Cameco and Brookfield Renewable agree to US$7.9B Westinghouse nuclear services buy

Canada’s largest uranium producer Cameco (TSX: CCO) has announced a significant expansion into the nuclear services sector after agreeing to buy U.S.-based Westinghouse Electric with Brookfield Renewable Partners (NYSE: BEP) in a US$7.9 billion deal, the companies announced on Tuesday.

Brookfield Renewable and its institutional partners will own a 51% interest in Westinghouse, while uranium fuel supplier Cameco will own 49%.

“The partnership of Brookfield and Cameco will help drive forward the growth of nuclear power the world needs for its clean energy transition,” said Brookfield vice chair and head of transition investing Mark Carney in a statement.

The deal combines Cameco’s expertise in the nuclear industry with Brookfield Renewable’s expertise in clean energy and positions atomic power at the heart of the energy transition. It also creates a platform for strategic growth across the nuclear sector.

Among the terms of the deal, Westinghouse’s existing debt structure will remain in place, leaving an estimated US$4.5 billion equity cost to the consortium, subject to closing adjustments. This equity cost will be shared proportionately between Brookfield and its institutional partners (about US$2.3 billion) and Cameco (about US$2.2 billion).

Westinghouse services about half the nuclear power generation sector and is the original equipment manufacturer of more than half the global nuclear reactor fleet. The company has industry-leading intellectual property and a specialized workforce of roughly 9,000 employees capable of operating in highly regulated markets worldwide.

The deal is expected to close in the second half of 2023.

Cameco CEO Tim Gitzel said the transaction fits perfectly within Cameco’s strategy and was expected to increase its ability to meet the growing needs of existing and new customers at a time when the origin and security of supply are of significant concern. “At the same time, we expect the recurring demand for Westinghouse’s operating plant services and nuclear fuel will generate a strong revenue stream and add stable cash flow to complement Cameco’s existing uranium and fuel services business,” said Gitzel.

According to Cameco, nuclear power is experiencing a resurgence worldwide, with more than 20 countries across the Americas, Europe, the Middle East and Asia pursuing new projects or plant extensions. More than 50 GW of plant extensions have been announced, and more than 60 GW of new-build reactors are expected between 2020 and 2040. An estimated 400 GW of additional nuclear capacity will be needed by 2050.

Nuclear power is one of the only zero-emission, baseload sources of electricity currently available at scale.

The consortium sees further multi-decade growth opportunities in the rollout of next-generation advanced nuclear technology and long-term nuclear energy storage solutions. Modular baseload generation, such as Westinghouse’s eVinci micro-reactor technology, can play a growing role in an increasingly decentralized and decarbonized energy system.

Cameco shares closed at $35.62 on Tuesday afternoon, down nearly 3%, giving it a market capitalization of $14.2 billion. The stock is up 34% over the 12-month timeframe.