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Perhaps Australia's politicians have a deep fear of a Homer Simpson-type overseeing the controls in sector 7G of their local nuclear power plant. Or perhaps there's a genuine concern about how and where nuclear waste is disposed. Whatever the reason, despite its merits as an emission-free energy source, nuclear power generation in Australia looks to be off the cards for some time.

It's a shame that we're not having a genuine debate about nuclear fuel because with the price of other forms of energy rising inexorably, the monetary and environmental arguments are becoming more compelling. Elsewhere in the world, nuclear energy is on the rise.

France produces nearly 80 per cent of its electricity from nuclear power. Globally, there are 34 reactors under construction and with more than 300 planned or proposed by 2025, many other countries aim to increase electricity generation by nuclear means.

Fuelling these nuclear plants will require uranium, lots of it. Paladin Energy is well placed to benefit. Paladin is a relatively simple company to understand. Its primary asset is the Langer Heinrich Uranium Project in Namibia, which began production in December.

Paladin owns 85 per cent of the Kayelekera Uranium Project in Malawi, which remains on schedule to commence production in the March quarter, next year.

In Australia, Paladin has a 50 per cent interest in a joint venture with Summit Resources (of which Paladin owns 81.82 per cent). The joint venture includes the Valhalla and Skal uranium deposits in Mount Isa, Queensland. While mining is not permitted, this could change.

The outlook Apart from the obvious risks of a new development project moving into production and uncertainty over the Australian assets, the outlook for Paladin remains strong.

Demand for electricity will continue to increase around the world. Currently, coal-fired power stations meet most of that demand. But coal is dirty and getting more expensive; clean coal technologies look promising but they are not yet commercially viable. We see the demand for uranium steadily increasing in the years to come. As one of the few existing global producers, Paladin is set to benefit strongly.

Price

Paladin's stock price had a remarkable run from late 2004 to early last year, rising from less than $1 to $10. But the uranium hype evaporated last year, bringing the share price back to reasonable levels. The stock bottomed at $4 in May and is now trading at more than $6.

Worth buying?

Paladin is not the cheapest stock around, trading about 40 times 2009 earnings forecasts. But the increase in earnings over the next five years is expected to be substantial. For that reason Paladin represents a worthy speculation in the energy sector, warranting a small portfolio allocation. With increasing concerns over carbon emissions, uranium mining and nuclear energy will come into focus. As with oil, uranium will soon be seen as a strategically important asset and this should be reflected in the performance of uranium producers like Paladin.