Callan's Annual Nuclear Decommissioning Funding Study Finds Almost 12% Jump in Fund Balances in 2021

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Jan 05, 2023, 12:15 ET

SAN FRANCISCO, Jan. 5, 2023 /PRNewswire/ -- Callan, a leading institutional investment consulting firm, announced the results of its annual Nuclear Decommissioning Funding Study, which offers key insights into the status of nuclear decommissioning funding in the U.S. In this study, Callan found that nuclear decommissioning trust (NDT) fund balances totaled ~$96 billion in 2021, up almost 12% from 2021 largely due to equity market performance.

The study covers 27 investor-owned and 26 public power utilities with an ownership interest in the 93 operating and 15 of the non-operating nuclear reactors in the U.S. NDTs are created to pay for the costs of decommissioning a closed nuclear power plant.

"The study, which makes peer comparisons more accurate and relevant, saw a strong increase in assets while costs remained fairly stable, resulting in the highest funded ratio (97.4%) since the study began," said Callan's Julia Moriarty, study author and co-manager of Callan's Capital Markets Research Group. "Two relatively recent trends include the purchase of shut reactors by privately owned firms focused on decommissioning and an increasing number of second 20-year license renewals for operating reactors."

Other Key Findings

Total decommissioning cost estimates amounted to over $98 billion in 2021, a modest decrease from a year earlier, and total contributions from utilities into their NDTs rose to $290 million in 2021, a 17% increase from 2020.
The median escalation rate (used in forecasting future decommissioning expenditures given current dollar cost estimates) for all plants was 2.88% with an average rate of 3.41%.
The asset allocations for 19 investor-owned utilities showed median equity and fixed income allocations of 60% and 38%, respectively. While all 19 investor-owned utility NDTs were invested in equity, only 10 of the 16 public power utility NDTs reported having an equity investment. The median allocation of those with an equity investment was 66%.
Public power trust returns were 613 basis points below those of investor-owned trusts on average and exhibited a much wider range of results due to the lower equity exposure described above.
The median investment return for all NDTs was 13.1% for 2021, with an average return of 10.4%.

Find the summary blog post and full survey here. Note: To access the full study, you will need to register for free and log in to the website.

About Callan

Callan was founded as an employee-owned investment consulting firm in 1973. Ever since, we have empowered institutional clients with creative, customized investment solutions backed by proprietary research, exclusive data, and ongoing education. Today, Callan advises on more than $3 trillion in total fund sponsor assets, which makes it among the largest independently owned investment consulting firms in the U.S. Callan uses a client-focused consulting model to serve pension and defined contribution plan sponsors, endowments, foundations, independent investment advisers, investment managers, and other asset owners. Callan has six offices throughout the U.S. Learn more at callan.com.

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SOURCE Callan LLC