Platts - Thursday, August 14, 2008 http://www.platts.com ------------ British Energy says takeover talks continuing Barcelona (Platts)--13Aug2008 British Energy said it is still in advanced takeover talks with another party. Although BE wouldn't name the counterparty, it is widely known to be Electricite de France. EDF withdrew a takeover offer August 1 after two groups of British Energy shareholders rejected it as being too low. British Energy CEO Bill Coley said August 13 during a financial results conference call that he wouldn't comment further, except to say talks were continuing. However, he also verified that the company is not currently involved in any ongoing partnership discussions. The company had previously said that it might participate in the UK's new nuclear plant construction program through a takeover or through partnership arrangements. Centrica is known to be interested in either taking a minority stake in BE with EDF, or in some kind of partnership arrangement. Other companies have also expressed interest in partnering with BE. ------------ Uranium One considers future of Australian properties Barcelona (Platts)--13Aug2008 Uranium One said Wednesday it was considering partnership options or a separate stock exchange listing for its Australian uranium properties, primarily the Honeymoon uranium project. Uranium One has appointed Rothschild as a financial advisor to assist it in exploring the options after it had previously suspended development activities at Honeymoon. The evaluation process is ongoing and the company said it expects to reach a conclusion in the second half of 2008. --David Stellfox, david_stellfox@platts.com ------------ Cigar Lake mine fault could push up spot uranium price Barcelona (Platts)--13Aug2008 Canada's Cameco Corp. late Tuesday announced that it temporarily suspended work on its Cigar Lake uranium project after water leaked into the mine shaft. News of such a potential supply shock could contribute to higher spot uranium prices. The company said it is now working to determine the source of the inflow at the northern Saskatchewan mine, and to determine if there will be an impact on its planned earliest production date of 2011. The mine first flooded in 2006 and has been under remediation since then. It was expected to produce 18 million pounds of uranium annually. The company said the water flowing in on Tuesday increased to a rate "beyond the range that can be managed while sustaining work in the shaft. An inflow at this rate is disappointing but our remediation plan, as approved by our joint venture partners, recognized the risk and included specific actions to be taken at various levels of inflow," Cameco CEO Tim Gitzel said. The company will provide an update on the situation in its second quarter news release to be issued Thursday with a conference call to follow at 11 am EDT, Gitzel said in a statement. --David Stellfox, david_stellfox@platts.com ------------ Pickering-8 returns from maintenance outage Ottawa (Platts)--12Aug2008 Pickering-8 was generating 199 MW by early afternoon August 12 after being returned to service at midnight August 10, according to grid regulator Ontario Electricity System Operator. The 540-MW unit was shut down July 15 for what Ontario Power Generation said at the time would be a brief maintenance outage. OPG spokesman Ted Gruetzner said August 12 that repairs were required on a valve in the unit's heat transport system. ------------ Tepco eyes restarting troubled Fukushima-2 nuclear unit this week Tokyo (Platts)--12Aug2008 Tokyo Electric Power Co. plans to restart the 1.10 GW No. 3 nuclear reactor at its Fukushima-2 nuclear power plant in northeastern Japan as early as this week due to the expected completion of maintenance after the discovery of a glitch, a company official said Tuesday. The official declined to say when exactly the 1.10 GW No. 3 reactor would be restarted, but said that the company was proceeding with maintenance with the aim of restarting the unit towards mid-August. Tepco's restart of the 1.10 GW No. 3 reactor may come in less than a week. It idled the unit August 9 after finding that spindles at one of the reactor's pumps were not working properly. Following the restart, Tepco, Japan's largest power utility, will have 10 nuclear units operating with a combined capacity of 9.096 GW, or 52.5% of its total nuclear capacity of 17.31 GW at 17 units across Japan. That leaves only the company's earthquake-hit 8.21 GW Kashiwazaki-Kariwa plant out of operation. Japan is in the middle of the country's summer power demand season, which normally peaks July-September. Tepco was forced to shut the Kashiwazaki-Kariwa nuclear power plant, which has a generation capacity of 8.212 GW over seven units, on July 16 last year after a major earthquake rocked the region. The drop in its nuclear power generation forced Tepco to boost its thermal power generation using feedstocks such as direct-burning crudes, low sulfur waxy residue, low sulfur fuel oil, LNG and coal. --Takeo Kumagai, takeo_kumagai@platts.com ------------ Uranium Resources posts $3.1-million loss in Q2 on higher costs Washington (Platts)--11Aug2008 Uranium Resources announced Monday a net loss of $3.1 million in the second quarter of 2008 compared with a net income of $1.2 million in the year-ago quarter, primarily owing to higher production costs, lower revenue and the writeoff of costs associated with terminating its agreement to acquire Rio Algom Mining. The Lewisville, Texas-based company's net loss was 6 cents/diluted share compared with earnings of 2 cents/share in Q2 2007, the company said, adding that the net loss also was due to increases in salaries and other administrative costs at its New Mexico and Texas operations. Second-quarter revenue for URI stood at $6.6 million, representing a $1.4-million decrease compared with the $8 million it earned a year ago this quarter due to lower volumes and cost of sold uranium. During the second quarter, URI sold 99,400 pounds of uranium, a 13.1% decrease from the 114,400 pounds it sold in Q2 2007 at an average selling price of $66.41/lb compared with $69.93/lb during that same period in 2007. URI produced 113,500 pounds of uranium, down from 135,800 pounds produced a year ago. It produced 19,800 pounds at Vasquez and 93,800 pounds at Kingsville Dome in the second quarter compared with 20,400 pounds and 115,400, respectively produced at these two mines a year ago. Average production costs per pound for URI rose in the second quarter to $40.03/lb compared with $27.78/lb in the same quarter. URI includes operation, depletion, depreciation, and amortization in estimating its direct uranium production costs. The company attributed the higher production costs to declining production costs from aging wellfields and less prolific wellfields at its Kingsville Dome operation. URI said its Rosita wellfield has not produced satisfactory results even though the company has reworked a number of wells to increase their flow rate. The company also has expended significant capital in delineating and developing new wells at both Rosita and Kingsville Dome. Consequently, the company's average selling price also rose from $41.52/lb in the just concluded quarter compared with $29.44/lb a year ago. Dave Clark, president and CEO of URI, said the company is implementing "aggressive measures" to reduce its costs in personnel and reduction in legal services and increased cost discipline to bring spending in line with the current uranium pricing environment. ------------ UK's Oldbury-2 approved to return to service Barcelona (Platts)--11Aug2008 The UK's Oldbury-2 magnox reactor has been approved to return to service, after shutting down July 26 when debris was discovered in a fuel channel. Magnox North spokesman Dan Gould declined August 11 to say when the reactor would return, citing commercial reasons. Upon remote camera inspection, the debris in the fuel channel turned out to be a spring from a fuel element, which Gould said is covered by the reactor's safety case and thus won't prohibit continued power generation. The reactor had been operating with Oldbury-1's steam turbine set because of previous problems with its own, but will return to service using its own steam turbine set, Gould said. ------------ UK still wants EDF to land BE, despite possible Centrica cash bid London (Platts)--11Aug2008 The UK government reiterated its support Monday for French utility EDF to take over British Energy, despite reports Centrica is considering offering up to GBP4 billion ($8 billion) as a cash sweetener for all or part of the government's 35% stake in the UK nuclear generator. A spokesman for the Department for Business, Enterprise and Regulatory Reform told Platts the government still feels EDF's nuclear experience makes the company a "good fit." He declined to comment on a report in the Sunday Telegraph that the board of British Gas owner Centrica is thinking about buying out the government's stake. Earlier this year, Centrica tabled an all-share offer for BE, but the Sunday Telegraph reported it is now looking at adding a cash portion of up to GBP4 billion to its proposal in the hope it will persuade the government to allow it a place in the deal. However, the FT reported Monday that Centrica would first of all wait to see if EDF can resurrect a deal with BE, which Centrica would then participate in through the purchase of a minority stake. Centrica could not be reached for comment Monday. Last week, after Centrica had confirmed it remained interested in a merger with BE, an unnamed government official was quoted as saying that such a proposal would not be "receiving the support of this party. British Energy needs more [nuclear] expertise, experience and knowledge technologies. Centrica's not going to provide that." Centrica is thought to be keen to get its hands on BE's nuclear output to strengthen its electricity supplies and reduce its exposure to gas. On the other hand, EDF already owns and runs 58 nuclear reactors in France. Any deal to take over British Energy requires state approval due to the state's 35.2% stake in the company. EDF's bid for the UK nuclear generator collapsed at the final hurdle despite strong UK government backing, after two major shareholders in British Energy decided to hold out for a better offer. British Energy generates around 20% of UK electricity and has prime sites for new nuclear power plants. ------------ NRC denies requests to amend spent fuel storage regulations Washington (Platts)--8Aug2008 NRC denied two requests for the agency to amend regulations relating to the environmental impacts of spent fuel stored in pools at reactor sites. Because the attorney generals of Massachusetts and California filed nearly identical petitions for rulemaking, respectively, in August 2006 and March 2007, the NRC considered the petitions together. The attorney generals said in their petitions that "new and significant information" shows that spent fuel will burn if the water level in the pool drops and uncovers the top of the fuel assemblies and that a severe accident caused by a terrorist strike at the plant was a "reasonably foreseeable" event. NRC has said that rapid oxidation of fuel cladding, creating an exothermic zirconium reaction commonly called a zirconium fire, is a low-probability event that could have severe offsite consequences. The attorney generals argued that NRC should revise its regulations to require that spent fuel pool fire scenarios be considered under severe accident mitigation alternatives in utilities' environmental reports and NRC supplemental environmental impact statements for individual plants. NRC said the studies cited by the attorney generals did not have new and significant information and that the agency's findings on spent fuel pool storage "remain valid." ------------