Cameco to contest Tepco’s termination of supply contract
Cameco announced today that Tokyo Electric Power Company Holdings (Tepco) has issued a termination notice for a uranium supply contract with Cameco Inc that it does not accept. "Cameco Inc sees no basis for terminating the contract, considers Tepco to be in default, and will pursue all its legal rights and remedies," the Saskatchewan, Canada-based uranium producer said.
The Japanese utility confirmed yesterday it would not accept a uranium delivery scheduled for 1 February and would not withdraw the contract termination notice it provided to Cameco on 24 January, according to Cameco's statement. Tepco alleges that an event of 'force majeure' has occurred because it has been unable to operate its nuclear generating plants for 18 consecutive months due to government regulations arising from the Fukushima nuclear accident in March 2011.
"We are surprised and disappointed that Tepco is seeking to terminate its contract given all the past productive discussions we have had to date," said Tim Gitzel, president and CEO of Cameco. "For the past six years we have worked in good faith with Tepco to restructure this contract, and would continue to do so if there was any basis for a commercial resolution. During the past week we tried to engage Tepco to obtain clarification given conflicting information we had received previously from them and only received confirmation of their intent to terminate the contract yesterday."
Cameco will "vigorously pursue" remedies to recover value for its shareholders and other stakeholders, Gitzel added.
Under the contract, Tepco has already received and paid for 2.2 million pounds of uranium since 2014. The termination would affect about 9.3 million pounds of uranium deliveries through 2028, worth about $1.3 billion in revenue to Cameco, including about $126 million in each of 2017, 2018 and 2019 based on 855,000 pounds of deliveries in each of those years. In 2017, Cameco's consolidated revenue, including the Tepco volume, is expected to range between $2.1 billion to $2.2 billion.
Cameco said it will be "moving expeditiously" to enforce its rights under the uranium supply contract to recover losses arising from Tepco's actions.
"As with any commercial dispute, it will take some time for a resolution to be achieved, particularly if it proceeds all the way to arbitration," Cameco said.
The company, which is scheduled to release its annual results after markets close on 9 February, said it has "sufficient financial capacity" to manage any loss of revenue in 2017 as a result of the dispute.
A spokesman for Tepco said: "We have terminated the uranium concentrate supply agreement with Cameco by giving written notice to Cameco in accordance with the terms and conditions of the agreement. We are aware that Cameco is showing their objection to our assertion of termination. However, our notice complies with the agreement and we will take appropriate action."
Tepco scraps uranium supply contract with Canada's Cameco
Feb 1 Canadian uranium producer Cameco Corp said on Wednesday that Tokyo Electric Power (Tepco) , the operator of Japan's wrecked Fukushima nuclear plant, had scrapped its uranium supply contract with the company.
Shares of Cameco slid 12.2 percent to C$14.55 in early trading on Wednesday.
The company, one of the world's largest uranium producers, said it considered Tepco's move to terminate the contract unfair and that it would pursue legal action.
Cameco said Tepco cited a force majeure for ending the contract as it had been unable to operate its nuclear plants for 18 straight months due to Japanese regulations arising from the 2011 Fukushima nuclear accident.
The company said it was notified of the contract termination by Tepco last week.
Tepco's termination of the contract would affect about 9.3 million pounds of uranium deliveries through 2028, worth about C$1.3 billion ($995.41 million) in revenue to Cameco, the Saskatoon, Canada-based company said.
Cameco's earnings before interest, taxes, depreciation and amortization could take a 10-15 percent hit in the near-term as a result of the Tepco dispute, said Edward Sterck, an analyst at BMO Capital Markets.
Tepco's move comes amid a fall in demand for uranium that is largely a result of the Fukushima nuclear plant meltdown, which led to shutdowns of all of Japan's nuclear reactors.
Some reactors have since come back online, but global inventories of the radioactive metal remain high.
Cameco warned late last year that the uranium market would remain depressed until Japan's nuclear reactors were restarted and excess supply was depleted.
Cameco also said it expected 2017 revenue of C$2.1 billion to C$2.2 billion, inclusive of Tepco's volume, adding that it could withstand any potential loss of revenue this year from the dispute.dunrenard | February 1, 2017 at 11:18 pm | Tags: Cameco, Tepco, Uranium supply | Categories: Japan | URL: http://wp.me/phgse-sZn
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