US-based X-Energy Reactor Company and publicly-traded special purpose acquisition company Ares Acquisition Corporation (AAC), have mutually agreed to terminate their previously announced business combination agreement with immediate effect. Over the course of 2023, X-energy received strong interest from potential investors. However, X-energy and AAC agreed not to proceed with the transaction citing “challenging market conditions, peer-company trading performance and a balancing of the benefits and drawbacks”.

“I am deeply proud of the remarkable business that the X-energy team has built, and I am confident in the company’s future as a global clean energy leader,” said X-energy Founder and Executive Chairman Kam Ghaffarian. “Both X-energy and AAC recognise the challenges presented by the current financial market environment and the opportunity for X-energy to continue forward as a private company. I remain confident in X-energy’s attractive value proposition, and I appreciate the support we have received from AAC and other investors.”

X-energy CEO J Clay Sell team listed the company’s accomplishments in the last year. “We have advanced the initial deployment of four Xe-100 units with Dow on the Texas Gulf Coast, signed a joint development agreement with Energy Northwest for up to 12 Xe-100 units in central Washington, progressed the Xe-100 from basic design to the Final Design Readiness Review phase and signed a cooperative agreements with both the US Department of Defense and US Department of Energy to further advance the development of a mobile microreactor design.”

He continued: “Looking ahead, we will continue to execute against our strategy that capitalises on our proprietary clean energy technology, competitive advantages and strategic relationships to the benefit of our customers and stakeholders around the world.”

David Kaplan, AAC Co-Chairman & CEO, and Co-Founder, Director & Partner of Ares Management Corporation said: “While the persistently volatile public market conditions over the course of 2023 have led to this mutual decision, we remain steadfast in our belief in X-energy’s exceptional talent, differentiated nuclear technology and mission to deliver affordable, zero-carbon energy on a global scale.” An investment vehicle affiliated with Ares Management Corporation has agreed to make a private investment into X-energy in order to support its continued growth as a private company.

Neither party is required to pay the other a termination fee as a result of the mutual decision to terminate the agreement. AAC determined that it will not be able to consummate an initial business combination within the time period required by its amended and restated memorandum and articles of association and intends to dissolve and liquidate. AAC anticipates that the last day of trading in the public shares will be 6 November

In December 2022, the business combination had ascribed a pre-money equity value of approximately $2bn to X-energy, the companies said. The transaction was then expected to be completed in the second quarter of 2023 subject to approvals. In June, X-energy and AAC updated their agreement that revising X-energy's pre-money equity value sown to $1.8bn. In September, Ares had increased its total investment to $80m through a $50m PIPE investment on top of an initial $30m investment announced in December 2022.

X-energy is developing its Xe-100 pebble bed high-temperature gas reactor design with an output of 200 MWt or 80 MWe using TRISO (tri-structural isotropic) fuel. X-energy says the reactor, optimised as a four-unit plant delivering 320 MWe, can provide baseload power to an electricity system or use its thermal output to support industrial applications with high pressure, high temperature steam.

In January this year, X-energy announced a strategic investment of $25m from South Korea's DL E&C and Doosan Enerbility in a private round of financing to advance the global deployment of the Xe-100.

NuScale Power was the first SMR developer to undergo a business combination to progress commercialisation of its technology. In May 2022, it merged with Spring Valley Acquisition Corp to create the world's first publicly traded SMR technology provider.

However, NuScale is also facing difficulties after a lengthy report by Iceberg Research entitled “Nuscale Power ($SMR): A fake customer and a major contract in peril cast doubt on NuScale’s viability”. Iceberg alleged that NuScale had sold 24 reactors to a “fake customer”. This referenced a deal NuScale announced in October to supply Standard Power with 1,848 MWe of power provided by 24 SMRs to power two US data centre sites. Iceberg predicts Standard Power will be unable to support the contract. NuScale said the Iceberg allegations were “riddled with speculative statements with no basis in fact and demonstrates a limited understanding of small modular nuclear reactors (SMRs) and the nuclear power industry.”

Iceberg says in a disclaimer: “Our research and reports express our opinions, which we have based upon generally available public information, field research, inferences and deductions through our due diligence and analytical process. To the best of our ability and belief, all information contained herein is accurate and reliable, and has been obtained from public sources we believe to be accurate.”

The Standard Power deal is bigger than NuScale’s other contract, with the government-backed Carbon Free Power Project (CFPP) to provide Utah Associated Municipal Power Systems (UAMPS) with 462 MWe. Iceberg said NuScale has “around 15 months before its cash runs out” and that the UAMPS contract is reaching a crucial stage. Overall shares in NuScale have fallen around 75% since their peak in late 2022, from around $14 to around $3.5.

NuScale said it “will not engage in a point-by-point rebuttal of every falsehood” but added that is important to set the record straight on some key points. “We are proud that developers and customers are selecting NuScale SMRs as their technology of choice to power their projects and meet their carbon-free energy objectives.”

NuScale says: “Standard Power conducted a comprehensive review of baseload, reliable and secure power sources that are the most critical component for operating data centres in the AI-sector. That comprehensive and independent study led Standard Power to select NuScale’s SMRs as the technology of choice for its power facilities in Ohio and Pennsylvania.” NuScale said it has analysed Standard Power’s extensive data room “and is confident that our power modules are appropriate for the selected sites”. It added that Standard Power has already begun site preparation.

NuScale expects customer agreements to drive revenue next year. “NuScale generates cash and revenue from three sources: the sale and delivery of NuScale Power Modules, licensing support, and services provided. NuScale has already generated income from services for our committed customers and we expect our customer agreements to generate additional revenue in 2024.”

NuScale says it has $197m in total cash and no debt as of 30 September. “The Company’s customer agreements will continue to drive NuScale towards cash flow profitability and our healthy balance sheet enables access to sources of capital as needed.”

With respect to the CFPP project, NuScale says it has its own project challenges “not attributable to NuScale’s SMR technology”. It adds: “The work we have completed to date has advanced our nuclear power modules to the point that utilities, governments and industrials can rely on a proven SMR technology that has regulatory approval, is in active production and is ready for commercial deployment.”

"NuScale’s Senior Leadership and Board of Directors stand firmly behind the strength of our business," said John Hopkins, NuScale President and CEO. "Not only do we have a solid, debt-free balance sheet and a talented and dedicated team, but we are years ahead of the global competition as the only SMR technology provider and producer with US regulatory approval and that is ready for commercial deployment. We are confident in our position to drive the global energy transition and we look forward to continuing to lead."