March 1, 2024

Uranium Processor Still Optimistic About Nuclear Industry

The accompanying tsunami, they learned, had swamped a Cameco customer: the Fukushima Daiichi nuclear power plant. Suddenly, this strategy meeting would be anything but routine.

“We had kind of a fortuitous convergence,” said Gerald W. Grandey, the chief executive of Cameco, which held the meeting near its headquarters in Saskatoon, Saskatchewan.

Fortuitous, but not fortunate — for Cameco or the rest of the uranium industry, whose products fuel the world’s nuclear power plants.

Over the last five years, uranium miners and processors — and their stock prices — have generally benefited from the assumption that rising energy demand in developing countries, and global concerns about greenhouse gas emissions, were creating a new appreciation for nuclear power industry.

Shares of Cameco had reached a recent high of $43.14 in mid-February, reflecting a steady rise from a low of $16 in October 2008. But since the tsunami, shares of Cameco have closed as low as $30.82, and closed Friday at $31.17.

Unusually rich ore deposits, particularly at Cameco’s main deep-rock mine in northern Saskatchewan, help make it a low-cost producer. Uranium mining requires costly robotic systems and other measures to protect workers and the environment from radiation.

Cameco produces about 16 percent of the world’s uranium supply and dominates the market, along with Areva, a French company with 17 percent of production, and the British-Australian mining giant Rio Tinto, which also holds a 16 percent share. But compared with those more diversified companies, Cameco is essentially a pure-play uranium producer.

The Tokyo Electric Power Company, which owns that power plant, is not only a buyer of nuclear fuel from Cameco, among other suppliers. Tepco, as it is known, also holds a small stake in a Canadian mine that Cameco plans to open in 2013 as part of its goal to double production by 2018, which would make it the global leader in uranium.

Right now, most of the rest of the world is pausing to assess the future of its nuclear power programs. In Germany, a market for Cameco, Chancellor Angela Merkel has temporarily shut down seven nuclear plants and suspended a program for extending the life of aging reactors. And Italy, has suspended a plan to resume its nuclear power program, which it had stopped after the 1986 disaster at Chernobyl.

But for all that, Mr. Grandey said this week that he was still optimistic about the long-term future of nuclear power. He says he thinks the nuclear renaissance is only taking a temporary pause.

“Even with Chernobyl, Three Mile Island and now Fukushima, nuclear still has an impeccable safety record,” Mr. Grandey said in an interview. “There will be in time — I’m looking five, seven years — a rapid acceleration of nuclear building putting us back on track to where we would have been, absent Fukushima.”

Not everyone, of course, shares Mr. Grandey’s optimism, or his assessment of the industry’s safety record. But there is no question that Cameco’s future depends largely on the world’s appetite for processed uranium after Fukushima.

Even if there is a global pullback on developing new power plants, Cameco has something of a cushion with its current customers. The company generally has multiyear contracts with utilities that require them to pay for fuel even if they do not accept delivery. (The company has suspended some contract terms for Tokyo Electric and another Japanese utility with reactors in the heavily damaged north, Tohoku Electric Power. Long-term Japan accounts for about 18 to 20 percent of Cameco’s contracted sales.)

Farther out, Mr. Grandey bases his optimism on the inexorable rise in energy demand by developing economies like China and India, which have both indicated that they do not plan to curtail their ambitious rollout of new nuclear plants though they will proceed with a greater sense of caution. Fossil fuels, whether for environmental issues, supply constraints or price uncertainties, simply cannot meet the world’s needs, he said.

“It will take us six months a year to digest and learn the lessons of Fukushima,” he said. “After we digest the lessons learned, I think we’ll get back on the path of nuclear construction.”

Joshua M. Pearce, a professor of mechanical and engineering at Queen’s University in Kingston, Ontario, said that such analysis omitted an important factor.

“This is not the 1950s when there was just nuclear and fossil fuels,” he said, noting that alternative energy sources like solar and wind had become increasingly viable.

Professor Pearce was a co-author of a recent academic paper about indirect subsidies to nuclear power plants. He estimates that insurance liability caps granted to the American nuclear power industry, for example, produce an annual indirect subsidy of $33 million for every reactor in the United States.

He said that the liability costs to the Japanese government arising from Fukushima Daiichi, while still impossible to estimate, were presumably large, and might make other governments see that offering subsidies to renewable energy sources might be a comparative bargain.

Tony Ward, who heads Ernst Young’s power and utility practice in London, agrees that the current crisis will focus new attention on wind and solar power, particularly in China, which has already heavily invested in renewable energy technologies.

But Mr. Ward points to a significant limit to renewable energy as an alternative to nuclear. “The supply chain is not sufficiently deep to provide the sheer scale of capacity that is sufficient,” he said.

For Mr. Ward, one potential long-term change for Cameco stemming from the Fukushima Daiichi disaster is the issue of spent fuel storage — which has been a big source of the trouble at that plant. He expects governments to reassess the economics of reprocessing nuclear waste into new fuel rather than allowing its continued storage.

But Cameco’s Mr. Grandey, voicing optimism, insists that the nuclear industry’s image will suffer no long-term harm.

“The numbers that are questioning safety have gone up but that’s inevitable,” Mr. Grandy said. “But it certainly can’t be described as a mass change in attitude toward nuclear.”

He added: “I think the public also understands that these are 35- and 40-year-old plants. So like airplanes that occasionally fall out of the sky, or like other industrial activities that experience disasters, every industry learns and improves.”

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