[cdn-nucl-l] Cameco May Challenge Bruce Power Guarantees

["Adam McLean" <adam.mclean@utoronto.ca>]

Posted on Morningstar.ca on November 4, 2002 and at:
http://www.morningstar.ca/globalhome/industry/News.asp?articleid=MTFH241
24_2002-11-05_00-05-46_N04355414

Adam

----------------------

Cameco May Challenge Bruce Power Guarantees 
4 Nov 02(7:05 PM) |  E-mail Article to a Friend 
 
By Lesley Wroughton

TORONTO (Reuters) - Cameco Corp. <CCO.TO>, looking to protect its 15
percent stake in Ontario's Bruce Power nuclear station, said on Monday
it may challenge the legality of a guarantee given to the British
government as collateral for its cash-strapped partner British Energy
<BGY.L>.

One analyst who follows the company said it might be Cameco's way of
forcing British Energy to sell its 82 percent stake in the 6,140
megawatt Bruce nuclear plant on Lake Huron, about 250 kilometers (165
miles) northwest of Toronto.

The Saskatchewan-based company, the world's biggest uranium supplier,
confirmed on Monday it was in talks on changing Bruce's ownership but
that there were no firm developments.

Cameco has long said it would welcome a bigger interest in Bruce Power
and has a right of first offer over British Energy's interest.

The sale of all or part of its stake to Cameco would give Britain's
largest electricity generator a much-needed cash boost.

Cameco said on Monday it believed that Bruce Power's board did not have
sufficient information or time to make a proper decision regarding the
guarantee, which had created uncertainty over its investment.

The British government sought collateral from various British Energy
(BE) units in return for emergency funding for the large electricity
generator, which has survived on state money since September.

The government loan runs until Nov. 29.

BE shareholders on Monday approved an increase in its borrowing limits
to 1.6 billion pounds ($2.5 billion).

Rita Mierwald, vice-president for corporate relations at Cameco, told
Reuters the company would prefer to avoid any court action but might be
forced to go that route to defend Cameco shareholders.

She said Cameco could ultimately ask for the guarantee to be withdrawn.

On Sept. 9, Cameco said in a statement it had consented to Bruce Power
providing the guarantees, but Mierwald said the company had since had
time to consider the implications and didn't like what it saw.

"At that time, given what we knew, and knew we had to make a decision
rather hastily, we did agree to support it," said Mierwald.

"But over time we have begun to understand it more in detail," she said,
adding that British Energy's problems have dragged on longer than
thought.

She said the risk to Cameco was somewhat controlled but the company
feared that the Bruce Power asset could be called for failure to honor
the loans.

In the first nine months, Bruce Power generated C$682 million ($438
million) in revenue, with C$571 million in operating costs. In the third
quarter the station generated 5.5 terawatt hours of electricity.

Analysts said the remained cautious toward the stock and were watching
the developments around the joint venture.

"We would view a larger interest, say 30 percent, as a positive step for
Cameco and a development that would have a material positive impact,"
said one Toronto-based analyst.

Cameco stock closed down C$1.34 at C$33.60 on the Toronto Stock Exchange
on Monday. The stock hit a 52-week low of C$25.59 on Sept. 25 but has
since gained 31 percent.

($1=$1.56 Canadian)

($1=0.64 GB pounds)