June 28, 2011

Tepco Shareholders Reject Ditching Nuclear Power - Japan

Published on Tuesday June 28 2011 (AEST)

Tokyo Electric Power Co. shareholders on Tuesday rejected a motion to abandon nuclear power, a proposal that arose during a contentious meeting the drew a record turnout.
The motion had called for a moratorium on building new plants as well as shutting existing ones, in the wake of the radiation crisis at the company’s Fukushima Daiichi power plant in northeast Japan. Fuel rods in three of its reactors melted after the March 11 earthquake and tsunami critically damaged cooling systems at the plant, which is still spewing radiation more than three months later.

Tepco JP:9501 0.00% /quotes/zigman/527598 TKECY +10.90% ,as the company is known, didn’t release the final tally of the votes at its semi-annual general meeting. It also said shareholders approved the appointment of 17 board members and the reappointment of president-elect Toshio Nishizawa, who takes the helm from health problem-plagued Masataka Shimizu.

The reappointment was likely to disappoint those hoping for new leadership at the troubled utility.

“A fundamental structural overhaul is needed at the board level to enable Tepco to rebuild its reputation and recover financially,” corporate governance advisory firm Glass Lewis & Co. said in a statement on its website ahead of the meeting. See Glass Lewis proxy bulletin on Tepco.

More than 9,000 people attended the six-hour meeting, nearly three times as many as last year. One shareholder said Tepco executives should all jump into the reactors, and another suggested they commit ritual suicide to take responsibility, according to news reports.

On June 14, the government came up with a plan to help Tepco pay compensation to radiation victims, which some estimates put at over $100 billion. About 80,000 people evacuated from areas around the plant, and scores of farmers and fishermen have likely permanently lost their livelihoods. The plan hasn’t yet been approved by parliament. Read more on Tepco compensation plan.

In May, Tepco posted a loss of 1.25 trillion yen ($15 billion) for the year that ended in March, compared with a profit of almost ¥134 billion in the previous fiscal year.

Tepco shares ended trading Tuesday unchanged from the previous session at ¥316 — above their lifetime low of ¥148 reached earlier this month, but a far cry from prices above ¥2,000 that the stock fetched just before the disasters.The Nikkei Stock Average /quotes/zigman/715506 JP:NIK +0.74% added 0.7%.

The utility had been Japan’s top corporate issuer, with about ¥5 trillion in bonds outstanding. It had also paid an annual dividend of ¥60, which has been suspended.

Hours before Tuesday’s meeting was to take place, dozens of police gathered around the venue to make sure any protests remained orderly.

Uranium Spot Prices Decline In Wake of Japan Crisis

Published on Tuesday June 28 2011 (AEST)

Uranium spot prices fell 0.5 percent as demand remained weak amid Japan’s nuclear crisis, Ux Consulting Co. said.
Uranium-oxide concentrate for immediate delivery was at $54.25 a pound in the seven days through June 27, Ux said in an e-mailed report today. That’s based on the most competitive offer tracked by the Roswell, Georgia-based company.

The spot price for the nuclear fuel, which has declined 18 percent since the week before a March 11 earthquake and tsunami damaged Tokyo Electric Power Co.’s Fukushima Dai-Ichi power station, has fallen by $3.25 this month. The nuclear accident, the worst since Chernobyl in 1986, has seen Tokyo Electric attempt to bring damaged reactors under control using outside pumps, after cooling systems were knocked out.

“Buyers see no urgency to buy, as reflected by bids for delivery at the end of this year up only marginally from current levels,” Ux said. “The market is dominated by the aftershocks of Fukushima, specifically the reduction in demand spawned by that accident.”

Nuclear-power utilities buy the bulk of their uranium for processing into fuel from mining companies, with the contracts mostly extending beyond 12 months. The market for immediate delivery, or spot market, allows trading for delivery within a year and includes financial investors. The U.S. government also periodically conducts auctions to reduce stocks.

Germany, which relies on atomic energy for 23 percent of its supplies, may phase out plants as early as 2022, Georg Nuesslein, a lawmaker for Bavaria’s Christian Social Union party, said in May. Chancellor Angela Merkel ordered a halt to the country’s seven oldest reactors in the wake of the Fukushima crisis, removing more than 25 percent of its 20,700 megawatts of capacity, equivalent to the power needed to supply almost 21 million U.S. households.

“There is little reason to expect that the price will increase anytime soon,” Ux said. “The forward price curve is relatively flat, with bids out in the future a little higher than those for more immediate delivery. 

 Buyers are waiting for news out of Japan and Germany to see what may happen to any excess inventories associated with the nuclear programs in those countries.”

June 21, 2011

Molycorp Surges On JP. Morgan's Buy Upgrade

Published on Tuesday June 21 2011 (AEST)

J.P. Morgan is out with a very positive note raising their estimates and price target on the Rare Earths miner. Firm’s new price tag is $105 (prev. $87) to reflect the continued rise in rare earth prices and their belief that MCP can operate significantly below its planned capacity and still realize sharp increases in shareholder value.

In fact, the firm estimates MCP could operate at 50% of capacity and see current spot prices drop 40% and still generate an NPV of $105/share. They think the stock will start to move higher as four misconceptions about MCP and the sector are ultimately dispelled: 1) MCP is struggling to achieve market prices, 2) ramping production from MCP will bring on too much supply post 2014, 3) China will ultimately reverse its production and export tightening measures, and 4) new supply outside of China will chase prices and eventually bring on too much supply.

Raising EPS. JPM is raising their EPS estimates (2012 to $5.93 from $5.25, 2013 to $14.48 from $12.51, and 2014 to $27.01 from $22.45) to reflect the continued increase in rare earth prices. In just the last month, average oxide export prices are up 22% and 195% YTD. In China over the last month, average domestic oxide prices are up 81% and 472% YTD.

- Piper Jaffray is upgrading MCP to Overweight from Neutral with a $73 price target (unch) following the stock’s ~40% correction since early May.

Piper believes the pullback overly discounts the risk that rare earth prices will fall precipitously – which they believe is unlikely to occur over the next 6-12 months. They maintain their $73 price target and view continued restrictive policy actions from China, positive 2Q results, and progress on the funded capital project as potential catalysts for the stock. Less conservative pricing assumptions in our model could present upside north of $100/share.

Recent pullback creates an attractive entry point. MCP remains a highly controversial stock, fueled by the sharp run-up in rare earth pricing over the past year and uncertainty around Chinese policy on quotas and tariffs. Piper fully expects rare earth prices to fall in the future as additional supply comes online – they have incorporated an average price reduction of 60% by 2013 in their model – but looking out over the next 6-12 months, they see little change to industry fundamentals. At current valuations, they believe the market is pricing in 1) more severe price cuts in the 70%+ range AND 2) no additional volume from Phase II of the company’s project plan which will double production capacity in 2014. Piper believes these assumptions are overly pessimistic in at least the near term.

Near-term catalysts present potential for upside. In the next several weeks, China will unveil its quota policy for 2H11. They expect the rare earth quota level for 2H11 to be set consistent with 1H11 levels, which will continue to strain global supply. Piper believes the release of the quota policy will once again revive fears of China’s restrictive policies on rare earths, which will support near-term pricing. Additionally, they believe MCP is poised to report strong 2Q results with production levels showing a healthy q/q increase and pricing expectations on Lanthanum have been set more appropriately following the 1Q confusion.

June 16, 2011

China's Nuclear Power Plants Pass Safety Inspections

Published on Thursday June 16 2011 (AEST)

Regulators give country's 13 reactors the all-clear following checks ordered in wake of Fukushima disaster.

The Daya Bay nuclear power station in Guangdong province, south China. Inspectors have given the country's existing reactors the all-clear. Photograph: Adrian Bradshaw/EPA

China has moved a step closer towards resuming its ambitious nuclear power plans after it was revealed that safety inspectors have given the country's 13 reactors the all-clear.
The clean bill of health makes it more likely that Beijing will not follow the example of other countries – most recently German, Italy and Japan – who have promised to scale back or abandon nuclear power in the wake of the meltdown at the Fukushima Dai-ichi plant in March.

China has the world's biggest nuclear expansion plans with a goal of more than 100 reactors by 2020, but it suspended permits for new plants after the tsunami disaster in Japan.

The government said it would not be resumed until existing plants were checked, construction plans reviewed and a new national safety framework put in place.

That process is now well under way, according to a statement by the deputy environment minister, Li Ganjie, posted on a government website. As well as the completed checks for plants in operation, reviews of facilities under construction would be finished by October, he said.

Few analysts expect China to trim or delay targets that were included in the latest five-year economic plan to meet the power demands of a growing economy, while reducing the country's reliance on greenhouse gas-emitting fuel sources.

But critical voices have grown louder. Professor He Zuoxiu, who helped to develop China's first atomic bomb, caused a storm last month when he claimed that plans to ramp up production of nuclear energy twentyfold by 2030 could be as disastrous as the Great Leap Forward.

Writing in the Science Times, he criticised government advisers for failing to disclose the earthquake risks posed to nuclear power plants and said they had overestimated the availability of uranium in the country and the maturity of fission technology.

"Are we really ready for this kind of giddy speed [of nuclear power development]? I think not – we're seriously underprepared, especially on the safety front," wrote the fellow of the Chinese Academy of Sciences.

Nuclear power executives are counting on China to make up for demand that is being lost elsewhere amid the radiation fears prompted by Fukushima.

Japan, Germany and Switzerland have all move to scale back nuclear power as a result of that disaster. China merely put its programme on hold to assess safety concerns.

In the latest setback for the industry, the Italian electorate voted overwhelmingly against proposals to revive the country's nuclear energy programme.

China, however, is still on course to have a nuclear capacity of 200 gigawatts by 2030 and 400GW by 2050 - more than 15% of the national energy supply.

June 15, 2011

Energy Resources To Restart Ranger Mine Operations

Published on Wednesday June 15 2011 (AEST)

Energy Resources of Australia (ERA) Ltd (ERA) says it will begin a progressive restart of processing operations at its troubled Ranger uranium mine in the Northern Territory on Wednesday.

ERA, which is 68.4 per cent held by Rio Tinto Ltd, was forced in late January to suspend uranium processing operations at the mine for the remainder of the wet season after heavy rains filled the tailings dam to near capacity.

In a announcement late on Tuesday, the company also said it was revising its 2011 first half loss guidance to be between $20 million and $30 million, from previous guidance of between $30 million to $50 million issued in April.

ERA said good dry season conditions in the Top End had allowed work to restart at Ranger on Wednesday.

"Since late April 2011, typical dry season weather conditions have been experienced," the company said in a statement to the Australian Securities Exchange.

"These weather conditions have reduced the total process water inventory at the Ranger mine to a level that allows ERA to re-commence processing plant operations.

"ERA expects that it will take approximately one month for the processing plant to return to normal production levels."

The company said it was provide further guidance on production for 2011 when it releases its June 2011 Quarter Operations Review.

Shares in ERA have plunged in the past year as production declines at the maturing Ranger mine ahead of its expected closure in 2021.

ERA shares closed down 21 cents, or 4.94 per cent, at $4.04 on Tuesday, prior to the announcement.

The stock was trading at just under $14 one year ago.

June 8, 2011

Australian Uranium Association Calls For Nuclear Reactor By 2022

Published on Wednesday June 08 2011 (AEST)

AUSTRALIA should try to get its first electricity generating nuclear reactor up by 2022, despite the Fukushima nuclear plant accident in Japan, the head of the Australian Uranium Association says.
Michael Angwin, chief executive of the AUA, told an International Uranium Conference in perth today he was puzzled why the country was debating a carbon price without talking about energy choices.

But with political debate reaching its ``crescendo'' Mr Angwin said attention could now be given to Australia's future energy sources, including nuclear.

He said although the meltdown of reactor cores at the Fukushima nuclear power plant in March caused nuclear energy to fall out of favour, the various international examinations would address many safety issues and give the community greater assurances over the power source.

``Now is not the time for policy makers to go any softer on nuclear power,'' Mr Angwin said.

``Now is exactly the right time for policy makers to give nuclear power a dispassionate, economic, technological, social and political examination.''

He called for a ``genuine conversation in which the outcome is not pre-determined by political fear and which there's some considered, weighing up of benefits of cost and after which the country makes a genuine choice.''

Mr Angwin called on the Productivity Commission to bring Dr Ziggy Switkowski's 2006 report into nuclear energy up-to-date in light of the Fukushima accident and the current climate change policy debate.

A nuclear energy commission should be established to provide the regulatory framework and identify possible reactor sites, while the government should encourage nuclear business proposals from industry.

``If Australia takes these kinds of initiatives we might be in a position to make a decision about the nuclear industry within five-to-seven years,'' he said.

If that path was followed, Australia could have its first power-generating nuclear reactor by 2022, he said.

Fukushima was not the accident which resolved the nuclear debate in favour of the anti-nuclear side but re-opened the entire debate.

The current debate among global greens groups was no longer about their anti-nuclear tactics but whether nuclear energy was better than fossil fuels.

Demand for electricity in Australia is expected to increase 35 per cent by 2030, which will require high capital investment and be managed with the government's 20 per cent renewable energy target.

Mr Angwin criticised those who argued against nuclear power because solar power was a baseload power source, '' in that they think solar is a consistent and reliable, around-the-clock source of energy''.

``Bear in mind most people's only experience of solar power is likely to have been installing photovoltaic panels in their roof at the expense of other tax payers.''