Electricity Is Not a Commodity

“Electricity is not, and never was, a commodity.”
 – Mark Nelson

A famous adage in venture investing highlights a key truth: all deals are undersubscribed, except for the ones that are oversubscribed. In these cases, simply following the lead of others and getting involved in deals already backed by key players can yield strong returns. No need to dive deep into financial models or tech trends—if you're invited into the right deals, lucrative returns are likely to follow. [1]

Following the Leaders 
This concept mirrors what Ben Hunt refers to as the common knowledge game, where success often hinges on identifying when groupthink reaches a tipping point. In project financing, private investors seek reliable returns to mitigate risk. Large-scale projects like power plants need substantial capital and often rely on government support and major banks to secure private money. Without that confidence trifecta, these projects rarely succeed.

A perfect example of an industry that has struggled with such confidence is civilian nuclear energy. Since the infamous meltdown at Three Mile Island in 1979, the sector has faced constant setbacks, often fueled by public fear and opposition. Nuclear energy producers spent decades just trying to keep existing plants open, let alone break ground on new facilities. But the rapid growth of artificial intelligence, which demands an immense supply of electricity, is changing the landscape.

A New Era for Nuclear Power 

"The owner of the shuttered Three Mile Island nuclear plant in Pennsylvania will invest $1.6 billion to revive it, with all output sold to Microsoft as they seek carbon-free electricity for AI data centers."

Constellation Energy Corp., the largest U.S. nuclear operator, announced plans to reopen the remaining reactor at Three Mile Island by 2028. After years of dormancy and facing economic challenges, the plant is now poised for revival thanks to Microsoft's energy needs. This move signals a major shift in confidence, as nuclear energy may reclaim its role in powering the future.

Inflection Points in Confidence
The revival of Three Mile Island underscores the growing recognition of Nuclear's role in meeting the energy demands of next-generation technologies like AI. Nuclear power's ability to provide constant, carbon-free electricity makes it uniquely suited for the massive energy needs of hyperscale data centers. As energy demands soar, nuclear energy offers the stability and reliability that other renewable sources, like wind and solar, struggle to match.

There is Global Momentum in Nuclear
While the return of Three Mile Island is a major milestone, it is part of a broader resurgence in nuclear power. Earlier this year, at the Climate Week summit in New York, a landmark meeting titled "Financing the Tripling of Nuclear" brought together international leaders, financial institutions, and nuclear industry advocates. The event marked a critical turning point, signaling that both governments and big banks are ready to support nuclear on a global scale.

At the heart of this shift is the realization that nuclear energy must play a crucial role in achieving global carbon neutrality by 2050. Major banks, including Barclays and BNP Paribas, are now backing nuclear as a solution to the intermittent nature of other renewables like wind and solar. As these financial powerhouses throw their weight behind nuclear energy, long-standing barriers to funding and development are finally being dismantled.

A Growing Opportunity for Investors 
As nuclear energy makes its potential comeback, investors have an opportunity to gain exposure to companies leading this revival. With increasing confidence in the sector, the future of nuclear power could be brighter than ever.

How May Investors Gain Exposure to Companies in the Nuclear Energy Sector?

The Range Nuclear Renaissance Index ETF
The Range Nuclear Renaissance Index ETF (NUKZ) seeks to track the performance, before fees and expenses, of the Range Nuclear Renaissance Index. The index aims to track the performance of a portfolio of stocks that are involved in the nuclear fuel and energy industry.

*Please note Constellation Energy currently makes up approximately 11.14% in the NUKZ ETF as of 9/24/2024

For a full listing of NUKZ holdings, please click here. Holdings are subject to change.

[1] Unless otherwise noted, all data sourced from: "Cometh The Hour. Big tech and big banks throw their support behind nuclear energy” Doomberg, September 25, 2024

Risk Disclosures:

Carefully consider the Fund's investment objectives, risk factors, charges and expenses before investing. This and additional information can be found in the Fund's full or summary prospectus, which may be obtained by visiting www.rangeetfs.com/nukz. Read it carefully before investing or sending money.

Investing involves risk, including possible loss of principal. There is no guarantee the Funds will achieve their stated investment objectives.

Investments in the energy industry are subject to significant volatility due to changes in commodity prices. Additional risks include changes in exchange rates, government regulation, world events, economic and political conditions in the countries where energy companies are located or do business, and risks for environmental damage claims.

The Fund is non-diversified. Its concentration in an industry or sector can increase the impact of, and potential losses associated with, the risks from investing in those industries/sectors.

Nuclear companies may be subject to substantial government regulation and contractual fixed pricing, which may increase the cost of doing business and limit the earnings of these companies. A significant portion of revenues of nuclear companies depends on a relatively small number of customers, including governmental entities and utilities. As a result, governmental budget constraints may have a material adverse effect on the stock prices of companies in this sub-industry.

International investments may involve risk of capital loss from unfavorable fluctuation in currency values, from differences in generally accepted accounting principles or from social, economic or political instability in other nations. Emerging markets involve heightened risks related to the same factors as well as increased volatility and lower trading volume. Investments in smaller companies typically exhibit higher volatility.

The Fund may invest in securities denominated in foreign currencies. Because the Fund's NAV is determined in U.S. dollars, the Fund's NAV could decline if currencies of the underlying securities depreciate against the U.S. dollar or if there are delays or limits on repatriation of such currencies. Currency exchange rates can be very volatile and can change quickly and unpredictably.

Because the Fund is new, investors in the Fund bear the risk that the Fund may not be successful in implementing its investment strategy, may not employ a successful investment strategy, or may fail to attract sufficient assets under management to realize economies of scale, any of which could result in the Fund being liquidated at any time without shareholder approval and at a time that may not be favorable for all shareholders. Such liquidation could have negative tax consequences for shareholders and will cause shareholders to incur expenses of liquidation.

The Fund is a recently organized investment company with no operating history. As a result, prospective investors have no track record or history on which to base their investment decision. Moreover, investors will not be able to evaluate the Fund against one or more comparable funds on the basis of relative performance until the Funds has established a track record.

Exchange Traded Concepts, LLC serves as the investment advisor of the fund. The Fund is distributed by SEI Investments Distribution Co. (SIDCO, 1 Freedom Valley Drive, Oaks, PA 19456), which is not affiliated with Exchange Traded Concepts, LLC, or any of its affiliates.