Cameco seeks stake in U.S. nuclear plants

"We have an agreement to buy an excellent asset in a healthy and growing market," Cameco chief executive Jerry Grandey said during a conference call with analysts. "We believe it is a very appropriate step for us as we look to realize Cameco's vision to be a dominant nuclear energy company producing nuclear fuel and generating clean electricity."

Saskatoon-based Cameco said it wants to buy a 25.2 per cent stake in the South Texas Project nuclear plants from a subsidiary of American Electric Power. The project, called STP, consists of two 1,250-megawatt nuclear plants in Texas. Cameco said the price includes $54 million for fuel and non-fuel inventory.

The balance of STP is held by Texas Genco with 30.8 per cent, San Antonio City Public Service Board, 28 per cent, and Austin Energy, 16 per cent — and all three partners have a 90-day right of first refusal on the stake sought by Cameco.

Austin Energy official Carlos Cordova said the community-owned utility is evaluating the deal and will later make a recommendation to Austin city council. Texas Genco also said it will evaluate the proposal.

Bob McCullough, of San Antonio's City Public Service, said the utility had not yet received a formal proposal recently.

"When we get more details of this proposal and once we understand what's being proposed, we'll evaluate things under our rights," he said.

Grandey said Cameco will not go through with the deal if its stake is less than 13.2 per cent.

Last year, Cameco earned a record $204.7 million (Canadian), or $3.58 per share, as the company received $108 million from its investment in the Bruce Power partnership. That compared with a profit of $43.5 million, or 78 cents per share, for 2002, when it received $16 million from the Bruce investment.

And earlier this year, Bruce Power announced it was considering building one or more new reactors at its nuclear power complex on the shore of Lake Huron near Owen Sound.

The Bruce partnership — including Cameco, Trans-Canada Corp., the Ontario Municipal Employees Retirement System and the Bruce complex's unions — said it will study the feasibility of restarting at least two old reactors at the station — Bruce A units 1 and 2 — and refurbishing four Bruce B reactors.

The feasibility study will involve a technical inspection of the two laid-up Bruce A units and an assessment of how much it would cost to upgrade them to current standards.

It will also look at what improvements are needed to extend the operating life of Bruce B, as well as the feasibility of installing one or more of the advanced Candu reactors that are being developed.

Cameco said its South Texas investment is expected to add to cash flow and earnings. Cameco said it doesn't intend to increase long-term debt and it is looking at various options to finance the deal, including selling shares.

American Electric is selling all the generation assets owned by AEP Texas Central Co. to recover costs under Texas electricity deregulation legislation. The South Texas Project is on a 4,400-hectare site southwest of Houston. The two units began production in 1988 and 1989.