Note the following Cameco Press Release.
Regards, Jim Muckeheide
Cameco Signs Agreement to Add US Nuclear Generation
(PRESSI.COM 03/01/2004) Saskatoon, Saskatchewan,
Cameco Corporation announced
today that one of its wholly owned US
subsidiaries has signed an agreement to purchase a 25.2% interest in assets
comprising the South Texas Project (STP) from a wholly owned subsidiary of
American Electric Power (AEP) for $333 million (US). Included in the purchase price
is $54 million (US)
for fuel and non-fuel inventory. STP consists of two 1,250 megawatt (MW)
nuclear units located in Texas.
The net generating capacity from the 25.2% interest in STP is 630 MW. Each
owner takes in kind and markets its pro-rata share of electricity generated by
The balance of STP is held by
Texas Genco (30.8%), San Antonio City Public Service Board (28%) and Austin
Energy (16%). The interest being purchased by Cameco is subject to a right of
first refusal in favour of these owners for a period of 90 days.
"If this acquisition is
successful, the South Texas Project will be another milestone in our vision to
become a dominant nuclear energy company producing uranium fuel and generating
clean electricity," said Jerry Grandey, Cameco’s president and chief
executive officer. “This is a quality acquisition in two of the newer US reactors.
STP has a history of solid operating performance, with dedicated employees led
by a strong and experienced management team."
Cameco's investment in STP is
expected to have a positive impact on cash flow and net earnings after closing
based on current operating performance and market conditions. Cameco does not
intend to increase long-term debt and is looking at various options to finance
the purchase, including issuing equity.
“The ownership structure
of STP is an ideal fit for Cameco since it provides us the opportunity to be an
active partner," Grandey said. Cameco will participate in the governance
of STP through an owners’ committee and the board of directors of the
AEP is selling all of the
generation assets owned by AEP Texas Central Company (TCC) to recover stranded
costs under Texas
electricity deregulation legislation. Texas Senate Bill 7 on restructuring of
the electricity market provides for recovery of stranded costs as part of the
transition to the competitive retail market.
The agreement is also subject
to regulatory approval and other closing conditions, and the final purchase
price is subject to closing adjustments. The transaction is expected to close
in the second half of 2004.
STP is located on an 11,000
acre site approximately 90 miles southwest of Houston. The two units began production in
1988 and 1989 and their operating licences expire in 2027 and 2028, with the
expectation that they will be extended. The operator of STP is STP Nuclear
Operating Company, a non-profit company with about 1,200 full time employees.
The average capacity factor for the units was 84% over the last five years. The
STP units are operated on an 18-month refueling and outage maintenance cycle,
with a typical refueling outage of less than a month.
STP Electricity Market
STP is located within the
Electricity Reliability Council of Texas (ERCOT) market that comprises about
85% of Texas electricity demand and does not
extend beyond the state of Texas.
ERCOT is also the independent system operator responsible for maintaining
reliable operations of the bulk electric power supply system and balancing the
supply and demand of electricity. The ERCOT market is deregulated and almost
all power is sold under bilateral contracts between buyers and sellers.
Commercial reporting services use their market intelligence to publish prices
for bilateral electricity contracts. There is a small balancing market that
accounts for less than 3% of the market. Prices in this small market may not
reflect bilateral contract prices.
Electricity demand in Texas is almost equally
from residential, commercial and industrial users. While ERCOT has a limited
ability to import electricity, there is capacity in the market to meet the
total demand as well as peak requirements, however, this capacity includes
older generators that are expensive to operate. Natural gas plants are the
primary driver for electricity prices.
As a result of the
acquisition, Cameco would market its entire electricity share unencumbered by
any previous contract commitments from AEP. The company has negotiated an
interim marketing arrangement with AEP.
At the end of the operating
lives of the STP reactors, the owners, through STP Nuclear Operating Company,
are responsible for decommissioning the facilities, with funding provided by
ratepayers. Approximately $125 million (US) has been collected for
decommissioning the share of STP that Cameco has agreed to purchase.
Investor & Media
We invite you to join us in a
conference call at 10:00 a.m. Eastern time (9:00 a.m. Saskatoon time) today, March 1, 2004, to
discuss this news release. The call will be open to all members of the
investment community. Members of the media will be invited to ask questions at
the end of the call. In order to join the conference call, please dial (416)
695-5259 or (800) 766-6630 (Canada
and US). An operator will put your call through. Please pass this invitation to
colleagues in your organization who have an interest in Cameco.
A recorded version of the
proceedings will be available:
on our web site, www.cameco.com, shortly after the call, and on post view
until midnight on Monday, March 15 by calling (416) 695-5275 or (866) 518-1010
(no code required)
Cameco, with its head office
in Saskatoon, Saskatchewan, is the world’s largest
uranium supplier. The company’s uranium products are used to generate
electricity in nuclear energy plants around the world, providing one of the
cleanest sources of energy available today. Cameco’s shares trade on the Toronto and New
York stock exchanges.
American Electric Profile
AEP owns and operates more
than 42,000 megawatts of generating capacity in the United
States and select international markets and is the
largest electricity generator in the US. AEP is also one of the largest
electric utilities in the United
States, with almost 5 million customers
linked to AEP’s 11-state electricity transmission and distribution grid.
The company is based in Columbus,
Statements contained in this
news release which are not historical facts are forward-looking statements that
involve risks, uncertainties and other factors that could cause actual results
to differ materially from those expressed or implied by such forward-looking
statements. Factors that could cause such differences, without limiting the
generality of the following, include: volatility and sensitivity to market
prices for uranium, electricity in Ontario and gold; the impact of the sales
volume of uranium, conversion services, electricity generated and gold;
competition; the impact of change in foreign currency exchange rates and interest
rates; imprecision in reserve estimates; environmental and safety risks
including increased regulatory burdens; unexpected geological or hydrological
conditions; political risks arising from operating in certain developing
countries; a possible deterioration in political support for nuclear energy;
changes in government regulations and policies, including trade laws and
policies; demand for nuclear power; replacement of production and failure to
obtain necessary permits and approvals from government authorities; legislative
and regulatory initiatives regarding deregulation, regulation or restructuring
of the electric utility industry in Ontario; Ontario electricity rate
regulations; weather and other natural phenomena; ability to maintain and
further improve positive labour relations; operating performance of the
facilities; success of planned development projects; and other development and
Although Cameco believes that
the assumptions inherent in the forward-looking statements are reasonable,
undue reliance should not be placed on these statements, which only apply as of
the date of this report. Cameco disclaims any intention or obligation to update
or revise any forward-looking statement, whether as a result of new
information, future events or otherwise.
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