UrencoUrenco, a European consortium, built a uranium enrichment plant in New Mexico.
CAPENHURST, England — The first thing you notice when entering Building E23 on a tightly guarded site here in northwest England is the loud tick-tock. The sound resonates throughout the long, low-slung building where, behind secured doors, sit row upon row of tall thin tubes.
That ticking means the building’s radiation detection system is working — crucial comfort. Inside each cylinder is a centrifuge, spinning a gaseous form of uranium to give it the atomic boost it needs to be used as nuclear reactor fuel.
The company that operates this uranium enrichment center, Urenco, is the world leader in the field. It is also plumply profitable. So why are its owners eager to sell it?
The answer, as with many things involving nuclear power, is a combination of economics, geopolitics and the Promethean prospect of an energy source that is as potentially green and abundant as deadly dangerous.
Urenco was formed by treaty in 1971 when Britain, West Germany and the Netherlands decided for strategic and business reasons to combine their uranium enrichment programs. The company is still owned by the British and Dutch governments, with one-third each, and with the German third held jointly by two big utility companies, E.On and RWE.
Urenco now has four enrichment plants — in Britain, the Netherlands and Germany — selling fuel for civilian energy purposes around the world, capturing nearly a third of the global market. It is also heavily investing in an American centrifuge complex in Eunice, N.M., that will eventually be its largest plant.
“Over the years we have developed generations of these machines,” said Helmut Engelbrecht, Urenco’s chief executive in a telephone interview. “If you do something continuously you always improve.”
Besides fuel, Urenco’s centrifuges spin off fairly good money: revenue of 1.6 billion euros, or $2.1 billion last year, yielding earnings of 402 million euros, for a profit margin of 25 percent. And its order book stands at 18 billion euros, which mean at least 10 years of steady work.
Analysts estimate Urenco’s market value at about 10 billion euros. For all that momentum, though, the company is at a crossroads. Growth may flatten in the next couple of years, executives say, mainly because Japan — a major user of nuclear power until the 2011 Fukushima Daiichi disaster — has shut down its reactors, taking about 10 percent of the world’s nuclear energy generating capacity offline. And the Japanese have stockpiled substantial amounts of fuel for the day, if ever, that those reactors go back into operation.
The British government, intent on cleaning up its budget by selling state-owned enterprises, said in March that it had hired Morgan Stanley to look into disposing of all or part of its Urenco stake. In some respects Urenco is an easier business to sell than, say, the Royal Mail, because it has an internationally marketable product and a relatively small work force — about 1,400 employees.
The German utilities E.On and RWE have hired Bank of America as their adviser. With the German government’s having decided to get out of the nuclear industry in 2011 after Fukushima, the sale of their Urenco stakes would help the power companies beef up their thin balance sheets.
A sale became more likely Thursday, when the Dutch government said it wanted to sell its shares, as long as “the public interest in terms of nonproliferation, nuclear safety and supply security” could be safeguarded.
A person close to planning, who insisted on anonymity because of the delicacy of the matter, said if things went smoothly a sale might occur either late this year or in the first half of 2014.
“Nuclear strategies have changed,” said Michael Kruse, a consultant on nuclear issues for the management consultant Arthur D. Little in Frankfurt. “Governments no longer think they need to be in this business,” he said, “and utilities in several countries want out after Fukushima.”
People in the industry say the most likely buyers would be companies already in the industry that might want to offer clients fuel along with nuclear power stations. Areva, a French giant, might fit that bill. So might Toshiba of Japan, which is studying building nuclear plants in Britain. Still, “there are in my view not many companies that can buy Urenco,” Mr. Kruse said.
Urenco’s chief executive, Mr. Engelbrecht, in a presentation to analysts in March, declined to discuss a possible sale of the company, saying he would leave that to the shareholders. But he argued that fast-growing emerging economies would take up the slack left by Japan.
Already, he noted, China is in the midst of a nuclear plant building boom, and India is also seriously pursuing nuclear power. In the Middle East, Urenco has a contract to enrich uranium for the plants in Abu Dhabi being built by South Korean contractors. Countries that are seeing 10 percent to 15 percent increases in electricity demand and that have major air pollution problems “are all betting on nuclear, and that is where we believe the future of our business will be,” Mr. Engelbrecht said.
The company has 50 customers in 17 countries, which it denotes with little plaques on a wall in the enrichment center’s entranceway. The honorees include the Indian Point nuclear plant in Buchanan, N.Y.; Wolf Creek in Burlington, Kan., and the Olkiluoto plant on an island off western Finland.
Even if the potential buyers are a small pool, analysts say that buying into Urenco would present a rare opportunity. Urenco’s centrifuge technology, honed over several generations of machines, is considered the most efficient way to enrich uranium.
Urenco plants receive shipments of uranium hexafluoride, a granular substance derived from uranium ore, which is turned into gas by heating it. The gas is then piped into the centrifuges which use their spinning power to separate out the lighter and more reactive uranium 235 isotopes. When the gas is cooled again, it settles out as a solid resembling grains of sugar.
Urenco’s process increases the proportion of U235, raising it from a starting point of about 0.7 percent to end up about 4 percent — a suitable level for reactor fuel, but only a small fraction of the concentration needed to make a nuclear weapon.
Urenco’s enriched uranium is put in canisters that then go to a fuel fabricator, where it is converted into pellets and loaded into fuel rods which are then delivered to the power plants.
The centrifuges rarely stop at the Capenhurst plant, which sprawls over about 170 acres in what has long been a munitions testing site surrounded by cow pastures and farm ponds. The newest group of cascades — as the array of centrifuges is known — in the Capenhurst building was installed 15 years ago and “has never been brought to rest,” said Geoff Owens, a Urenco engineer.
Areva, of France, which has about 10 percent of the world market for nuclear fuel sales, began switching over to Urenco’s technology in the mid-2000s for its uranium enrichment. Areva’s and Urenco’s owners each have a 50 percent stake in a company called Enrichment Technology, based in Almelo, the Netherlands, that develops and makes the centrifuges.
It is very difficult for competitors to gain a foothold in Urenco’s business. The details of the technology are closely guarded, and the uranium trade is tightly controlled and regulated. “There are massive barriers to entry,” said Harold Hutchinson, an analyst at Investec in London.
Urenco produces the steady, long-run returns that might be valued by pension funds and private equity groups. But worries that the wrong people may gain access to Urenco’s world-leading technology will probably mean that the shareholders — and the British, Dutch and German governments — will be highly selective about who can buy stakes.
While Asian or Middle Eastern sovereign wealth funds are said to be among those interested, only companies from North America, western Europe, Japan, or possibly, South Korea, are likely to pass muster, people in the industry say.
“There are an awful lot of security concerns which arise around these types of businesses,” said Fiona Reilly, who heads the nuclear industry practice at Norton Rose, a law firm in London.
Besides potential candidates like Areva and Toshiba, another shopper might be Cameco, a big Canadian uranium mining outfit. It has shown interest in working with Urenco in the past and already uses a plant in Preston, England, that turns refined uranium ore into the uranium hexafluoride that could serve as feedstock for Urenco’s nearby Capenhurst complex.
“Enrichment is a potential growth area for us,” Gord Struthers, a Cameco spokesman said in an e-mail, while declining to comment on whether an offer might be imminent. “We are watching what happens with Urenco closely.”
Article source: http://dealbook.nytimes.com/2013/05/27/powerhouse-of-the-uranium-enrichment-industry-seeks-an-exit/?partner=rss&emc=rss
