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Blue Chip of Uranium Grabs Westinghouse Electric

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Westinghouse Electric Company LLC, an American nuclear power company formed in 1999 from the nuclear power division of the original Westinghouse Electric Corporation, has changed hands several times since then. On November 3, Canadian uranium firm Cameco Corp. announced that it had all its ducks in a row to become the new minority owner of the legacy nuclear business.

Westinghouse Electric Company LLC offers nuclear products and services internationally, including nuclear fuel, service and maintenance, instrumentation, and nuclear power plants. Brookfield Business Partners, a Canadian private equity fund and a subsidiary of Brookfield Asset Management, is the current majority owner of Westinghouse.

On March 24, 2017, then parent company Toshiba announced that Westinghouse Electric Company would file for Chapter 11 bankruptcy because of US$9 billion of losses from nuclear reactor construction projects. In 2018, Westinghouse was acquired by Brookfield Business Partners.

Cameco Corp. (CCO:TSX; CCJ:NYSE) is a Canada-based company engaged in providing uranium fuel to help utilities generate clean, reliable baseload electricity around the globe. The company also offers nuclear fuel processing services and refinery services. It manufactures fuel assemblies and reactor components and operates through two segments: uranium and fuel services.

The uranium segment is involved in the exploration for, mining, milling, purchase, and sale of uranium concentrate, while the fuel services segment is involved in the refining, conversion, and fabrication of uranium concentrate and the purchase and sale of conversion services.

Cameco's uranium projects include Millennium, Yeelirrie, and Kintyre. The Cree Extension-Millennium project is a Cameco-operated joint venture located in the southeastern portion of Canada's Athabasca Basin, while the Yeelirrie deposit is located approximately 650 kilometers northeast of Perth and approximately 750 km south of the Company's Kintyre project.

The Catalyst: Regulatory Approval for Acquisition

Cameco management announced the approval of the Westinghouse acquisition on November 3, with a press release that explained Cameco "anticipates the transaction will close on or about November 7, subject to the satisfaction of all other customary closing conditions."

Ron Struthers of Struthers Stock Reports said, "Cameco will also benefit from current and future geopolitical events.

According to the release, "Cameco plans to finance our share of the acquisition utilizing the full amount of our US$600 million term loan, which will be drawn down at closing, along with available cash. We will not be utilizing the US$280 million bridge commitment that we secured concurrently with the acquisition agreement, and that commitment will be terminated."

The joint acquisition attempt with Brookfield Renewable was first announced on October 11. Cameco and Brookfield Renewable will purchase Westinghouse Electric Company from current owner Brookfield Business Partners in a US$7.9 billion deal.

The Brookfield subsidiary and its institutional partners will retain a 51% interest in Westinghouse, while Cameco will own the remaining 49% after the deal.

Why This Sector? Nuclear Getting 'Greener'

The demand for green energy is surging, and with it, the demand for more nuclear power grows. A market article from November 3 explained, "Hedge funds are significantly increasing their exposure to uranium stocks, betting on major price gains as nuclear energy sees a global resurgence."

"Several prominent hedge fund managers have begun substantially ramping up their investments in uranium stocks," the article explains. "They are betting on significant price appreciation as nuclear energy experiences a major global resurgence. According to Bloomberg, managers, including Matthew Langsford of Terra Capital, Arthur Hyde of Segra Capital, Barry Norris of Argonaut Capital, and Renaud Saleur of Anaconda Invest, are building large positions in uranium mining companies."

The company has been called "the blue-chip of the sector" by several analysts, including Andrew Weekly of SmithWeekly in a June 13 interview.

According to another market summary published by McAlinden Research on August 30, "For all the Russian products that have essentially been cut off from Western economies throughout the past year and a half following Russia's formal invasion of Ukraine, enriched uranium sold by state-owned nuclear giant Rosatom has been mostly untouched in its overseas shipment."

"While the European Union has enacted bans on Russian crude oil shipments (with exemptions for some countries in Eastern Europe), along with similar restrictions on the import of coal and refined oil products, Bloomberg notes that Russia fulfills about 30% of the EU's demand for enriched uranium, on a separative work units (SWU) basis. The U.S. has implemented its own bans on those same products but relied on Russian supplies for 24% of the enriched Uranium demand in 2022."

According to the report, "There are 18 nuclear power plants in the EU that use Russian designs and rely on Russian imports, making it unlikely that the EU will stifle imports of components and fuels from Rosatom in the near term. Russian news outlet Sputnik recently claimed U.S. federal statistical system data shows the U.S. bought 416 tonnes of uranium from Russia in the first half of 2023, which is 2.2x greater than purchases in the same period a year ago."

On October 31, Mike Kozak of Cantor Fitzgerald rated Cameco Corp. a Buy with a price target of US$58.

"A bill banning Russian uranium imports to the U.S. has had some success in the U.S. Congress, receiving committee approval in the House of Representatives last May, but has not been brought up for a vote. Rosatom currently supplies a quarter of America's 92 nuclear reactors."

As you might imagine, American leaders are not happy that fully 25% of their required civic nuclear fuel is being sourced from a de facto enemy power. Thus, while the drive towards green power is growing, its nuclear appendage may become hamstrung by inter-jurisdictional infighting.

It doesn't help that a military coup upended all regular markets in Niger in July. Niger is Africa's second-biggest uranium producer and the main supplier for European electric companies.

As the McAlinden Research brief continues, "African and Middle Eastern media sources reported that Niger would be halting the nation's uranium exports to France. France is particularly reliant on uranium to fuel its nuclear power capacity, responsible for 75% of the country's electricity generation."

"Per Le Monde, France imported more than 20% of its Uranium from Niger in 2022 — most of which comes from mines owned by French state-owned enterprises like Orano. It remains to be seen how rising aggression toward France's presence in Niger and the surrounding region will impact these interests."

Why This Company? Proven Friend-Shored Reserves

More than anything else, Cameco Corp. offers Western civic nuclear users access to an important source of uranium that — because of its prime location in Canada — is unlikely to experience any sort of political embargo or restriction. This supply model, sometimes called "friend-shoring," involved companies ensuring that their entire supply lines are located only in friendly countries.

According to Cameco CEO Timothy Gitzel, the company "has the licensed capacity to produce over 30 million pounds of uranium concentrate per year. Our operations are backed by proven and probable reserves exceeding 469 million pounds of uranium. Beyond mining and milling, we also provide key refining, conversion, and fuel manufacturing services to our utility customers."

Expert Opinions

In May, Ron Struthers of Struthers Stock Reports said, "Cameco will also benefit from current and future geopolitical events, they point out. The global nuclear industry is reliant on Russian supplies for approximately 14% of uranium concentrates, 27% of conversion, and 39% of enrichment; the geopolitical realignment is also highlighting the security of supply risk associated with the growing primary supply gap and shrinking secondary supplies while increasing the focus on the origin of supply."

The company has been called "the blue-chip of the sector" by several analysts, including Andrew Weekly of SmithWeekly in a June 13 interview.

Michael Ballanger of GGM Advisory Inc. stated, "After listening to the Cameco Corp. conference call yesterday, I was kicking myself squarely where I sit down because, as a bull on uranium for at least five years, I never entertained the idea of owning the world's fourth largest uranium producer."

"Through its proven Tier 1 assets, Cameco has the reputation of being the preferred supplier for nuclear utilities globally," Weekly explains. "Cameco is downstreaming its business, through the partial acquisition of Westinghouse, to take advantage of challenges in the fuel cycle plus the bifurcation that is developing in the market as a result of the war in Europe."

"We like everything that Cameco is doing in this market, and they are supporting better pricing and a healthier market going forward. Cameco is a great choice for safer money that needs capable hands. Led by Tim Gitzel and Grant Isaac, these are two of the most competent leaders in the business. They are very intelligent guys, and your readers should take note to hear often from them."

On October 31, Mike Kozak of Cantor Fitzgerald rated Cameco Corp. a Buy with a price target of US$58, saying, "Incorporating the Q3/23 results, and based on an unchanged equally blended target multiple of 2.25x NAVPS and 22.5x 2024E CFPS, we are increasing our price target on Cameco from US$57.00 to US$58.00/share."

streetwise book logoStreetwise Ownership Overview*

Cameco Corp. (CCO:TSX; CCJ:NYSE)

*Share Structure as of 11/1/2023

Michael Ballanger of GGM Advisory Inc. is also optimistic about the company. In a November 3 piece, he stated, "After listening to the Cameco Corp. conference call yesterday, I was kicking myself squarely where I sit down because, as a bull on uranium for at least five years, I never entertained the idea of owning the world's fourth largest uranium producer," meaning Cameco Corp.

Ownership and Share Structure

According to Reuters, 0.39% of the company is held by management and insiders. Director Tim Gitzel has 0.10%, with 0.44 million shares, and Executive Vice-President and Chief Financial Officer Grant Isaac has 0.06%, with 0.27 million.

73.04% is with institutional investors. Fidelity Management & Research Company LLC has 5.07%, with 21.99 million shares. The Vangaurd Group Inc. has 3.49%, with 15.13 million. Capital World Investors 3.29%, with 14.28 million. Capital World Investors has 3.29%, with 14.28 million. Mirae Asset Global Investments (USA) LLC has 2.89%, with 12.55 million, and T. Rowe Price Associates Inc. 2.35%, with 10.19 million. 0.01% is with strategic investors, and the rest is held by retail.

Market Watch notes that the company has a market cap of US$ 17.71 billion and 433.31 million shares outstanding. It trades in the 52-week range between US$21.22 and US$42.17.

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Important Disclosures:

  1. As of the date of this article, officers and/or employees of Streetwise Reports LLC (including members of their household) own securities of Cameco Corp.
  2. Doresa Banning wrote this article for Streetwise Reports LLC and provides services to Streetwise Reports as an independent contractor.
  3. The article does not constitute investment advice. Each reader is encouraged to consult with his or her individual financial professional and any action a reader takes as a result of information presented here is his or her own responsibility. By opening this page, each reader accepts and agrees to Streetwise Reports' terms of use and full legal disclaimer. This article is not a solicitation for investment. Streetwise Reports does not render general or specific investment advice and the information on Streetwise Reports should not be considered a recommendation to buy or sell any security. Streetwise Reports does not endorse or recommend the business, products, services or securities of any company mentioned on Streetwise Reports.

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