In early February, Tokyo Electric Power Co. Holdings Inc. (TEPCO) issued a termination notice for a uranium supply contract with Cameco Inc. and the company announced that it did not accept the notice.
“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 company said.
TEPCO confirmed on January 31 that it would not accept a uranium delivery scheduled for February 1 and would not withdraw the contract termination notice it provided to Cameco on January 24. TEPCO alleged that an event of “force majeure” occurred because it had 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.
Gitzel said the company tried to obtain clarification on conflicting information the company had received previously from TEPCO and only received confirmation of their intent to terminate the contract yesterday.
“Now we will vigorously pursue remedies to recover value for our shareholders and other stakeholders, as we have done successfully in the past,” Gitzel said.
Under the contract, TEPCO has already received and paid for 2.2 million pounds (lb) of uranium since 2014. The termination would affect approximately 9.3 million lb of uranium deliveries through 2028, worth approximately $1.3 billion in revenue to Cameco, including about $126 million in each of 2017, 2018 and 2019 based on 855,000 lb 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 and $2.2 billion.
The uranium supply contract provides for disputes to be resolved by binding arbitration after a period of good faith negotiations, the company said. Cameco added that is has sufficient financial capacity to manage any loss of revenue in 2017 as a result of the dispute.
Cameco is one of the world’s largest uranium producers and one of two Candu fuel manufacturers in Canada.