Relaxed Regulations Highlight Nuclear ETFs

The Environmental Protection Agency is considering a review of its 1977 rule, that limits the amount of whole-body radiation that any member of the public can be exposed to as a result of the uranium fuel cycle.

While they have not made any immediate determination to change the current level of 0.25 millisieverts per year of allowable radiation, they are reviewing the scientific data to decide if changes need to be made.

Items under review include water resource protection, spent fuel storage facilities and alternative technologies that weren’t previously developed when the initial regulation was put in place.

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As a result of the EPA soliciting public feedback on this matter, companies that develop uranium, along with utilities that operate nuclear facilities, have been thrust back into the spotlight.

The Global X Uranium ETF URA is comprised of 23 global companies engaged in the exploration, mining, refinement and manufacturing of equipment to support the uranium industry, This ETF currently has $246 million in total assets and charges an expense ratio of 0.69 percent. 

URA has been on a rollercoaster ride this year, with a jump higher in the first quarter that subsequently faded.  This ETF is currently sitting near the flat line for the year in total return.

Despite this recent underperformance, the underlying companies in URA provide the necessary fuel to the 435 nuclear reactors currently in production around the world.  In addition, according to the Nuclear Energy Institute, there are 72 new nuclear power plants under construction in 15 countries.

The Market Vectors Uranium+Nuclear Energy ETF NLR is another ETF with a broader focus on both uranium production and nuclear energy utilities.  Top holdings in the market-cap weighted NLR include Duke Energy Corp DUK and NextEra Energy Inc NEE.

The expanded scope of utility companies has helped NLR to significantly outperform URA on a year-to-date basis.  NLR has gained 7.28 percent so far in 2014, and is well above its long-term moving averages.

Depending on the scope of any changes to current nuclear legislation, the underlying companies in these ETFs may find a myriad of new regulations to contend with.