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."
Researched and written
by World Nuclear News