Sunday, June 22, 2008

Laser enrichment gets a boost

Cameco takes 24% stake in GE Hitachi unit

CamecoGE Hitachi and Cameco Corp, (CCO:TO) the world's largest uranium producer, have announced that Cameco will invest $124 million for a 24% stake in the business unit that is developing a laser enrichment technology. Cameco will also supply uranium to the unit enabling GE Hitachi to buy and enrich uranium for sale as commercial fuel for civilian nuclear reactors.

The 24% share worth $124 million, is combined with a 51% share by GE-Hitachi joint venture, and the remaining 25% share directly owned by Hitachi. These numbers suggest a total project cost in the range of $516 million. These costs likely represent R&D, test loop facility, licensing, and other pre-commercial activities.

GE is planning a big plant. Areva's recently announced Idaho plant, estimated to cost $2 billion, is expected to supply 3 million SWU or half the capacity of the GE plant at full production. The full-scale GE plant, expected to supply 3.5-6.0 million SWU, will require additional investor commitments.

The GE commercial facility will be built in Wilmington, NC, assuming the firm gives it a green light. The GE nuclear fuel plant would supply customers of GE-Hitachi's nuclear reactors as well as others.

30 Second Take Away

First, it gets Cameco into the next stages of the nuclear fuel cycle without having to be tied down by a protracted process of authorizing uranium enrichment in Canada.

Second, it gets GE into vertical integration for the nuclear fuel cycle (fuel, reactors, spent fuel) with a reliable source of uranium without having to invest directly in mines.

Third, it positions GE to be a reliable fuel supplier not only for its own reactors but also to the global market.

Cameco joins money with marketing

Cameco told Reuters it is using existing credit facilities to fund its investment in the North Carolina-based operation and does not expect to incur further development or commercialization expenses until 2010.

Cameco also agreed to jointly market uranium and enrichment services to meet customer demand for bundled services. Demand for enriched uranium is projected to increase significantly in the next decade with the construction of new nuclear power plants, Cameco said.

grandey cameco"This investment further expands and integrates Cameco's interests in the nuclear fuel cycle as we pursue our objective to be a leading nuclear energy company, producing uranium fuel and generating clean electricity," said Cameco Chief Executive Jerry Grandey (right) in a statement.

Connecting the stages of the fuel-cycle value chain

GE_logo Lisa Price, SVP for the nuclear-fuel cycle at GE told the Wall Street Journal the deal with Cameco offers both companies "the opportunity to provide [both] uranium and enrichment to customers."

She also said the decision to go ahead with a full-scale facility could be made as early as 2009 with a start-up operations expected in 2012. Full-scale production would come later.

World Nuclear News published an analysis that pointed out that currently most nuclear power utilities buy their fuel by sourcing uranium, conversion, enrichment and fuel fabrication services from different companies across the globe. Only France's Areva can offer every service. GE's Price said integration in the fuel cycle was an "important long-term growth strategy" for GLE.

Last October Exelon and Entergy, two of the United States’ largest nuclear utilities, signed letters of intent to contract for uranium enrichment services from GE-Hitachi Nuclear Energy (GEH). As part of the deal, the two utilities will provide GEH with technical support for facility licensing of the development of a commercial-scale, production facility. GE has already begun the licensing process with the NRC.

GE-Hitachi now has an assured source of uranium and a major investor. Cameco and some of its mining operations are located in Saskatchewan. In addition to mining the firm is also involved in uranium conversion which changes uranium oxide to a gaseous form (uranium hexafluoride) which is the feedstock for the enrichment process.

Brad Wall, the provincial leader in Saskatchewan, launched an initiative last March to develop uranium enrichment capabilities there. To be successful his efforts will require some very high level diplomatic hand waving among G-8 countries. In the meantime, Cameco has a near-term commercial opportunity and doesn't have to wait for the striped pants set to make up their minds. Wall may get a plant eventually, but even if the political barriers are overcome, which is likely, getting investors and the technology may take up to a decade.

A new enrichment technology comes to market

GE-Hitachi Laser Enrichment (GLE) has exclusive rights to develop, commercialize and launch the technology on a global basis under an agreement inked in 2006 with the original developer, the Australian company Silex Systems Ltd. The next important milestone for the technology is the test loop phase, which is anticipated to begin in late 2008. The test loop process is intended to verify performance and reliability data necessary to support the construction of a commercial-scale enrichment facility.

uranium conversion While the specific technical details of the laser enrichment process are closely guarded secrets, GE-Hitachi said in a fact sheet on its web site the general approach is different than the gas centrifuge technology which will be used in Areva's recently announced plant in Idaho.

Uranium hexafluoride is vaporized into a gaseous form and exposed to a laser beam that preferentially excites the 235UF6 isotope, which enables separation of natural uranium into enriched and depleted uranium. The process operation, while technically complex, is potentially more efficient than existing second-generation centrifuge enrichment technology.

The construction of the test loop is already underway at GEH’s existing technology site in Wilmington, NC. Final design and procurement activities for equipment for the test loop demonstration are also underway. The GLE test loop is intended to confirm full-scale facility parameters required for the construction of the full-scale commercial facility.

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