NANO Nuclear Energy Inc. (NNE) Earnings Call Transcript

Thank you. Greetings. Welcome to the NanoNuclear Q3 2026 Financial Results and Business Update Call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press the button. zero on your telephone keypad. Please note this conference is being recorded. I will now turn the conference over to Matthew Barry.

Thank you and good afternoon everyone. Joining me on the call today are JU, Nanonuclear's founder, chairman and president, James Walker, our CEO, and Jason Garcha, our CFO. Please note that today's press release and slide presentation to accompany this webcast are available on our website. Before moving ahead, I'll quickly address forward-looking statements made on this call. As reflected in more detail in slide two, today's presentation contains forward-looking statements about NANOS futures that are made under the safe harbor provisions of the applicable federal securities laws. caution that actual results including without limitation the results of nano's micro reactor development activities our plans for vertical integration customer acquisition and other strategies and plans timelines for achieving goals and other matters relating to our future operations may differ materially and adversely from those expressed or implied by the forward-looking statements important risks and other factors that could cause to differ from those in our forward-looking statements are contained in our filings with the SEC, including our annual report on Form 10-K filed this past December, which you're encouraged to review. The forward-looking information provided today is accurate only as of today, and NANO disclaims any obligation to update any information provided except as required by law. With that, I'll turn the call over to JU, NANO's founder, chairman, and partner.

Thank you, Matt, and thank you to everyone joining the call today. I'd like to begin the call by reminding investors what differentiates nanonuclear and why we believe we're well positioned to capture value in the advanced nuclear industry. We've intentionally built our strategy around six factors we believe will determine commercial success at scale. First is our technology. Kronos is built upon high-temperature gas-cooled reactor technology, which has been demonstrated through decades of global deployments. The trisophyll used by Kronos also benefits from extensive qualification work under the U.S. DOE's AGR program, contributing to our confidence in building upon mature advanced reactor technology. At the same time, Kronos' enhanced safety profile using helium as coolant and trisulfil positions it well for applications requiring colocation with the customer, including AI data centers, industrial applications, military installations, and remote mining operations. The second is design maturity and fuel flexibility. Kronos' high TRL is backed by substantial historic investment over a decade of development. Our confidence in Kronos' design maturity is supported by the NRC's formal acceptance of the University of Illinois construction permit application for review. making nanonuclear the first commercially ready microreactor developer building a full-scale unit. and one of only a handful of Generation 4 Advanced Reactor Developers to reach this stage. Our reactor is also designed to utilize LEU Plus fuel that's commercially available today. while maintaining the flexibility to utilize HALU in the future without redesign once HALU is available and economically viable. Next is scalability. We believe success will be measured by the ability to manufacture a standardized design economically and at scale. Kronos, this small modular architect, is intended to support standardized manufacturing and repeatable deployment. We expect this approach to provide one of the clearest pathways to benefit from new expedited licensing pathways, including Part 53 and proposed Part 57. and deployment schedules and economies of scale. Fourth is commercialization. Our first full-scale prototype development at the University of Illinois is advancing through formal NRC licensing with a clear pathway towards first power around 2030. Our commercial pipeline also continues to grow. We recently completed a feasibility study assessing the potential to deploy up to one gigawatt of power with Bonn-Rupon. And at the same time, we are advancing discussions with potential strategic collaborator and customer advancing planned GigaWatt AL data centers in the U.S. and internationally. These discussions continue to progress, and we see a potential to soon reach an initial framework identifying nanonuclear as their preferred nuclear technology provider. In parallel, we're exploring strategic alignment mechanisms, which could include milestone-based investments tied to define commercial and project development milestones we believe would drive meaningful value for shareholders. This proposed structure is designed to align long-term interests and incentivize our joint success. Separately, we are advancing discussions with nuclear power project developer and AI infrastructure company to jointly evaluate several projects. And lastly, we're also seeing strong interest from earlier stage discussions with potential defense, mining and industrial customers. We believe these opportunities provide visibility into multiple gigawatts of potential commercial deployments. Next is vertical integration. We believe one of the greatest challenges facing advanced nuclear industry over the coming decade will be execution across a broader nuclear fuel cycle, which is why we're strategically focused on expanding our capabilities in that area. Our recently announced acquisition of Secure Transportation Services, or STS, has accelerated our progress by providing the ability to transport nuclear fuel and spent fuel. Our team has already identified opportunities to leverage STS's specialized expertise to de-risk Kronos' advancement and our expansion across the fuel cycle. Equally as important, STS has demonstrated a history of profitability, and our team is excited for several significant opportunities to grow the business organically. as well as through an additional M&A opportunity currently under evaluation. We also continue to advance M&A and partnership discussions targeting fuel facility assets to further de-risk the nuclear fuel cycle. And lastly, execution requires both capital and the right team. We ended the quarter with approximately $580 million of liquidity, providing what we believe is one of the strongest balance sheets among advanced reactor developers. A strong financial position provides the financial flexibility to advance our first deployment, while also pursuing strategic acquisitions and partnerships across the nuclear fuel cycle. Equally as important, we've assembled an experienced team from the DOE, the NRC, U.S. National Labs, the U.S. military, and advanced reactor developers. Our team has grown significantly over the past year, with our headcount increasing to 85 employees and contractors as of the end of our third quarter, from 31 one year prior. And we have expectations for significant growth. We believe this combination of technology, financial strength, and industry experience has built one of the industry's strongest foundations for long-term value creation. Our team looks forward to additional progress and remains excited for both short and long-term opportunities to create further value for shareholders. With that, I'll turn over the call to our CEO, James Walker, who will provide additional details on our progress and recent developments.

Thank you, Jay. Nanonuclear has established a strong foundation within the advanced nuclear industry, and we continued converting that foundation into tangible execution during the third quarter. In May, the NRC formally accepted for review the construction permit application for the deployment of the Kronos MMR at the University of Illinois, Urbana-Champaign, initiating formal review activities. The NRC subsequently announced its expectation to complete its environmental assessment in Q1 2027 and its safety evaluation in Q3 2027. These projected milestones remain consistent with our expectation for the review process to complete in 2027, providing the opportunity to begin initial construction activities in the second half of 2027. In parallel, we're advancing several critical engineering work streams. We recently announced progress with an engineering collaboration with Fortil, an internationally recognized engineering and consulting firm, to advance Kronos' fuel handling and storage system. This system is an important element of both our first deployment and our broader commercialization of the platform. We're also advancing an engineering collaboration with another globally recognized engineering firm to advance Kronos' primary helium circulator. This firm has decades of experience supporting gas-cooled nuclear reactor programs, and this collaboration has now advanced into the detailed design phase. Together, these advancements reflect progress across several critical path work streams. They are helping us mature key reactor subsystems, reduce first-of-a-kind execution risk, and establish repeatable designs for future standardized commercial deployments. Another significant area of progress during the quarter was the continued expansion of our vertically integrated nuclear platform. As Jay highlighted, we completed the acquisition of STS in May. STS is a globally operating nuclear logistics, transportation, and services company with a history of profitability. With more than 20 years of experience supporting the movement of radioactive and nuclear materials, STS supports both commercial nuclear customers and critical missions for the U.S. DOE, and NSA. By bringing these capabilities in-house, we can reduce reliance on third-party providers, accelerate our expansion across several aspects of the fuel cycle, and accelerate future reactor deployments. At the same time, we've made strong progress advancing several synergistic acquisition and partnership opportunities across the nuclear fuel cycle. These include an additional fuel transportation business and nuclear fuel facility assets. see potential for more than one announcement in the coming months, subject to further diligence and closing conditions, with one position to contribute revenue upon closing, and another offering more meaningful revenue potential in or around the 2030 timeframe. The third key area of progress came from the expansion of Kronos' commercial pipeline. During the quarter, we continued progressing our deployment opportunity with Berupon by completing the previously announced feasibility study, which evaluated a phased deployment of up to 1 gigawatt of Kronos MMR capacity. We view this as an important milestone, and we're advancing discussions towards initiation of the NRC licensing process. We're concurrently advancing discussions towards an initial framework with a potential strategic collaborator and customer to support their planned multi-gigawatt pipeline of data center projects. If finalized, the framework could position nanonuclear as the preferred nuclear technology provider. While terms remain under discussion, we believe this framework and future collaboration could significantly strengthen our path towards commercialization by aligning nanonuclear with an experienced infrastructure developer with a strong track record of developing, financing, and executing large-scale projects. We're also evaluating mechanisms to align interests through future investment in nanonuclear energy ties to defined commercial milestones we believe could drive substantial value for shareholders. Moreover, we believe this collaboration could be a meaningful validator of our technology and our commercialization strategy, while also providing visibility into a multi-gigawatt deployment pipeline, which could help accelerate Kronos' commercialization. We also signed an MOU with Supermicro to evaluate the integration of Kronos with Supermicro's AI server and data center infrastructure platforms, as well as potential joint go-to-market opportunities and off-grid deployments for next-generation AI infrastructure. By engaging early, we can jointly evaluate how in the future nuclear-powered data centers may be designed as integrated systems rather than treating the power source and computing infrastructure as separate development decisions. Moreover, we continue to advance several opportunities within and outside of the data center market, further demonstrating the breadth and scale of the market opportunity for Kronos. To this end, we were recently selected for an SBIR Phase I award by F-Works, the innovation arm of the Department of the Air Force, to advance the Kronos MMR for the US Air Force. The latest award further expands our opportunity set with the Department of the Air Force following the company's previously announced direct phase two SPR award for joint base Anacostia Bowling, which continues to progress on schedule. We recently submitted our fourth contract line item deliverable, with the remaining four deliverables expected to be completed over the next 12 to 18 months. Lastly, we further enhanced our strong balance sheet by raising approximately $26 million in net proceeds from our at-the-market or ATM facility. At quarter end, we held approximately $580 million in liquidity. Overall, the quarter included substantial progress across each of our principal strategic priorities. I'd now like to provide additional colour on our recent acquisitions of STS, the progress we've made since completing the transaction, and the opportunities we see to create long-term shareholder value. Our acquisition of STS represents more than a fuel transportation business. Beyond its established operating business, regulatory appearances, experienced personnel, and longstanding customer relationships, STS provides a strategic platform to expand our capabilities across the nuclear fuel cycle, helping to further de-risk Kronos' deployments. Since joining Nanonuclear, SDS has continued demonstrating the strength of its platform by supporting several important DOE and NNSA missions, including the successful transport of HALU from Japan to the United States, the removal of highly enriched uranium from Venezuela, and additional domestic transportation campaigns supporting the U.S. nuclear industry. We believe these missions reflect both the highly specialized nature of SDS's capabilities and the confidence key government agencies place in the organization. Looking ahead, we believe FTS is exceptionally well positioned to benefit from the continued growth of the nuclear industry. Increasing reactor deployments are expected to drive demand for fuel transportation and related fuel cycle services. And SDS is one of the established leaders in this specialized market. Under the nano nuclear umbrella, SDS is already advancing initiatives to broaden its capabilities in anticipation of that growth. SDS also strengthens nanonuclear beyond transportation and logistics. The team includes personnel with decades of experience supporting the industry. We believe this expertise can support future reactor operations while further strengthening our relationships with key government organizations. We've also been encouraged by the feedback we've received from prospective customers, several of whom view our ability to offer a more integrated solution as a meaningful differentiator compared with other reactor developers. SDS provides a successful standalone operating business we expect will continue generating a solid base of revenue while offering multiple avenues for significant organic growth. At the same time, we're already evaluating a complimentary acquisition we believe could meaningfully expand SDS's capabilities, geographic footprint, and revenue base. We look forward to sharing updates on our progress in the coming quarters. And with that, I'll hand over the call to our CFO, Jason, to discuss the financial highlights.

Thank you, James. I'll now provide a brief overview of our financial performance for the third quarter and the year-to-date period. Our acquisition of STS provides Nanonuclear with a revenue generating fuel transportation business with a demonstrated history of profitability. STS generated approximately $3.9 million of unaudited revenue during the first six months of calendar year 2026, including $200,000 from the May 22nd closing of the transaction through June 30th. Operating expenses totaled $15.9 million, driven by higher G&A and R&D expenses as we continue to advance Kronos development, progress Kronos through the formal NRC licensing process, advance activities at the U of I, and expand capabilities across the nuclear fuel cycle. As expected, operating expenses increased versus the prior year period as we scale our engineering, regulatory, commercial, and fuel cycle workstreams. Our Q3 net loss was $10.1 million compared to $7.6 million in the prior year quarter. The increase reflects higher op-ex, partially offset by higher interest income driven by our larger liquidity position. Year-to-date net loss totaled $25.8 million, an improvement versus the $32 million in the prior year period, benefiting from substantially higher interest income and lower equity-based compensation. Year-to-date net cash used in operating activities was $18.7 million, primarily reflecting the year-to-date net loss, partially offset by non-cash equity-based compensation. Year-to-date net cash used in investing activities was $297.6 million, driven by our approximate $281 million purchase of short-term investments. approximately $10 million in plant, property, and equipment additions, and approximately $6 million related to the STS acquisition. At quarter end, we held $580 million in liquidity, an increase of roughly $11 million from the prior quarter. This increase reflects approximately $26 million in net proceeds from our ATM program. partially offset by capital deployed to advance Kronos development, NRC licensing activities, and broader fuel cycle initiatives. We believe our balance sheet is among the strongest in the advanced nuclear energy sector, providing a clear competitive advantage as we progress toward our first-of-kind deployment. Our strong financial position could be further enhanced by several non-dilutive funding opportunities for the U of I project, which we believe could meaningfully reduce the capital required. Taken together, this liquidity profile not only positions us well to advance our first-of-kind prototype, but also provides the flexibility to pursue value-accretive acquisitions across the fuel cycle while continuing to advance Kronos towards commercialization. We will continue to deploy capital strategically to de-risk Kronos development and commercialization. and prudently in line with prior successful value accretive investments, such as the acquisition of the Kronos MMR assets and STS. Overall, we remain confident that our financial strength positions us exceptionally well to execute on our growth strategy. With that, I'll turn the call over to the operator for Q&A. Thank you. We will now be conducting a question and answer session.

Like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star 2 if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. We ask that you please limit yourself to one question. Thank you. One moment while we pull for questions. from Samir Joshi with H.C. Wainwright. Please proceed with your question.

Hey, good afternoon James, Jay, Jason and Matt. Congratulations on the progress. The CPA acceptance was, real achievement and the STS acquisition also fits nicely in your strategy. So my first question is about just as the, regulatory process goes through with the safety valuation and environmental the assessment, on the other side, you said you're working with Fortel and another engineering firm. Are there any long lead items that you might need to order now to start construction in the second half of 2027.

So the initial construction fortunately focuses more on things like the installation of the citadel. So if you think about a big subterranean concrete structure for which the reactor will sit in. For instance, technically right at the start of the construction period, we don't need any reactor related components. That doesn't mean we haven't started sourcing them already and we're into the construction vendor negotiations with regard to costs and delivery schedules and all that. But the initial construction isn't waiting on those. Once we get the approval and the turnaround from the the NRC, the federal regulator. We'll proceed straight away with the the ground excavation followed by concrete pouring and steel installation for that portion of the project that will house the nuclear reactor. The other parts of the actual system, the Kronos system overall, include the thermal energy storage system, which is the solar salt, so the thing that which converts that thermal output to electric. Now none of that is nuclear at all. And a lot of those components are very standard. So you're thinking turbine systems, solar cells, don't even need to wait for NRC approval. We can get constructing on those straight away and those are more off the shelf components. So there's a lot we can do even before we procure components. But we do want to, by the time we get the approval next year, be in a position where we know where everything is coming from, the costs of everything, and we have everything like find out in terms of the pathway to the full build out of the reactor system.

That is reassuring and good to know. My next question is about the acquisition you spoke about, of course, SDS is in the bag. you spoke about adjacent acquisition and maybe another one. Have you allocated any budget particular amount dollar amount that you want to spend during 2026 or you are more likely to be opportunistic and strategic about this.

So it's not that there's a ceiling on the limit to which we're about to spend on on acquisitions, but we are very capital conscious. And I think that's important because we don't want to go off to big acquisitions that are in the order of like hundreds of millions of dollars, even if it was to acquire a big revenue generating businesses for nano internally. The focus has always largely been on acquisitions that provide us that in-house capability that will facilitate the rollout of our reactor systems. And a lot of the time, all that means is acquiring small companies. And so for instance, even with STS, I think the initial payment as part of that acquisition. We're only in the region of about $7 million with some future payments for retention allowances factored in. But that's kind of... emblematic of the other acquisitions that we're considering at the moment. They are small scale, it's to bring in-house capabilities to us. The only contradiction to that might be a fuel facility that we are looking at. But again, that fuel facility, there's no acquisition cost exactly. Our equity position in that would be earned through investment into the completion of that facility. So it does need to all be very strategic, and all of these acquisitions are of course to facilitate the rollout, the mass rollout of the reactor systems. But we don't want to spend big money on acquisitions, the revenue is obviously beneficial and it It does de-risk the company to some degree, but it's in-house capabilities. And it's partially also to take advantage of the massively expanding nuclear market. That STS acquisition already – We're looking at all sorts of contracts that are way in excess of contracts that STS has been able to solicit for before because it needed more capital backing, which we can now give it. So there's the expansion potential that exists for these small entities, but succinctly to the question, no, we're not looking to,.

have big outlays for big acquisitions. And Sameer, I would also just add as well that if there are acquisitions that have a bigger outlay relative to some of the acquisitions we've executed upon thus far, we're very conscious of that as James highlighted in terms of the capital outlay. And we also are ideally evaluating several different funding mechanisms to reduce that, whether it's like government programs or other mechanisms to reduce that capital outlay. And also, if there were other larger type acquisitions, it would be safe to say that those capital outlays would occur over a number of years rather than all up front.

Understood. Thanks for that, Kaila. And thanks. I will step back in queue.

Thank you. Our next question comes from Craig Irwin with Ross Capital Partners. Please proceed with your question.

Good evening and thank you for taking my questions. So I wanted to ask about the project outlook, right? So your prepared remarks make it very clear the UIUC project is on track, construction start by the end of next year. And you've announced a particularly interesting relationship with Amoresco that I don't think is appreciated appropriately by the market. So Amoresco has eight enhanced use leases from the Navy. actually bidding for leases right now from the army where this gives them land and access to easy permitting or much faster permitting than commercial or non-military land for for power projects to support data centers that would be used both by hyperscalers and by the military itself. You know, they've talked publicly about a $10 billion near-term pipeline. You know, the billion and a half in bookings they had this last quarter, a very large chunk of that actually came from data center. And, you know, I understand the actual number is, you know, mid-20s is sort of the medium term. Mid-20s billion is the medium term. term power opportunity they're looking down. You know, given that they can move faster and they probably have access to, DOE and DOD licensing pathways for nuclear power. This could be one of the most interesting customers in the market. Can you maybe expand on your relationship with Amoresco? Have you been in discussions with them about potentially using these alternative pathways for construction approval, for plan approval, given that these would be DOD projects. You know, they've talked about 70% funded by third party debt. And I think there are names that are big names that are lined up and competing for those slots. Anything you can share about your conversations with that company that can help people understand the real value there.

Sure. I'm happy to give some background and color on that. So the challenge for Nano is that we're a technology company, we've got a great reactor system. But when we start commercially deploying the reactors, We're going to be looking at dozens of different sites and many different reactors that will be deploying all around the place. That means a lot of components coming from a lot of different sources and going to one place. It's going to require a lot of EPC work. So the initial conversations with Amoresco were based around that engineering procurement and construction work, the coordination of that because it is a big operation in and of itself, especially considering the size of the potential scale of some of these operations that we're looking at. Now, Amoresco, I think they're clean energy projects. When they're looking at things like DOD, it's almost similar to how we're dealing with the Air Force and our Air Force contracts. Now, they are also the different DOD pushing in the direction of trying to get these these systems online so they can have that energy sovereignty. But it is, even for the DoD, these are new endeavors. They have a lot of familiarity with naval reactor systems, aircraft carriers reactor systems, but even this is a bit new territory for them. So it's also, whether it's through MRSCO's projects or it's through the Air Force, we still need to go through that feasibility study analysis similar to how we're going through with the Air Force. I wouldn't say that MRSCO's projects could expedite us hugely. just given, say, our existing experience of what we're having to go through at the moment in terms of providing the necessary information for the military to get comfortable with the installation of reactors at their sites. Now, they do need to defer to the NRC on some things, just given these are new reactor systems, I think even for Amoresco's projects, where they'll be looking at the introduction of nuclear reactors onto their sites, it's still, no matter how you slice it, a new endeavor for the DoD that they will need NRC assistance and they do benefit from projects like the UIUC project, the University of Illinois construction project, because they can see it being constructed. They can see the NRC working through the process and it does provide more reassurance. and they are in that phase now where they are trying to analyze the real players in this because there are really only a few handful on that sort of commercial path. And they're distilling that down as they get more expert now at understanding this sort of advanced reactor industry. in total. So it's not to convolute the answer but effectively it's really a factor of conventional licensing frameworks that need to be worked through for reassurance and the ability to fast track them is rather minimal.

Yes, and I just wanted to add with Amoresco, we are in active talks with them. They do have a robust nuclear kind of group there. So we're working with them actively and we are looking at different strategies with them. So just to reinforce what you said, They are looking at different areas, and one of their areas is nuclear, and there are synergies there, as you mentioned. So we are ongoing and talking with them about these possibilities. Thank you.

Thank you for that. So my second question is about Deoxitec, right? So there's been public coverage out there that nanonuclear proposed a $230 million investment structured in two phases. You know, I think it's fairly obvious that that's that didn't come from you, but it is out there in the public domain. So maybe that, that, increases the bandwidth or the opportunity for you to maybe discuss this potential investment. You know, I know it was a proposal and that there's a negotiation going on and that, you know, you don't necessarily, like there could be other parties that might win the bid in this process. But can you maybe just give us a little bit of color from your perspective where things stand at the moment, you know, and, you know, how this could be a strategic fit for nano over the next couple years? Sure.

Sure. So, yes. Well, I could quickly answer that. You know, our proposal is currently under review and we hope to have an update in the coming months. But we can't really touch on that right now. But we are looking to be vertically integrated, obviously, so this would be a big consideration. kind of achievement for us, but right now it's still under review, so we don't really have too much comment on that.

Understood, completely understood. My last question, if I may. You know, it's not easy to hire people with nuclear expertise, right? And Nano has done a fantastic job bringing on experienced executives, bureaucrats, engineers. from the industry, people with decades of experience, many of them. Can you talk about your hiring plans over the next year? Would you expect the growth in employees to continue at the similar rate that it's been materializing over the course of the last year? And do we need to see double in the total number of employees in the medium to longer term to have the capabilities that you foresee and that you're planning for the broader nano nuclear energy capacity and execution potential.

It's a good question actually because Nano has obviously transitioned from a small company to a medium-sized company and what came with that was a big reorganization of how we actually run things and integrate the departments. The technical team does still need further expansion and we need to create, we need to do that essentially to help have that in-house infrastructure to carry a reactor project forward from advanced all the way through to an actual physical operating reactor system. So already, I'm calling from the University of Illinois today. And that's even the conversations today with the chancellors and the deans involve significant amount of personnel and technical work being required. So even over the next few months, you'll probably see a big upscaling in technical staff as we bring on more people. And over the next couple of years, that will expand even further. that expansion is very necessary. And that's only specific to the reactor system. There are additional acquisitions that will bring in additional people in other departments of the nuclear industry as well, including transportation. The other areas that we have alluded to already around fuel supply chain, that we are also making additional recruitment in those areas as well. So, Nano is expanding very quickly. I think the most important part though is to be very sensible in the hiring process because over employing and not having the organization in place with the correct reporting lines can quite quickly quickly result in personnel that are not allocated properly and do not have designated tasks that are specific to MANO's mission. So we're trying to do it as carefully as we can, but the pressure is on us to upscale as quickly as we can.

Thank you. Our next question comes from Nate Pendleton with Texas Capital Bank. Please proceed with your question.

Good afternoon, and thanks for taking my questions. In your prepared remarks, you talked about advancing discussions toward a framework with a strategic collaborator and customer for a multi-gigawatt pipeline. Can you provide some insight into what that kind of structure would look like, what it could unlock from a commercialization perspective for you, and maybe what attracted the customer to Nano specifically?.

Sure. So we haven't publicly released a huge amount of information there, but I can speak in sort of high levels to the sort of the framework that's been put in place that is being put in place at the moment with this big partner. They establish a lot of data center campuses. they're looking to integrate nano systems into these data center campuses over time. They would provide things like finance, the campuses, power infrastructure, and nano would provide things like the reactors, fuel, licensing support, and operational capabilities. The way we have structured this is that we have looked at how other companies have structured PPA agreements. And the reason why a lot of these are deficient is that they don't require investment from the potential customer that they're going to be servicing. And that can create some level of weakness because any agreement that's non-binding that says if you... build a reactor system and it costs this much money for power, sure we'll buy it. If it doesn't meet this requirement, we have no obligation. That is an insufficient model, I think, for how reactor companies are going to successfully market and deploy their reactor systems. So the way we are structuring this is that the partner in this question will have an ability to receive equity grants and warrants in Nano, but also give them the ability to invest. tens of millions, if not $100 million into nano as part of like a development and reactive purchase, as development and reactive purchase milestones are achieved. So it's a very, incentivizing arrangement where we can even, even Nano for instance, could invest in the nuclear data center project itself. So we could have equity in that position. So again, it could lead towards additional revenue being generated for the company once nuclear, and once nuclear construction actually begins. This way, we are more bound up with the technology partner. And that co-level of investment de-risks both sides and provides a way for us both to double dip almost into, and ability to raise revenue on both sides. But that synergistic partnership is essentially what we're aiming for with this project this new framework that we're deploying for Kronos in collaboration with the data center.

And also, if I could just jump in and just add some additional color as well. So this potential partner is a global infrastructure investment and development firm, has experience building, owning and operating large infrastructure projects globally, which they expect will translate well to some of their ambitious goals. you know, plans for some gigawatt scale AI industrial campuses in the US and also internationally. And so I'd say, as James highlighted, close to finalizing an initial framework. where Nano could be their preferred nuclear technology provider. This would be structured, obviously James talked about seeing some of the challenges with types of agreements, whether it's PPA agreements or other, this would be potentially structured a little bit differently as this company would look to purchase Nano's reactor, so given their experience with some of these large scale infrastructure projects, experience identifying land, procuring power, and sort of executing on these. They're very adept and also financing them as well. they're very adept at all of that, which would be very complimentary to us. And so they would purchase our reactors in what we envision But as James highlighted, there would be an opportunity for things like, you know, you know, options to potentially have equity interest in some of that, you know, nuclear, you know, company that would be selling the power, which is really interesting. And then lastly, as James highlighted, yes, I think The potential to have an arrangement where there is a level of investment in nano not only signifies additional capital potentially in the future, but also signifies a level of seriousness to this and a level of, I'd say, belief and confidence in nanonuclear and how strong it is. strongly positioned we are in terms of being the first micro reactor developer building a full scale prototype to enter formal NRC licensing and obviously having, being able to procure fuel that's commercially available today and having a design that has had significant investment and so I think it also signifies confidence in Nano as a company and I think also important is that given the potential planned pipeline, potential multi-gigawatt opportunity for Nano, I think it would really be you know accelerate potentially our commercialization as well and obviously it being with a credible partner I think is also makes it really really important so hopefully all that kind of you know helps Absolutely. Sounds really exciting. So I'll stay tuned on the specifics. And then maybe for my follow-up, going back to your prepared remarks on the supply chain, fuel availability tends to be a key critical path item that a lot are focused on right now. Can you provide an update on how your conversations with commercial enrichment providers and triso fabricators are progressing? And what does that availability look like based on your commercialization timelines at UIUC and beyond? Sure.

This is, I think, an intrinsically important question for every reactor company at the moment. conversations with enrichment and fabricators of very different conversations, but on the enrichment front, I think the big advantage we have over most of our competitors is the fact that we can use low enriched uranium. So fuel that can actually be manufactured today, um, Companies like Urenco, we've already started conversations with them about them being able to provide us the enrichment that we would need for the mass rollout of systems. So that's obviously different from the University of Illinois project where we're obviously sourcing the fuel that's necessary for that first of a kind initial reactor system. There are a number of fabricators on that side that I'll discuss in just a second. But the enrichment part is fortunately plays into our favor. Now, when HALU is available, and there are a number of companies that we are already speaking with, groups like Centris, that do intend to make HALU fuel, we will take that fuel. We will be able to refuel our reactors without modification. with that helium fuel that will allow for longer periods between refueling. But the advantage is we wanna get to market soon. We wanna get to market sooner and the ability to actually utilize enrichment companies that don't need any site amendment, license amendment to make our fuel is a big one. So those conversations thankfully, they do come They've been very positive, the capacity exists to do that. And the other reactor companies that are looking at utilizing HALU, they're not having those conversations with existing enrichment companies because they would not be able to source their type of fuel from them. Now on the fabrication side of things, the interesting part of this is that there are emerging players in this market. So everyone's probably familiar with the B2XT, they've already been manufacturing Triso for many years. They are looking now for a commercial arm of that venture where they would establish a Cat2 site, principally because their Cat1 site creates far too many overheads to make a competitive product. And then there are groups like Standard Nuclear partnered with Framatome and even TrisoX with the subsidiary of The nice part is that as there are more and more players involved in this space, we are in a nice position to negotiate and find the best prices. So with everybody that I've mentioned, we are speaking to all of them at the moment and we are trying to lock down long term contracts. ability to fabricate the fuel that we need for the first of a kind reactor system already exists. We aren't worried about getting that fabrication done and meeting our timelines because that capacity and that capability is already there. Now, the long-term strategy could look a bit different as we look at bigger bulk loads and with escalating production of reactors over time. And there still might have to be some element of nano that we would bring online in the future to manufacture certain elements of the fuel, like the SCM that's necessary for our fuel. It could be that we want to be more involved in that and we establish joint ventures in that department. through for a long-term de-risking but the important part is those are considerations i think for the future as we want to de-risk the mass rollout of reactor systems. First of a kind is fine, both on enrichment and fabrication. I think we already we've turned our focus towards 2030 and beyond where we want to be in a position where we hit that timeline and we can mass manufacture reactors with mass fabricated fuel.

Thank you. Our next question comes from Craig Shear with Tuwe Brothers. Please proceed with your question.

Good afternoon. Thanks for taking the questions. So in a peer SMR industry earnings call, an argument was made that most deployment opportunities that take advantage of both the power and thermal applications can utilize 400 to 450 degree fast reactor technology as readily as high temperature gas cooled reactors, and that HTGRs are only uniquely optimally suited for perhaps niche applications. Now, we've kind of made a bigger deal about the HTGR technology. differentiation though, noting X-Energy's most advanced deployment is with Dow. And that NNE in particular has a great many opportunities from Korea to the Middle East, to those remote off-grid cold weather Canadian markets, whether they be communities or mining operations. Can you chime in on just how important that higher temperature run rate, even versus metallic-fueled fast reactors, may actually be? Sure.

Sure. So as a bit of technical background, and thankfully, you know, I've got a nuclear engineering background to speak to this somewhat. So the background to what was said about high temperature gas reactors is that they have been previously deployed in the past. There's been many deployed internationally around the world and people are very familiar with their operating profile. The only criticism really of them is that the capacity factors were low because the time to ramp up power and ramp down power could be fairly long. And so for industrial applications where you might have fluctuating demand, it could be ill suited. So in the advanced reactor systems like ours, the solar salt loop acts as an energy storage. So the reactor can actually just maintain constant output. And it's the thermal energy storage system that you can take up and take down and fluctuate demand in enormously. So that's been specifically designed around that operating history that's given us that information. The problem with fast reactors, though, if you're if you are comparing the two is that they've never been deployed commercially and in order to, if I'm just going off the top of my head, to actually deploy a fast reactor you would need a very enriched central core of fuel which would either have to be some sort of halo fuel or some sort of blend of plutonium The problem with both of those is one, HALU is not available and it might not be available for a long time. commercial company being allowed to handle some plutonium is also not allowed. but also require legal changes. So if you had to choose from the two of them, you would choose a high temperature gas reactor or a fast reactor any day of the week at the moment, especially given the fact that it lacks operating history and commercial deployment. The reason why high temperature gas reactors would be better as well for industrial applications, giving the thermal energy storage system is that they do produce a high thermal output, which would be ideal for foundries, but it doesn't require fuel that is just not available. It's available now. And the other part is if you make a fast reactor, you really, the bigger the better. And the reason why is that you have a lot of nutrients and you're not moderating it. It's called a fast reactor because the fast fission that takes place as a result of the the fission incident, you are compacting your core with things like uranium-238, which isn't that fissile, but with enough neutron flux, you can create that fission reaction. But on a small scale, it's difficult. So you need a big reactor system. If you're making a massive reactor system, like to cater towards the efficiencies of fast reactor, you're already limiting the flexibility of your deployment because you cannot make them as small and as mobile and as portable and as modular as you can a high temperature gas reactor. Very different strategies. I would say if you put me into a fast reactor company today, one, I would have to look at the fuel straight away and trying to come up with a solution. Two, I would be targeting bigger, going bigger, almost straight away. So it's, I think you would be being very selective with your information if you said fast reactors had an advantage over high-temperature gas reactors when it came to thermal output for industry. Very difficult to make that case unless you're being very carefully selective.

Very helpful. My second question, some of this has already been touched on when you were responding to questions about the potential strategic developer partner relationship and the fee-based versus some retained equity ownership. partnership potential. But I'm interested in kind of the tension between those two across your entire business We've got kind of like on the one end the AHQA ownership PPA model and then on the other and then a few others, X energy and nucleo terrestrial energy with more of a fee-based or fuel sales model. Now I realize you're open to both and that probably the fee-based approach may ultimately comprise the lion's share of deployments, but is there a geographic distinction where you may be, for example, more likely to provide services versus retained ownership.

internationally? That's a very interesting question. Actually, funnily enough, it kind of ties into your first question, because we have a lot of interest coming from countries like South Korea and A lot of their interests is around industrial heat for manufacturing operations because they don't have access to the same level of gas or coal or oil that the US might have or other countries. The long-term de-risking of their own heavy industry is they're looking at nuclear as being a solution. because they are looking at nuclear as being a solution, there is more of an interest I think there of being able to do mass deploy these reactor systems and so for the nuclear industry There is a bit of a mix there between wanting ownership of those systems and So you don't have to worry about the long-term payments of those reactors. You would just have to pay for servicing, maintenance, and refueling. I would still say that is a minority even compared to just paying a monthly or quarterly agreed contractual price for the power. Because a lot of these industries, even though they are heavy industries trying to de-risk their long-term security, they still are not as interested in owning and operating them. in a reactor and being responsible for it. They are still happy to put in capital investment into these projects. But they ultimately want the responsibility to sit with somebody else, but they just want that long-term de-risking power to come in.