Southern Group's and Shaw's Headache Equals Buying Opportunity

Winning a Department of Energy loan guarantee, worth $8.3 billion, utility Southern Company (NYSE: SO) and heavy construction firm Shaw Group (NASDAQ: SHAW) have begun construction on the United States first nuclear reactor since the 1970's. While this is bullish news for the worldwide nuclear revival, the project has recently hit a snag.

An outside expert recently submitted testimony highlighting an alleged design flaw in Shaw's containment structure. This was followed by a press release in which the NRC's Atomic Safety and Licensing Board announced a prehearing conference in order to address the expert's challenge to Southern Nuclear Operating Company's Combined License application for two of Shaw Westinghouse AP1000's modules. With construction underway and previous NRC approval of the project, the odds are in favor of these claims being over turned.

The long term nuclear and infrastructure themes are quite sound. Investors could use this “hiccup” to add both Southern and Shaw to a long term portfolio.