increases might have been the same, the magnitude relative to the baseline might actually be a fairly hefty percentage? What are we talking about, 5, 10 percent?

Art Hyde
Yeah, well, it's all about what the market's pricing in, right? So if you just went by the man on the street, a poll, and you walk down Fifth Avenue and ask people, Okay, energy transition, what are we going to invest in? 10 out of 10 say wind and solar, expectations are there. That's the solution, everybody knows it. Probably nobody would mention nuclear. And so our point was that, if nuclear plays a role, especially in emerging markets, right, this is really going to be a demand driven story from emerging markets. The relative return of investments in that space would actually significantly outpace other opportunity sets. So I guess what we're saying is, at the time, certainly, the idea that nuclear could play a role in the energy transition wasn't even discussed.

Bret Kugelmass
How long term are these positions? Because, even if you're right and there is going to be continued steady increase in nuclear better relative to baseline expectations, you still have a lot of force. I mean, nuclear plants, you have got a lot of warning before that nuclear plant comes online and start sucking up fuel. So how long term are you trying to make your bets relative to market changes?

Adam Rodman
Technically speaking, we started our fund with a four year lock in mid-2018. That would be the technical timeline. But I think the answer to your question kind of more accurately is where valuation and prices in the market intersect with fundamentals in industry or macro fundamentals for the nuclear sector, and that really is kind of a sliding scale. or kind of a path dependent decision tree for us. Without getting into the total nitty gritty, we have a view on where various prices in the fuel cycle have to go under various scenarios and we underwrite relatively conservative kind of valuation targets from companies who will be taking advantage of that kind of industry environment. And under timescales, price scales, an industry event kind of, that's the looser part of it, but industry event frameworks where all those intersect is how we buy and sell kind of securities in our fund.

Art Hyde
But just in terms of like - sorry, not to - but in terms of how we think about this, this is very much a buy and hold strategy. It's not to say that we don't trade this book to a certain extent, but our whole pitch to investors, I think the terms we used were, we're trying to do private equity in public markets. We understand these are volatile, we understand we may be early, but our pitch is that, as the scene unfolds, being early, which we were in 2018, is actually a much better scenario than being a little bit late, because the price changes of these securities can be relatively dramatic and relatively quick. And so thinking that you're going to get in at exactly the right time, it's very hard to do that. You'd rather build a foundation with the right valuation framework, and wait for the thesis to unfold.

Bret Kugelmass
And then, can you also, if you what you're doing is you're promising, Hey, this is like a long term hold play, but you do see some early indications of you being right, can you use that early success, even though you're not going to sell at that point, to then raise more money and then line up another fund to double down on your thesis?

Adam Rodman
Yeah, yeah, absolutely. And actually, our fund, knock on wood, luckily, we had a pretty gangbusters year last year. The fund was actually closed to fundraising at that time, both liquidity and the opportunities that improved this year, and we opened the fund for a brief quarter to take capital again. And we could, in theory, do that again if we thought the opportunity was there, and liquidity as well.

Bret Kugelmass
And what were driving prices of- actually, I first want to ask, what part of the fuel cycle are you buying into? Because as I understand it, it's not just the uranium ore that's a commodity, but there's also enrichment, SWUs, as they call it? Where do you guys buy? What part of the fuel cycle?

Art Hyde
I mean, maybe the way we kind of start out, let's say we just have the view that nuclear is under-owned, as an industry. Then it's about ways to play. You look across the public market equities that are available across regions and there's not that many ways to have a levered view on nuclear as an industry. The only way that we've really found a lever of play to the prospects of nuclear is through the fuel cycle, within the fuel cycle, conversion and enrichment are really services. And frankly, from the enrichment side, there is some structural oversupply in that market. When we look at the next 5, 10 years, the real hole is uranium. We have invested heavily in miners that will effectively be the supply chain for nuclear reactors.

Bret Kugelmass
I see, you were saying, then that that makes sense. Maybe I misinterpreted earlier, you're not buying the commodities, you said you're buying equities. So that means you're buying stock in companies that do things as part of the supply chain.

Art Hyde
Yeah, we think we're looking at a structurally undersupplied market in the future without significantly higher prices. And so you could go out and buy physical uranium today and maybe under our base case forecasts, that price needs to double, let's say. If any of your listeners are familiar with natural resource investors, you tend to get significant leverage to a commodity price cycle if you actually own the underlying assets, because you're buying pounds in the ground significantly cheaper than you are pounds above ground. That inherent leverage in the business model of mining, if you're right, gives you a better payoff structure. It can also be significantly more risky and that's where our underwriting and stock selection matters a lot.

Bret Kugelmass
And where's it more risky? Under what scenario?

Adam Rodman
Just that you're taking operational risk.

Bret Kugelmass
That they can't pull up the uranium ore cost effectively?

Art Hyde
Maybe the asset never gets delivered, maybe it costs significantly more than you thought it did. Maybe a government in a certain country takes over the asset. There's plenty of risks to equity in a miner versus just holding what's liquid. By being a commodity, it's inherently liquid. I can buy it and sell it tomorrow. That's what defines it as a commodity, so you're taking an extra layer of risk, but we think being compensated for it.

Bret Kugelmass
And what makes a miner? Is a miner a company that has drilling equipment or is a miner company that buys land rights?

Adam Rodman
It can be anything. It depends what stage of development you're in, I mean, everything from an exploration company that pretty much has a piece of paper that say you have rights, to the next level being a well-delineated development project that has high probability reserves, all the way to a mine that's fully in production, selling and delivering, or to a converter.

Art Hyde
And I'm smiling, for those of you on audio, simply because I think you actually hammer on a great point, which is we think it's a really interesting industry. But if anybody's ever dealt with junior resources, in junior mining, oftentimes you are just talking about a piece of paper or a land package, there's nothing really there. Again, we think diligence in this sector matters a lot. And what we've seen so far is that, at the beginning of the cycle, as something was left for dead and then people start to see promise, capital kind of floods in, in a very ungoverned way. And it tends to, we always say in the cycle, everything's correlation one, all the miners go up together, and you're not really seeing the type of institutional framework deployed that you will see as the cycle progresses, and that's where we see kind of the most opportunity. If you're gonna be an expert in your field, you want to be adding value through stock selection, not just through broader thematic momentum,

Bret Kugelmass
And how many - that's, I mean, that's a good point, and that's the hard work, actually digging into a real company and trying to figure out what's right, and what's wrong about any given opportunity - so how many total companies could there possibly be in the uranium exploration and mining space?

Adam Rodman
There are about 50 or 55 or so.

Bret Kugelmass
You got work cut out for you then, actually going through 55 companies.

Adam Rodman
We've looked at more in circumstances, but of those 55 or so, we take rather chunky positions in five-ish core names that we really like.

Bret Kugelmass
And sorry, is there a mechanism by which, if you really know a sector, can you insulate yourself against, and you're going deep on a company, can you insulate yourself against market trends? Like, would you take a long position in those five but then short the other 45?

Art Hyde
We are a long-short fund, we do have the ability to do that. But I think that at least what we've explained to our investors is that we actually want the cyclical nature of this industry within our P&L. We are not a market mutual fund. We are a heavily long-bias fund. As the cycle progresses, many innings down the road, if we think that it's overbought, or valuations are unjustifiably high, we actually could be net short. I think we're agnostic. And that would not short the nuclear industry, to be clear, we would just be saying that this one component of the fuel cycle is actually overvalued, versus what our base case is. We kind of have joked with nuclear utilities a few times, who saw us initially as, Hey, you guys are going out and trying to buy up a bunch of uranium and we need to buy uranium, and maybe we're competing. And I think what we've explained them all the time is that we're actually helping finance their capital cycle. We're actually making sure that there are going to be mines in production at the time they need them five and seven years down the road, and if investors like us aren't there at the bottom of the cycle, that's where you get these squeeze points, unnecessary tightness in the cycle which actually hurts them much more over the long term. And so I think that we are a balancing mechanism in the market by choosing high quality development resources that they are going to need, again, late 2020s.

Bret Kugelmass
And just to understand the rest of the market, you mentioned that you're investing in public equities, is there a significant component to the global market in the nuclear fuel cycle that's just private that you don't have access to?

Art Hyde
Yeah, that certainly is one dynamic. There are entities I would say like Uranium One which is owned by Rosatom, that is a private uranium company. There are companies that are joint ventures which are owned by governments or by private capital. So yes, there are privates. I think when we initially underwrote the thesis, we looked around the private markets - there are also just private assets that exists, some private owner has them - and we saw that the public markets were actually offering us liquidity for free, meaning that public market assets were actually priced at or below what we were seeing in private markets. That's doesn't happen very often and that's why we chose the public markets.

Bret Kugelmass
And why would that be? Is there just some sort of ESG stigma or something associated with it?

Adam Rodman
There are a lot of dynamics to this, to be honest, and this is probably a broader comment on markets in our strategy, but so much of today's public markets are kind of flows driven and then also driven by rather strict mandates for fund managers, both in terms of how liquid assets have to be, how volatile they are versus benchmarks, honestly, how much Wall Street coverage there is of a certain sector, certainly, if you're a mutual fund, that would come into play. The uranium fuel cycle checks none of those boxes, extremely illiquid on a relative basis, almost no Wall Street coverage, highly volatile, in many cases, penny stocks. So it was as much a lack of focus, as it was an inability to play for a large swath of the markets until you got, kind of as Arthur alluded to, several innings off the bottom of this very distressed cycle. And that led to inefficiencies in the public versus private markets. Kind of said differently, the private markets might have had a natural buyer for various assets in these circumstances and the public markets simply could not, almost more for structural reasons than anything else.

Bret Kugelmass
And tell me more about uranium mining, in general. When people go out to get uranium, is it just in a uranium mine somewhere? Or is this one of those metals that's kind of co-produced with other mines and other metals that exist? And how does that affect the dynamics?

Art Hyde
The answer is it depends. There are assets globally, like Olympic Dam in Australia would be a great example. A very large mine, uranium is a byproduct of broader production of other metals. But I would say the majority of uranium mining globally is actually dedicated. These are uranium specific assets. They are mined either through traditional underground mining methods or through something called ISR, which is a leaching solution which is pumped in the ground, you pull the uranium out and you treat it. I would say the majority of time you're talking pure play. There are bigger multi-asset mining companies that may have a small amount of uranium production in their asset base, but they're usually not- like the price of that stock is not removed based on the prices.

Bret Kugelmass
So you can just ignore that essentially?

Art Hyde
Well, like you could buy BHP because they do produce uranium, but the stock price of BHP is not going to move based on their uranium production. It's just too small within their broader portfolio.

Bret Kugelmass
Got it.

Art Hyde
And the only other point I'd make is that, while we're very, very focused on uranium, because we think again, it's the most leverage point in terms of ways to play nuclear, we do look at other assets. We've looked at plenty of private rounds for things like advanced reactors. We do look at other technologies. We look at things like fuel rod technology, and some other privates. So we do look across the space and our fund does have an open mandate to invest in.

Bret Kugelmass
That was my next question.

Art Hyde
Yeah, it's just about risk reward. We could buy Exelon stock, but I don't think Exelon stock moves day to day based on nuclear policy. It might a couple days, but again, we want to create leverage to the thesis.

Bret Kugelmass
Yeah, maybe not Exelon.

Adam Rodman
Really, this is a kind of, our fund is a nuclear fund. It is trying to find, as Arthur said, kind of the pinch points and the best ways to play an industry that we think is going to exist and hopefully grow substantially through the energy transition. We have kind of, as Arthur said, like a white paper or a blank slate approach in terms of our mandate within that sector, where we can kind of play as Art was saying, kind of what we want.

Adam Rodman
Is your fund size public? Are you allowed to tell, share with us?

Adam Rodman
We run about $200 million.

Bret Kugelmass
Okay. Great, that's a lot of money to put towards nuclear.

Adam Rodman
Anyway, my point is just, we would hate for any listener to have the takeaway that we are, as Arthur said, we're not dogmatic commodities investors who don't plan to stick around for 10 years in the market that we think goes up 100x, as you might hear somewhere else. We are strategic investors in the space, looking for places that are capital starved, and therefore have a real valuation advantage to us and our partners, and in the early parts of the cycle that really was in the fuel cycle and on the supply side of the equation.

Bret Kugelmass
I have a question for you guys about how much you look at technology and I'll ask it from two perspectives: one, from as part of your investing thesis, but also just personally, I know sometimes people are just personally curious. Are you looking at technologies, like the in-situ leaching or other advances in technologies that might affect the production rate of certain assets? Or new assets that could be mined, such as the ocean? Are you guys looking at technology as well?

Adam Rodman
Absolutely.

Art Hyde
Yeah, I think if you're going to invest in any sort of commodity market, and you don't have a keen eye towards technological improvement, I mean, the most well-known would be the gas market, right. But if you didn't see fracking coming, or you didn't pay attention as it was coming up the curve, you'd be in a really bad position. We certainly spend time on different technologies, both on the reactor side and on the uranium side.

Bret Kugelmass
Can we dissect those together for a second? On the uranium mining side, what are the new emerging technologies that you might want to keep an eye on?

Adam Rodman
Truth is that, right there, there isn't much. Obviously, ISR mining was a big technological advantage for geological settings which are amenable to that mining technique. I actually probably won't even go into the names of the one or two different very early stage mining related techniques, because they're very unlikely, highly, highly unlikely, to impact the market for decades. That's truthfully the timeline, even if they were successful, and at this point, they're like preclinical biotech companies. What I think Arthur meant on the technology side was probably more on generation.

Bret Kugelmass
We'll move on to that in a second, but I just wanted to say one more thing, because - and correct me if I'm wrong, because I'm not in this financial game - I know that sometimes, like the private equity players, if they buy a stake, they might actually influence the practices of a company. Is that, as investors, as public investors, are you able to get on shareholder calls and yell at a company and say, like, You're still digging it up with an open top mountain, like, why have you not incorporated the ISR technology? I'm looking at the map, and this would increase your production rates by 10%. Are you allowed to do that?

Adam Rodman
Oh, absolutely. Yeah. Not only are we allowed to do, because I think technically, anybody would be allowed to if they're a public shareholder, but we are big advocates for our portfolio companies, which includes attempting to whip them into shape if and when we think they're making missteps. Luckily, our track record in picking good management teams has been strong so far, but to the extent that anything from compensation to mine plans deviate from what we think our ideal, we're absolutely vocal shareholders.

Bret Kugelmass
Actually, that brought up another interesting idea. Is the idea that you want to invest in companies with good management teams? Or do you want to invest in companies with good assets and bad management teams, and then replace the management team?

Art Hyde
You know, it's funny, you say that. I think that, on paper, that makes sense. The idea that you're going to go buy part of the company, replace the management team, clean it up, get it to re-rate, and then move on. I think in practice, there are a lot of personalities in the sector, like anything else. I actually think what we've really tried to do is partner with good management teams that share our vision for how an asset should be developed, how they think about community engagement. I think whenever you're dealing with something in the nuclear space, you have to think of stakeholders far outside of just capital, right? It's pretty easy to think about shareholders, for the most part. A lot of investors are aligned with management teams regarding compensation. Oftentimes, they have significant stakes in their companies. Again, we're aligned in terms of we'd like the share price to go higher and that would be a better value for the company. I think what's far harder, and what we spend a lot more of our time on, is making sure that the management teams are taking things like community engagement, and more like the ESG part of the investment thesis seriously, at an early stage. We think that more and more extractive industries are going to be both important to the clean energy transition, and also a little bit behind in terms of understanding how they can interact with the ESG dynamics at play.

Bret Kugelmass
Is that for risk mitigation purposes? Or is that just to be good stewards of it?

Adam Rodman
It's just gonna matter. That's probably a whole other topic. But if current ESG trends were to continue, the whole supply chain is going to come under the same scrutiny as the headline business itself. I mean, you could envision a hypothetical where if you were a uranium miner, for instance, or any part of the fuel cycle and not adhering to best practices from an ESG perspective, especially highly regulated and scrutinized utilities might not be able to contract with you.

Bret Kugelmass
It's just kind of ironic with the whole nuclear thing, because just by the fact, the virtue of digging up something that has 3 million times the energy density of the alternate, it's like you're already orders of magnitude better. I don't care what you do to that little local area - I mean, that sounds rough - but you're already so much better, just because you have to do so much less to get so much more energy out. That's why I-

Adam Rodman
Everything in nuclear is unfair. It's held to a higher standard. You just have to bake that in.

Art Hyde
You just have to know that you're going to be compared against perfection. That's the starting point for anybody in the nuclear industry. It's not fair and I think the industry could do a lot more to advocate for apples to apples comparisons, better metrics, things like that. But what I'd say is that, from here, other industries are actually getting required to come up the curve to where nuclear already is, when it comes to documentation and processing of waste any of this stuff, right. We're watching it with silicon, or solar panels in China, cobalt in the DRC. All of these other energy technologies are going to start getting treated like nuclear has been treated for 20 years. Again, if you're talking about relative impact on business models, we're already including the cleanup and waste management in our models for nuclear, because this-

Bret Kugelmass
-that is such a brilliant insight. Was that part of your pitch initially is that, like, nuclear has already done the hard and expensive and risky work of kind of cleaning up their practices, and now everyone else is gonna be held to that same standard, so the relative value will change?

Adam Rodman
We certainly mention it, but you'd be surprised at how much even a detailed review of nuclear related versus their competitors kind of goes like this. For the boogeyman, that nuclear brand, the boogeyman elements of the industry continue to haunt regardless of how factually proficient they are. As kind of Arthur pointed out, you're being compared against perfection. And that standard needs to come down, in our obvious opinion, for what you've outlined to happen in reality, which is for someone to give them the benefit of the doubt for how much money is, frankly, set aside from everything from the mining side generation side, to make sure that it's best in class standards. In short, no, it does not get a lot of benefit.

Art Hyde
And what we're doing is really just trying to be advocates for these dynamics. I think that one of the worst parts of nuclear is just that there aren't enough eyes on it. There aren't like, especially big financial institutions, whether they're larger funds, whether they're banks, there's not a skill set in analyzing the nuclear industry. For example, we're co-authoring a paper with the Gen IV Forum that will be released in the next, hopefully, in the next two months, which will be the case for nuclear as an ESG, investable asset class. We do a lot of advocacy work behind the scenes. And this is both good for our investment, because clearly we're along the sector, but also we just think it's going to happen anyway. We think that- do you know who Josh Wolfe is?

Bret Kugelmass
From Lux?

Art Hyde
Yes. So we were on - you know what Clubhouse is, we'll see if Clubhouse has an app that ends up being relevant in a couple years - but we were on a Clubhouse on nuclear technology. I think he said it really well, which was, If we were facing today's climate issues and nobody had ever heard of nuclear technology, and all of a sudden, it hit the front page of the New York Times that we'd figured out nuclear fission, the whole world would be celebrating. It would be the solution. It would be the way that we are going to battle the energy transition, we're going to battle carbon issues. Every single country would be investing in this sector and thinking about how this sector solves their problems. We're not. Why, right? That's how you need to start, as an advocate, thinking about this process, because the technology itself does phenomenal things. Can we market it appropriately?

Bret Kugelmass
Okay. So tell me about the technology that you're looking at on the generation side, I want to hear some of your thoughts there. And how deep is your analysis? Are you guys like really, really seriously looking at this or it's just kind of peripheral?

Adam Rodman
I think we're serious in the sense that we are hyper focused on continuing to find the best ways to, not only advocate for the space, but then also make money from it. I mean, we should be candid in saying that we're not physicists, or engineers. So we have-

Bret Kugelmass
I have to say, I'm actually glad that you made that distinction, because a lot of times what I find is that when it comes to the dollars and cents, it has nothing to do with how great the physics of your reactor is, it has to do with the engineering of the power plant.

Adam Rodman
Well, then I would I would agree with you there. But unfortunately, we are neither. I'm sorry to jump in. We're very serious about it and we can kind of walk through what we've seen and what we think about it. But we also have to acknowledge knowing our limitations as being hopefully an edge to a certain extent in and of itself. We do rely on outside consultants, political advisors, our own advocacy and role in industry to help kind of shape what those opportunities look like for us. But it's actually been, it's been a difficult sector, I think, to get behind. And Arthur, I don't know if you want to take it from there. But it's not clear.

Art Hyde
Yeah, it might be a whole another podcast episode on how we think about the risk and reward of advanced reactor investments. Listen, there's a lot of promise there, to be sure. But I think the reason that we've held back from fully committing to more of a private model focused on advanced reactors is that we don't know what the market looks like yet. Anybody can tell you what a TAM is and how big the energy markets are more generally, but at least with Western technologies, you actually don't have a defined customer base. And I think that's what's really hurting SMRs so far, which is they've been in this limbo, it's very easy to raise venture capital.

Bret Kugelmass
When you say SMRs, you mean small modular reactors?

Art Hyde
Right. Yeah. And again, this is one of the issues with the industry, you've got this kind of word soup of acronyms. Are they small modular reactors, are they advanced nuclear? What qualifies as advanced nuclear? Are they really modular, or do they really mirror more of a large scale reactor because you need to build 12 of them at once? How are we going to site these things? What is the security cost for siting? Is this going to power a mine at 30 megawatts, or is this gonna effectively replace Diablo Canyon? How do we think about what this sector is, is really still undefined. Yeah. And so I think, because-

Bret Kugelmass
Is there a good resource, is there a good go to resource you go to, to figure that out?

Art Hyde
To figure out where an individual-

Bret Kugelmass
-just to map out the whole nuclear, the whole next generation nuclear sector?

Adam Rodman
No, in fact the industry kind of has been forced in a position of competing against itself, which is, I guess, maybe another topic, but there would be no collaborative effort. We're speaking of things that we laugh about internally. Like if you happen to work at an electric vehicle company, or a battery company supporting electric vehicles, without a doubt, you got any of the management teams in those industries in a room and you just kind of blanket ask them what they think about electric vehicles, electrification, climate, they'll say the same things. They're all advocates and they're all rooting for a groundswell to support the industry that each of them is trying to maximize. That doesn't happen in the nuclear sphere. It's all sharp elbows and eating each other. Old nuclear is bad, new nuclear is good. In new nuclear, as Arthur said, advanced reactor versus SMR versus my technology versus yours. And it's self-defeating.

Bret Kugelmass
It's so crazy, it is all sharp elbows, I think it's a function of the fixed buy mentality that comes from grant allocations, because the only way these companies have been able to make any money is just by competing on government grants. And they just have to essentially pitch why all of the people who should be the best friends are dumb and suck.

Art Hyde
Well, and we've said this on, I think I said this on the prior podcast you referenced and we actually spoke at the World Nuclear Fuel Market conference to utilities about investments, and ESG, and how to think about all this. We said the same thing, which is, investors are more likely to underwrite nuclear writ large, and then pick the project they think has the best risk reward, right? You're not- I mean, having sat in credit committees at JPMorgan for a decade looking at different infrastructure opportunities, if you don't have everybody in that committee underwriting nuclear as an industry, I think it's really hard that they're gonna say, We don't underwrite nuclear, but we'll do this one project, right? I don't think capital is as smart as you think it is. And so, if you can't get a unified vision of why nuclear as this industry can create value for investors, you're not going to get very far. Again, you can get- what we've seen in advanced nuclear is you can attract venture capital. Venture capital is a lot of family offices and incredibly wealthy people that are willing to throw money to a long term problem with an expected loss. It's an incredible unit, diversify your book, so it's okay if a few of these fail. Getting from that to scaled capital to commercialize an assignment certainly works on paper. And that's the funny thing. I think most of these reactors are going to work. And it's just a question of getting one built and getting a customer to sign on to it. That gap is going to be harder to cross than I think most advocates for advanced nuclear realize.

Bret Kugelmass
Have you identified any - I don't know if I'm using this term correctly - like blue ocean markets for a certain type of advanced nuclear, where it's just the right size and steel companies in Europe are going to all be forced to shut down because of European tax something, that like this is a unique opportunity, essentially, for one type of - or a few different types of - reactors that just happen to be the perfect size to decarbonize this big industry in this particular geography?

Art Hyde
I mean, again, this is probably a longer topic, but I would say that the problem is, because we don't have clear and defined regulatory regimes, it's really hard to figure out which design fits within the regulatory regime best.

Bret Kugelmass
Sorry, when you say regulatory regime, do you mean nuclear licensing regime? Or do you mean the electricity market regime?

Art Hyde
Actually, it's probably both, now that you say it. I was thinking more on the licensing side, right, but what I would say is that, it also has to do with how these assets will be compensated by electricity markets, which is, as you know, very, very regional. So I think it's both. And I think that it's just much simpler in Russia or China, right? They're just picking a design, they are going to build it, and then if it works, they will build a lot more. I think there's certainly value to the much more capitalist driven approach that the United States has taken, but what it means is, it's going to be messier. There are going to be more growing pains. There's gonna be more capital loss trying to get to a better model. The question is, are investors going to sit through that?

Bret Kugelmass
Yep. And while we're still on this technology topic, have you guys ever looked at - rather than look at these startups that are, you said venture capital funded, have a new technology - I mean, is there any drive that you see, or that you would be willing to promote of just building it the way that they built it in the late 1960s? I mean, in many of my talks, I come back to these two specific plans, Point Beach One and Two, which were built in under three years - by the way, they're still operating today - built in under three years, a combined output greater than Vogtle, $730 million inflation adjusted, right. It's just like, it seems like you have the template right there, it works. You can go and see it working every day. They built two of them side by side. Like why not just a build a bunch of those everywhere that nuclear already exists? You double the market in three years. Three years!

Adam Rodman
I'll tie this back to the questions you asked us in the beginning about Western investors and the framework under which they look at nuclear and it's unfortunately skewed. You mentioned, Vogtle, we talked about Vogtle, that's more of an anomalous plant, kind of than anything if you go back further in our history, and certainly very anomalous, versus what the Korean have been doing, tried and true for decades, and what China is very quickly becoming successful at doing domestically. So the idea that we can standardize designs better, streamline the regulatory and licensing framework in the US better, because designs are simpler, 100%. I mean, I think you just nailed it. Not to borrow directly from Mike Shellenberger too much, but it sounds like you guys overlap on the idea that the industry is not going to get anywhere, or certainly is not going to get where it needs to be as fast as it should, if the prevailing wisdom is that old nuclear is bad.

Bret Kugelmass
I know. And I keep telling the advanced reactor guys, every time I see them, I'm like, you want to prove that you can build your advanced reactor, build 100 traditional reactors first, raise all the money that you want off of that success, and then build your, put your advanced core inside of a power plant. I mean, you get it done at the exact same time at the rate you're going.

Art Hyde
Yep. And it's funny, because you're so right. And I think anybody, even like top utility executives. They agree. The problem is, if they greenlight a Vogtle, it's a fireable offense. It's viewed as unnecessary risk. The reason is because we're so far away from- I think we're in this weird point where we know that the climate transition is imminent, we need to invest in it. We are not at the point in most markets where wind and solar are high enough penetration rate that we actually value baseload, right? Because, as we know, and I don't want to make this an anti renewables pitch, we are pro renewables, we just think everything has its own place. You need to look at everything on a risk adjusted basis, apples to apples. So going from 5% renewables to 15% renewables, incredibly easy. 15 to 30, more difficult, more impact on the grid, more spending, more system charges that need to be, in some way, carried, but you can do it. Above 50% is an academic exercise at this point, on an ongoing basis. So the question is, if we get to that point in 10 years, and we're all trying to figure out okay, well, what do we do for the rest of the grid? We're gonna come back to nuclear. And maybe then it's okay to take a risk on something like a Vogtle. But the 2020s are the point where we should be investing in this technology and it's excusable not to. But also - sorry, last point-

Bret Kugelmass
No, please.

Art Hyde
Whenever we think about nuclear, we treat each region very differently. So in the US, save existing plants, invest in advanced nuclear, keep talent within the industry, right? We want to create additional nuclear engineers, we want a young and vibrant industry, not a retiring one. Because if we want to suddenly try to catch Russia and China in 10 years, and we don't have the talent to do it, we're going to be in a really bad spot. And I think the federal government's just starting to realize that. In the emerging markets, and in parts of Europe, Eastern Europe, for the most part, it is large scale new builds. It is big light water reactors. In scale, the whole into is going to be, in theory, they're going to put the first unit in construction two years, I think it's sub $2,000 a kilowatt, and a four year build time. Now, if they can do that, if they can do that, you're competitive with everything, so cost is no longer the issue.

Bret Kugelmass
Amazing. Okay, we're running out of time. I want to give you guys the final word. Any remaining thoughts that you want to get out to our audience?

Adam Rodman
Are you going to kick me into the table if I address like a short-term relevant idea? It's more on the marketing side and the media side. Give me a big punch if you think it's the wrong thing to bring up. But I do think the industry and media gets way too big of a pass at poor reporting. Over the last day or two, we have some very weak news articles broken by CNN about a gas leak at a Chinese reactor. And while we are light on details, there's been a lot of official commentary coming out. I think after speaking with industry, it is almost certainly a cracked fuel rod, which is a very, very common-

Bret Kugelmass
-so minor.

Adam Rodman
So minor, common. We've spoken to a few reporters who have said, well point us to some of the other accidents - or not accidents, but some of the other operational issues - involving a cracked fuel rod and what the impact was. Our answer has been, it's happened so many times that in the US and Europe, it usually isn't even reported. You don't even normally go through any special maintenance for a cracked fuel rod and the quote, unquote gases that are being leaked are standard operational procedure to deal with one of your fuel rods cracking again, which has been a very common occurrence over time. But I only bring this up, because that's kind of been the headline for nuclear over the last couple of days and it's a really great example of just extremely poor and biased reporting, which does nobody any good, especially if we really are looking for climate improvement. And I understand that media has their own baked in biases, I'm not naive enough to think everything is going to be reported the way that it should. But that type of nonsense, you have to change. Maybe there are more facts that need to be released on this, but the reporting of it needs to be better. It needs to dig deeper and ultimately, it needs to prove out the facts that are known so that we don't end up shooting ourselves in the foot from a climate perspective going forward. Sorry, Arthur, you're looking at me like maybe I should absolutely have not brought this up. But it's just relevant to the nuclear discussion. It's a news item that I've always been burying my head in my hands about, because it's just, it's so poor.

Art Hyde
Yeah, but the counterpoint, the industry is in a tough place, right? They're, again, compared against perfect at all times. And the big fear, rightly, is that they're not being careful enough about incidents, to the extent that you view it as dismissive, that's almost worse. The problem is that in that world where you're compared against perfection, and you can't quickly counteract a story that you think is either misleading or oversimplifying an issue, there's a lot of, you need somebody to be able to go out there and counter punch, and this industry does not have that person, or hasn't for a long time. Yeah, I think industry needs to defend itself. Whether anybody wants to be the person coming out and defending nuclear when there's a big headline on CNN saying leak and nuclear in the same sentence, that's a tough position. I don't know if like a large utility is going to step in and defend the industry. But I think Adam's 100% right, the question is, how does the industry at large react to instances like this that, again, in the short time we've analyzed, it seemed well overblown by the media without looking uncaring.

Adam Rodman
It was a lay up for Bret, because the good work that you're doing both on this podcast and Titans of Nuclear can, and I imagine will, be addressing these types of things as time goes on. As Arthur said, there's just no talent. The reporter, assuming that they had good intentions in trying to break the news story, clearly doesn't have the industry acumen to make a quality article, or an accurate article, whereas, if this probably had happened in gas, or even in coal, or certainly renewables, you would have much more detail and likely better reporting. Maybe I guess my complaint about all this is just we need to keep the talent up. It's great that there's more interested in the space and hopefully over time, the industry comes to the rescue in some way, in some appropriate way, because you can't have headlines like that dominating even a day's worth of the public's attention, in my opinion, especially when it's really wrong.

Bret Kugelmass
The only problem that I find with this is that, in many ways, the industry is a victim of its own success. As you get closer to perfect, incidents become more rare. When they become more rare, people become more afraid, because they're something to talk about. Like, natural gas explosions happen every day. I mean, this wouldn't even be the equivalent of a natural gas explosion. This is the equivalent of natural gas leak, that didn't explode-

Adam Rodman
A small one.

Bret Kugelmass
-that didn't hurt anyone, couldn't hurt anybody. But anyway, there's a lot we could talk about communication issues. I'm going to make, I'm going to actually do, we're going to do one more final round with you guys. I want you to end on a note of where you see things 15 years from now. If you could kind of put on your magic cap, and just kind of talk about the industry 15 years out, what do you see?

Adam Rodman
I'll be brief, and Arthur can probably articulate this more eloquently than I can, but I'm gonna piggyback off my point about the bad media and the bad reporting. Nuclear is easy to malign when there's kind of no standard or no stick, as I like to call it to compare it on an even basis with other things. Over the last decade or so, when our environmental targets and the idea of carbon neutrality were kind of these loose ideas that we were all looking to achieve without any real stick or consequences for missing them, easy to talk down nuclear all the time. Easy to to enact policies like Energiewende in Germany, without much consequence. If we all believe that the climate picture is more serious now, and that the energy transition is real, I really believe that all the issues that I brought up will correct themselves in the face of science and math, which we actually need to solve our climate issues. I'm very optimistic on a 10 year basis. Hopefully, we don't have to go to too many failures or too much renewables penetration before we realize that clean baseload is important. But I do think we will get there and I think 10 years is an easy timeframe to hit it. And the industry will solve any problems, just because of how good the technology is.

Art Hyde
Yeah, I think you're gonna see more government support in the West. I mean, talk to any serious utilities analyst about hitting carbon-free electricity grid in the US by 2035 and it's a joke. I mean, I'm rooting for it, for sure. But we're not enacting the policies at the corporate or state or federal level to get there. I think the most likely scenario is that we all talk a lot about climate change and carbon neutrality for the next three years, we get into an election cycle, and we might be in the exact same place where we are today. I mean, everybody's doing a victory lap that we're making progress, but carbon emissions were down last year because of a huge, huge virus that destroyed GDP. As we all ramp up manufacturing globally, what's carbon going to do in the next three years? I'd like to say I'm hopeful, but I'm very, very skeptical that we're gonna make significant progress unless we really change the policies that are in place today. What I think is most likely is the current outlook for fixes for solutions probably will underperform versus expectations. And then in three or four years, we're going to all have a conversation where we have to find real solutions, and nuclear may be towards the front of the pack. Not to come off as-

Adam Rodman
I'm usually the pessimistic.

Art Hyde
I would love to be wrong. I'd love us all to start funding all of these solutions tomorrow and to take it really seriously. I just think that it's a lot of lip service and not much progress quite yet.

Adam Rodman
All jokes aside, I'm even converted over to Art's explanation more than mine with one caveat. I do think we save the plants that are slated to come off, which is actually a significant delta in our nuclear generation over the next decade. I do think we're far enough along in our targets to make that a priority. I hope I'm not wrong. And then maybe Arthur is right, though, that in terms of actually new builds to address longer and more ambitious targets, maybe we need to see a few failures before we get there.

Bret Kugelmass
Art Hyde, Adam Rodman, thank you for joining us on the Energy Impact.

Art Hyde
Thanks, Bret.

Adam Rodman
Thanks, Bret.