Cameco CEO Tim Gitzel says the world is witnessing some of the best market fundamentals ever seen in the nuclear energy sector.
Canadian uranium miner Cameco on Monday announced that it would partner with clean energy investor Brookfield Renewable to buy nuclear services group Westinghouse for an enterprise value of $7.88-billion.
Brookfield Renewable, with its institutional partners, would own a 51% interest and Cameco would own a 49% stake in Westinghouse, which services about half the nuclear power generation sector and is the original equipment manufacturer to more than half the global nuclear reactor fleet.
NYSE-listed Brookfield Business Partners bought Westinghouse out of bankruptcy in 2018.
"We’re witnessing some of the best market fundamentals we’ve ever seen in the nuclear energy sector,” said Cameco CEO Tim Gitzel.
Buying Westinghouse would create a platform for growth across the nuclear value chain, he added.
Westinghouse’s existing debt structure would remain in place, leaving an estimated $4.5-billion equity cost to the consortium. Brookfield and its institutional partners would pay $2.3-billion for the deal and Cameco $2.2-billion. Brookfield Renewable is pursuing this opportunity through the Brookfield Global Transition Fund I (BGTF I), which is the biggest fund in the world focused on the energy transition. Brookfield Renewable would invest about $750-million to acquire a 17% interest in Westinghouse, which would be funded through normal course funding initiatives, including asset level upfinancings and asset recycling.
Cameco has available liquidity and committed financing facilities to support the transaction. However, the uranium miner said it would be pursuing a permanent financing mix of capital sources (cash, debt and equity) to preserve its balance sheet and ratings strength, while maintaining its liquidity.
In a separate announcement, Cameco said that it would raise $650-million on a bought-deal basis. The company entered into an agreement with a syndicate of underwriters, led by CIBC Capital Markets and Goldman Sachs & Co, pursuant to which the underwriters would purchase 29 615 000 common shares at $21.95 each.
The proceeds would be used to partially fund its share of the acquisition of Westinghouse.
MARKET TRENDS
Brookfield vice chairperson and head of transition investing Mark Carney said that “every credible net-zero pathway relies on significant growth in nuclear power”.
“It is an essential, reliable zero-carbon technology that directly displaces fossil fuels and supports the growth of renewables by providing critical baseload to our grids. The partnership of Brookfield and Cameco will help drive forward the growth of nuclear power the world needs for its clean energy transition.”
Driven by electrification, decarbonization and energy security benefits, an estimated 400 GW of additional nuclear capacity would be needed by 2050.
The consortium states that more than 50 GW of plant extensions have been announced to date and more than 60 GW of new-build reactors are expected between 2020 and 2040.