Joanne Paulson
Saskatoon Star Phoenix
October 13, 2000

Uranium supplier invests $100 million in Ontario plants

Cameco Corp. plans to take its first plunge into nuclear power generation with a $100-million investment in the Bruce nuclear plants of Ontario.

Cameco announced Thursday it has signed a memorandum of understanding with British Energy PLC to take a 15 per cent interest in a new company, Bruce Power Partnership. The partnership was established to lease and operate the reactors.

British Energy will own 80 per cent of Bruce Power, and the remaining five per cent has been offered to the unions representing approximately 3,200 workers at the nuclear plants.

Earlier this year, British Energy struck a tentative deal running at least through 2018 to lease and operate the Bruce plants from Ontario Power Generation Inc. (OPG), formerly Ontario Hydro. The British company is expected to take over in mid-2001.

Cameco will also have an exclusive contract to supply all of the uranium, uranium conversion services and fuel fabrication services to the plants.

Cameco CEO and chair Bernard Michel said the deal is "like entering a new world" for his company.

"We have so far been a provider of fuel and fuel conversion, and now we become a 15 per cent producer of electricity from this very large nuclear plant," Michel said Thursday.

Cameco’s financial results will likely show little change until its investment is paid out over two years. However, Michel expects the partnership to be profitable. How profitable depends on long-term electrical and uranium prices.

"This should impact our earnings, after the two first years, increasing in the future by somewhere in the 20 to 25 per cent (range) every year … and cash flow should be about the same."

Michel said he is confident this forecast is based on a conservative assessment of future electrical prices in Ontario.

Bruce Power is in a transition phase, working to satisfy regulatory requirements and gain its operating licence from the Nuclear Safety Commission.

The Bruce project is divided into two parts called A and B, each with four Candu reactors. The four Bruce B plants are operating, although the Bruce A plants have been closed- one because of a technical problem, and the other three for business reasons.

Michel expressed confidence in the Candu technology, citing expert assessments that Candus are reliable, long-term nuclear reactors.

"They were operating with record capacity factors a few years ago, and they continue to do that for instance in Argentina, for instance in Korea, (and) they achieved excellent results in Romania," he said.

"It just needs to be operated well."

Elaine Kergoat, Cameco’s manager of public relations, said British Energy is assessing the possibility of bringing two of the four non-operational plants on stream.

If that occurs, Cameco will supply 1.5 million pounds of uranium and 600 tonnes of uranium dioxide conversion services annually. Otherwise, Cameco will provide one million pounds of uranium and 400 tonnes of uranium dioxide to the four plants.

OPG uses several uranium suppliers, including Cameco, although Cameco already provides all of the uranium dioxide conversion services for the Bruce reactors.

Cameco has always said it was looking for opportunities to expand in the industry without straying from its core business of mining and conversion, said Kergoat.

"This is a perfect fit for Cameco, given what it has been saying over the last several years."

Tom Adams, executive director of Energy Probe in Toronto, said having many partners with different specialties makes commercial logic in the operation of power plants. Energy Probe is a national consumer and environmental watchdog organization.

Adams said the long-term future of the nuclear industry is in doubt, considering declining prices for uranium and little construction of reactors around the world.

But he said plants such as these are still capable of creating substantial cash flow.

The Bruce site has recently been "very controversial" from an environmental point of view, Adams added. Of greatest concern is contaminated water leaking off-site, and it is uncertain where the water is coming from, he said.

News of the deal produced a lukewarm response from investors. Cameco shares rose 50 cents in Thursday trading on the Toronto Stock Exchange, closing at $21.75.