February 26, 2014

Nuclear An Important Power Source for Japan

Published on Thursday February 20 2014 (AEST 

Japan has a draft energy policy after almost three years of drift following the Fukushima accident. A summary today focused on security of supply and recommended the restart of idled reactors.


The draft released by the Ministry of Economy, Trade and Industry (METI) today noted the importance of energy supply to maintain Japan's industrial base, upon which its economy is founded. During the 1970s the country had to import 90% of its fuel, and the prolonged shutdown of nuclear reactors the situation has resulted in the same situation today. 

However, the rapid growth of new economies means that competition for the imported resources is greater than ever. METI noted that the Middle East is the source of 83% of Japan's crude oil and 29% of its LNG, which has surged in use to substitue for shut-down nuclear plants. The cost disparency between prices Japan pays for LNG and those enjoyed in America raises the possibility of 'a significant impact to industrial structure.' In the 1970s the roll-out of nuclear power plants gave Japan a secure source of reliable and low-emission electricity. 

Today the same is offered by the restart of the reactors idled for most of the time since the Fukushima Daiichi accident in March 2011. Nuclear power is an 'important power source that supports the stability of the energy supply and demand structure' Basic Energy Plan, METI METI said it's goals were to establish a robust energy system which is 'multi-layered' and able to respond flexibly to price shocks. One factor in this will be to open up the country's regional supply monopolies so that new organisations could begin to supply power, for example local governments and small players in distributed generation. 

This competition is expected to increase the efficiency of the energy sector, foster new industries and give choice to consumers. A range of energy sources are sure to figure in Japan's future, said METI. Natural gas, although imported, is flexible and so can compliment the intermittency of renewables. Coal is cheap, but its pollution works against emissions goals and represents a geopolitical risk. Renewables were given the most space and will be 'accelerated to full introduction': Solar is seen as useful to supply during peak demand; large scale deployment of wind could produce significant power, but this would come from northern areas and would require balancing with as-yet undeveloped storage systems; Japan has the third-largest geothermal resources in the world and this can be developed with local community support. Nuclear power, according to METI, is a quasi-domestic source that gives stable power, operates inexpensively and has a low greenhouse gas profile. 

However, METI noted that nuclear must be developed with safety as a priority and with constant work on preparedness for emergency. Nuclear power is an 'important power source that supports the stability of the energy supply and demand structure' it said. Applications are already with the Nuclear Regulatory Authority (NRA) for the restart of 17 reactors. 

The government's draft policy presents no new obstacle for this process, which will proceed according to the NRA's schedule and subject to its approval. The draft is expected to be approved by the cabinet in March, and the first reactors could be back in operation this year. Researched and written by World Nuclear News



February 20, 2014

New US Nuclear Power Plant Reactors Attain Goverment Finance

Published on Thursday February 20 2014 (AEST  

Washington D.C. — Building on President Obama’s State of the Union address to Congress and the American public last month, U.S. Secretary of Energy Ernest Moniz today announced at the National Press Club that he will be traveling to Waynesboro, Georgia tomorrow, February 20, to mark the issuance of approximately $6.5 billion in loan guarantees for the construction of two new nuclear reactors at the Alvin W. Vogtle Electric Generating Plant. The project represents the first new nuclear facilities in the U.S. to begin construction and receive NRC license in nearly three decades.  In addition, the deployment of two new 1,100 megawatt Westinghouse AP1000® nuclear reactors is a first-mover for a new generation of advanced nuclear reactors.

“The construction of new nuclear power facilities like this one - which will provide carbon-free electricity to well over a million American energy consumers - is not only a major milestone in the Administration’s commitment to jumpstart the U.S. nuclear power industry, it is also an important part of our all-of-the-above approach to American energy as we move toward a low-carbon energy future,” said Secretary Moniz. “The innovative technology used in this project represents a new generation of nuclear power with advanced safety features and demonstrates renewed leadership from the U.S. nuclear energy industry.”

The two new 1,100 megawatt Westinghouse AP1000 nuclear reactors at the Alvin W. Vogtle Electric Generating Plant will supplement the two existing reactor units at the facility. According to industry projections, the project will create approximately 3,500 onsite construction jobs and approximately 800 permanent jobs once the units begin operation. When the new nuclear reactors come on line, they will provide enough reliable electricity to power nearly 1.5 million American homes.

Project partners include Georgia Power Company (GPC), Oglethorpe Power Corporation (OPC), the Municipal Electric Authority of Georgia (MEAG), and the City of Dalton, Georgia (Dalton).

President Obama announced the Energy Department’s conditional commitments for the project in 2010, saying “To meet our growing energy needs and prevent the worst consequences of climate change, we need to increase our supply of nuclear power and today’s announcement helps to move us down that path.” At that time, the Energy Department made conditional commitments for a total of $8.33 billion in loan guarantees. Tomorrow, the Department is scheduled to issue loan guarantees to GPC and OPC for a total of approximately $6.5 billion. The Department continues to work on the remaining conditional commitment for a $1.8 billion loan guarantee to MEAG.

The Energy Policy Act of 2005 authorized the Department to issue loan guarantees for projects that avoid, reduce or sequester greenhouse gases and employ new or significantly-improved technologies as compared to technologies in service in the United States at the time the guarantee is issued.

The nuclear facility is eligible for loan guarantees since it is expected to avoid nearly 10 million metric tons of carbon dioxide emissions annually, which is the equivalent of removing more than two million vehicles from the roads. In addition, the Westinghouse AP1000® reactor has incorporated numerous innovations resulting in significant operational and safety improvements.

Currently, the Department’s Loan Programs Office (LPO) supports a large, diverse portfolio of more than $30 billion in loans, loan guarantees, and commitments, supporting more than 30 closed and committed projects. The projects that LPO has supported include one of the world’s largest wind farms; several of the world’s largest solar generation and thermal energy storage systems; and more than a dozen new or retooled auto manufacturing plants across the country.



February 7, 2014

Unloved Uranium Miners Going Cheap - Digging Value

Published on Friday February 07 2014 (AEST)
After a long slide, the uranium market may finally be 
ready to heat up.

Prices for the heavy metal were already on the decline in 2011, when the Fukushima disaster in Japan soured that nation, and much of the world, on nuclear power. Germany soon announced plans to shutter all its nuclear plants, and other European nations joined the anti-nuke chorus. Uranium prices have fallen by half since the tsunami. 

But now there are signs that demand may turn around. China is leading the charge to build new nuclear power plants, and could have 73 reactors in operation by 2022, up from 18 today. Russia, Eastern Europe and India are all constructing nuclear reactors as populations surge and electricity needs grow at an even faster clip. Globally, the number of nuclear power plants is expected to increase 20% to roughly 520 by 202

Even while demand increases, supply is drying up. In December, Russia sold its last load of uranium to the U.S., ending a 20-year agreement to enrich fuel from warheads. That Russian uranium stash— at roughly 24 million pounds per year, equivalent to the largest uranium mines of the world—is no more.

The supply/demand shift is great news for Canadian uranium mining giant Cameco (ticker: CCJ). Mining companies will need to meet global demand expected to climb from around 170 million pounds today to 220 million pounds over the next decade, and Cameco's production costs are half that of the industry average.
Cameco's massive mining operations—mostly in Canada, but also in the U.S. and Kazakhstan—put it among the top three uranium producing companies globally. Its McArthur River/Key Lake mining operation in Canada is the largest uranium complex in the world, and Cameco also is developing Canada's giant Cigar Lake mine, coveted for its high-grade uranium.

In the meantime, Cameco has production commitments into 2016 that put a floor under earnings. The company produces more than 20 million pounds of uranium annually and hopes to increase its annual supply to 36 million pounds by 2018. In Cameco last month, Barron's Roundtable member Fred Hickey pointed out that, because the company's cost of production is so low, it is able to earn a nice return even at today's price of around $36 a pound, down from $70 in 2011. 

Yet Cameco shares—cut in half since 2011—don't reflect the company's growth prospects. Hickey, who often is attracted to contrarian opportunities, called uranium mining a "hated segment."
"The uranium price went below the marginal cost of production … [which is] a good time to get involved in any commodity," says James Hunt, who owns Cameco shares in the Tocqueville International Value Fund. "Cameco is coming out of a period of elevated capital expenditures. So rising prices combined with reduced capex means free cash flow should expand a lot." 

The improving uranium scenario will not show up immediately on the income statement. Analysts expect earnings to fall 28% this year. At 22 times 2014 estimates of 92 cents per share, the price/earnings ratio reflects a low point in the uranium pricing cycle. 

Analysts are projecting a recovery in earnings to $1.10 per share in 2015. Using the current multiple on that estimate, the stock would trade just below the average analyst target price of $25, up from a recent $20.50. And as prices firm, estimates on which targets are based should move higher.

In addition to the improving supply/demand dynamics, Cameco has other tailwinds. After years of delay, the Cigar Lake facility, in which Cameco has a 50% stake, is scheduled to start producing uranium in the next few months. The company is selling its stake in four reactors, to focus on production. And shares yield 1.8%.
To be sure, Cameco faces potential obstacles. The company reports earnings results after the close Friday, which could lead to short-term volatility. And an election in Japan Sunday also will be closely watched, with an anti-nuke candidate in Tokyo challenging Prime Minister Shinzo Abe's nuclear agenda.

The dangers of radiation contamination are frighteningly real. The Fukushima fog, as CFO Grant Isaac recently called it, is clouding the timing of the transition to a demand-driven market where Cameco will have pricing power. Cameco shares have been stuck in this fog for two years.

But even in Japan, the pro-nuke position made headway in the latest campaign season. And as uranium demand strengthens globally, Cameco's shares should pick up, too.