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Westinghouse deal would turn Cameco into 'one stop shop' nuclear fuels provider from SNL Energy Finance Daily Westinghouse deal would turn Cameco into 'one stop shop' nuclear fuels providerByline: Kip Keen Georgia Power Co. Canadian uranium miner and processor Cameco Corp. could lock in more customers seeking to avoid acquiring nuclear fuel from Russia, thanks to its proposed deal to buy nuclear services and equipment company Westinghouse Electric Co. LLC in a joint venture with Brookfield Renewable Partners LP. Brookfield Renewable and its institutional partners will own 51% of Westinghouse, and Cameco will hold 49% under the terms of the proposed acquisition, announced Oct. 11. The deal values Westinghouse at about $7.9 billion, including about $4.5 billion in equity costs. For Cameco, the move may turn out to be a shrewd expansion into areas of the nuclear fuel cycle where it is not a player, amid growing interest in nuclear power as an important low-carbon energy source, market observers said. France, the U.K. and Japan have all expressed interest in building new or extending the life of old reactors last year, and Cameco is one of the world's largest uranium miners and a significant converter of uranium into uranium hexafluoride, or UF6, which is a precursor to more refined nuclear fuels. Westinghouse would give the company deeper roots in the downstream nuclear business, providing services, equipment and finished fuels to the power industry. "Obviously, if you have a Westinghouse reactor, you've got a captive customer there to provide those fuels and services," said Scott Melbye, president of the Uranium Producers of America and executive vice president of U.S. producer Uranium Energy. Observers cast the deal as a major shift in market dynamics for the nuclear fuels and services sector. Canaccord Genuity analyst Katie Lachapelle described it as the most significant nuclear industry transaction in more than a decade. Cameco "will effectively become a 'one stop shop' for utilities, which should give the company a competitive advantage in contract negotiations," Lachapelle said in an Oct. 12 note. Russian supply issues The deal came amid nuclear industry turmoil following Russia's invasion of Ukraine. Russia is not a major uranium miner, but it is a key provider of uranium processing and nuclear plant technical services. Westinghouse sells similar products in a market where some utilities are scrambling to secure non-Russian sources of fuel supplies and services. "I think Cameco clearly sees that as a huge and growing market," Melbye said. "And it really is." Cameco highlighted that potential during an Oct. 11 webcast, underscoring demand from customers in Eastern Europe. "This market has historically been captive to Russian fuel supply and is seriously looking to find other options for the fuel supplies required to power their critical nuclear power plants in a way that doesn't depend on Russia," Cameco President and CEO Tim Gitzel said on the webcast. What Cameco's part-ownership of Westinghouse would mean for its overall revenues and profits is unclear. The uranium miner could not immediately provide a detailed overview of Westinghouse's revenues and profits by division. Lachapelle estimated Westinghouse's annual EBITDA at around $600 million to $700 million. "In this scenario, we expect Westinghouse to be a preferred builder of new nuclear facilities in Europe and a servicer to new and existing plants previously serviced by [Russia's] Rosatom," Lachapelle said. Technology edge For its new owners, Westinghouse would bring expertise in next-generation nuclear technologies, such as small modular reactors. "Westinghouse is out there with AP1000 and smaller eVinci small modular reactors," Melbye said, referring to two newer technologies. "And they have room to grow business there significantly." Taking a similar view, Rick Rule a director and former president and CEO of Sprott U.S. Holdings Inc. and a top shareholder of Sprott Inc., which launched the Sprott Physical Uranium Trust Fund noted that the new owners would gain access to "best of breed" nuclear technology that would bolster Cameco's bid to become a full-cycle, integrated nuclear fuel provider, and not just a miner. And Rule praised Cameco's partner in the deal, Brookfield Renewable. "Affiliating with Brookfield could make sense, given that Brookfield is one of the only private sector players that could finance nuclear power plants, or enrichment facilities," Rule said in an email. The deal came as nuclear power gains increasing interest as an important low-carbon source of power, Gitzel and others noted. In a sign that dealmaking may be heating up, a day after Cameco and Brookfield Renewable announced the Westinghouse transaction, Uranium Energy Corp. announced a $150 million transaction to acquire the Roughrider uranium deposit in Saskatchewan from Rio Tinto Group. "The message for the broader market is incredibly bullish," Uranium Energy's Melbye said. |
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