Cameco and Tepco in dispute over uranium contract

6 February 2017

Canada-based uranium producer Cameco said in a 1 February statement that it will not accept a termination notice for a uranium supply contract from Tokyo Electric Power Company (Tepco). Cameco said it considers Tepco to be in default, and will pursue “all its legal rights and remedies”.  Tepco confirmed on 31 January it would not accept a uranium delivery scheduled for 1 February and would not withdraw a contract termination notice issued to Cameco on 24 January.

Tepco argued that an event of “force majeure” had occurred because it has been unable to operate its NPPs for 18 consecutive months due to government regulations arising from the 2011Fukushima-Daiichi nuclear accident. Tepco owns and operates the Fukushima-Daiichi and Fukushima-Daini NPPs as well as the seven-unit Kashiwazaki Kariwa NPP. None of the 17 reactors at any of the three facilities is operating, and the six Fukushima-Daiichi units are permanently closed, while the ultimate fate of Fukushima Daiini is uncertain.

Cameco CEO and President Tim Gitzel  said that Cameco has worked “in good faith” with Tepco for the past six years to restructure this contract and would continue to do so if there were 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.”

Under the contract, Tepco has already received and paid for 2.2m lbs of uranium since 2014. The termination would affect approximately 9.3m lbs of deliveries until 2028, worth approximately CAD1.3bn ($994m) in revenue to Cameco, including about CAD126m in 2017, 2018 and 2019 based on 855,000 lbs of deliveries in each of those years. In 2017, Cameco’s consolidated revenue, including the Tepco revenue, is expected to range be CAD2.1-2.2bn. Cameco said it has sufficient financial capacity to manage any loss of revenue in 2017 as a result of the dispute.

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.

A spokesman for Tepco said: "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."


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