Cameco Corp. is planning to contest the cancellation of its $1.3-billion contract to supply uranium to Tokyo Electric Power Co.
Cameco CEO Tim Gitzel said TEPCO gave notice to the company on Jan. 24 saying it wanted to kill the deal, signed in 2009 and scheduled to run until 2028, and would not accept a shipment due on Wednesday despite Cameco’s attempts to negotiate other remedies.
According to Gitzel, TEPCO is claiming “force majeure” (an act of God) because of its inability to run its power plants due to regulations put in place by the Japanese government in the wake of the 2011 tsunami and the resulting disaster at the Fukushima nuclear facility.
“We’re confident that TEPCO’s force majeure complaint is without merit,” Gitzel said in an investors’ call Wednesday morning. “It appears to us, and it is our opinion, that TEPCO simply doesn’t like the terms they agreed to, particularly the price and want to escape from the agreement.”
Gitzel said Cameco will pursue all legal “rights and remedies” and regards TEPCO as being in default of the contract.
“The Fukushima accident happened six years ago and we’ve been dealing with them since then. … They’ve taken delivery under this contract in 2014, 2015 and 2016, so we’re a bit perplexed as to why now all of a sudden they think there’s a case of, as they say, ‘force majeure.'”
Scotiabank metals and mining analyst Orest Wowkodaw wrote in a client advisory note that TEPCO’s decision may “open the floodgates” to similar moves, but Gitzel dismissed that notion.
The Saskatoon-based uranium giant (TSE:CCO) slid to $14.70 on the Toronto Stock Exchange Wednesday, down $1.87 from its previous closing price which represented a drop of more than 11 percent.
Cameco is due to report its 2016 financial results on Feb. 9. The company previously announced layoffs of 120 employees, 10 percent of its staff, in a cost reduction and efficiency move.
(Sources: Canadian Press; Financial Post; BNN)