Cameco, Shaw Fall Most Since 1990s as Quake Generates Doubts About Nuclear

Uranium producer Cameco Corp. (CCO) and construction company Shaw Group Inc. (SHAW) plunged the most in more than a year on concern that a near-meltdown at a Japanese atomic plant will cripple investment in the nuclear industry.

Companies ranging from General Electric Co. (GE) to Exelon Corp. (EXC), owner of the largest group of U.S. nuclear power plants, to fuel producers such as Uranium One Inc. (UUU) slumped as Tokyo Electric Power Co. engineers tried to stabilize three reactors damaged by the biggest earthquake in Japan’s history.

The battle to cool the Tepco units and prevent the release of radiation brings to mind accidents at the Three Mile Island plant near Harrisburg, Pennsylvania, in 1979 and at Chernobyl in the Ukraine in 1986, Scott Levine, an analyst at JPMorgan Chase & Co. (JPM) in New York, said in a report today.

“Previous disasters have prompted concerns regarding the safety of nuclear power,” said Levine, who has a “neutral” recommendation on Baton Rouge, Louisiana-based Shaw.

Shaw tumbled $3.52, or 9.2 percent, to $34.87 at 4 p.m. in New York Stock Exchange composite trading. That was the biggest one-day decline since October 2009. The shares pared an intraday decline of as much as 28 percent, the most since August 1998.

Worst Decline

Cameco, Canada’s largest uranium producer, dropped C$4.62, or 13 percent, to C$31.70 in Toronto. That was the biggest drop for the Saskatoon, Saskatchewan-based company since October 2008. Vancouver-based Uranium One fell C$1.65, or 28 percent, to C$4.31, for the worst plunge among 243 companies in the S&P/Toronto Stock Exchange Composite Index.

While the Japan crisis is unlikely to prompt cancellation of nuclear projects that have already been announced, reactors still on the drawing board probably face “more protracted” regulatory review, John Redstone, a Montreal-based analyst at Desjardins Securities Inc., said today in a note to clients.

“Uranium demand should continue to grow on average at a steady rate of roughly 2 percent per annum,” Redstone said in the note. “What is called into question is the potential acceleration of uranium demand.”

GE, which designed three of the boiling-water reactors at the Fukushima Daiichi plant run by Tepco, is offering technical assistance, Chief Executive Officer Jeffrey Immelt told reporters in New Dehli. Fairfield, Connecticut-based GE also is pledging $5 million to relief efforts.

GE fell 44 cents, or 2.2 percent, to $19.92 in New York trading, the lowest closing price since Jan. 26.

Overreaction on GE?

Investors probably were overreacting, because GE derives only about 3 percent of its sales from Japan and is protected by the country’s liability laws, according to notes today from two New York-based analysts, Citigroup Inc.’s Deane Dray and JPMorgan Stephen Tusa. Japan assigns nuclear-plant liability to operators and shields manufacturers and suppliers, Dray wrote.

GE’s nuclear division operates through a 60-40 venture with Hitachi Ltd. everywhere except Japan, where the venture is 80 percent owned by Hitachi. Annual revenue from GE’s portion of the venture is about $1 billion, analysts estimate.

Shaw said yesterday it continues to believe nuclear power will play an important role in the future of U.S. energy. New technology has boosted safety, according to Shaw, which has been counting on fresh interest in atomic power among countries seeking to cut emissions of so-called greenhouse gases.

Shaw’s CEO

“At this time, we do not believe there will be an impact on Shaw’s nuclear projects currently under construction in the United States and China,” CEO J.M. Bernhard Jr. said in a statement. “Our customers have indicated they intend to move forward.”

In the quarter ended Nov. 30, Shaw reported a third of its $1.5 billion in sales came from the power unit, which includes its nuclear business. The shares had gained 12 percent this year before today.

The company said in November it was named as contractor to develop a 2,700-megawatt nuclear power project in Texas, and is the construction contractor on Southern Co. (SO)’s Vogtle Units 3 and 4 in Georgia, which may be the first to get a Nuclear Regulatory Commission construction permit since 1979.

Shaw also has a 20 percent stake in Westinghouse Electric Co., a nuclear-power technology provider controlled by Tokyo- based Toshiba Corp. (6502)

Exelon, Entergy

Exelon’s 17 reactors at 10 stations in Illinois, New Jersey and Pennsylvania provide 20 percent of U.S. nuclear capacity, according to the Chicago-based company’s website. About 20 percent of U.S. power is generated from nuclear plants, JPMorgan’s Levine said.

Exelon slid 27 cents to $42.89 in New York trading.

Entergy Corp. (ETR), the second-largest U.S. nuclear reactor operator, is subject to possible regulatory delays as it seeks to renew licenses for four reactors, Hugh Wynne, a New York- based analyst for Sanford C. Bernstein, wrote in a note to clients today. Entergy operates 12 reactors at 10 sites in New York, Arkansas, Louisiana, Massachusetts, Nebraska, and Vermont.

PG&E Corp. (PCG)’s Diablo Canyon nuclear plant and Edison International (EIX)’s San Onofre station, both in California, are at similar risk of damage from earthquakes and tsunamis, Wynne wrote.

Entergy, based in New Orleans, fell $3.60, or 4.9 percent, to $70.09 in New York trading, while San Francisco-based PG&E dropped $1.34, or 2.9 percent, to $44.41.

To contact the reporter on this story: {Thomas Black} in Monterrey at tblack@bloomberg.net

To contact the editors responsible for this story: Ed Dufner at edufner@bloomberg.net; Tina Davis at tinadavis@bloomberg.net; Simon Casey at scasey4@bloomberg.net

Bloomberg reserves the right to edit or remove comments but is under no obligation to do so, or to explain individual moderation decisions.

Please enable JavaScript to view the comments powered by Disqus.