Cameco Sells Bruce Power Stake to Borealis for $404 Million

Cameco Corp. agreed to sell its stake in the world’s largest nuclear power plant to a unit of the Ontario Municipal Employees Retirement System for C$450 million ($404 million), as the company focuses on its uranium-mining business.

The sale to Borealis Infrastructure of its 31.6 percent interest in four of eight units at the Bruce Power station will be effective Dec. 31, 2013, the Saskatoon, Saskatchewan-based company said today in a statement. The transaction makes Borealis the majority shareholder in the Ontario facility, with 56.1 percent, the fund said in a separate statement.

Uranium is poised for a bull market as Japan reopens its reactors and other nations add nuclear power. Prices will average $41 a pound this year, 15 percent more than yesterday’s price, a survey of five analysts earlier this month showed. It traded at $35.75 yesterday, according to data compiled by Bloomberg. The fuel, which rose to as much as $152 in 2007, dropped to an eight-year low of $34 in August.

“We had to make a decision on where we wanted to deploy our capital going forward,” CEO Tim Gitzel said today in a phone interview from Toronto. “We decided that to focus on the uranium mining space was a better decision for our shareholders.”

Power from the 6,300-megawatt plant is sold through a contract with the Ontario Power Authority and accounts for about a third of the province’s electricity, according to the Bruce Power website. After spending billions on fixing some of the reactors, all eight units operated last year for the first time in almost two decades. The Ontario government has approved a plan to refurbish Units 3 through 8, starting in 2016.

Refurbishment Costs

Selling the stake allows Cameco to avoid contributing an estimated C$3.2 billion in costs for the Bruce reactors, Rob Chang, a Toronto-based analyst at Cantor Fitzgerald LP, wrote today in a note to clients. Gitzel declined to estimate Cameco’s share of the refurbishment.

TransCanada Corp., Power Workers’ Union and the Society of Energy Professionals, which also hold stakes in Bruce Power, are considering whether to exercise their options related to additional ownership in the station, Borealis said.

Cameco fell 3.7 percent to C$23.67 at the close in Toronto. The company, whose shares have gained 7.4 percent this year, has 14 buy, five hold and one sell recommendation from analysts.

The company may use the proceeds to acquire more uranium-exploration properties in the Athabasca Basin region of Saskatchewan where the company operates several large uranium mines, Chang said in a phone interview.

Gitzel said he’s “pretty happy” with the company’s 23-million-pound annual production and its half-billion pound reserves. Acquiring uranium exploration companies whose supplies wouldn’t be available for many years “wouldn’t be a priority.”

CIBC World Markets provided financial advice to Cameco and Osler, Hoskin & Harcourt LLP was legal counsel.