Urenco's owners set year-end deadline for indicative bids- sources

Sunday, October 12, 2014

(Reuters) - Britain, Germany and the Netherlands have asked prospective buyers for their jointly-owned nuclear fuel enrichment firm Urenco to submit indicative bids by year-end, sources familiar with the process said.

The governments, which each own a third of Urenco, have agreed to test the market's appetite for the world's second-largest nuclear fuel vendor before deciding whether to kick-start a privatisation process that could fetch up to 10 billion euros ($13 billion), said the sources.

France's Areva, Japan's Toshiba, a consortium led by former boss Patrick Upson and a number of private equity firms are expected to submit expressions of interests in December, said the sources, who declined to be named because the process is private.

Urenco, Areva, Toshiba and Upson were not immediately available for comment.

Urenco's owners want to raise money from asset sales but they also have a duty to ensure secret technology, that could be used to make an atomic bomb, does not fall into the wrong hands.

A decline in uranium prices is likely to depress Urenco's valuation. The London-based company, set up in 1970, reported a 19 percent rise in first half core profits this year but warned of weak prices, poor demand and swelling inventories.

Dutch Foreign Ministry spokesman Coen Gelinck said "there is no news, no new developments in the case." Representatives for the British and German governments could not immediately be reached for comment.

Urenco has been struggling with slower demand for its products since the 2011 Fukushima nuclear disaster that triggered the shutdown of all of Japan's nuclear plants and a phase-out of nuclear in several other countries including Germany.

The sellers, particularly the Dutch, want to gauge how much a sale might potentially raise before starting the process, the source added.

Some among the bidders would have preferred to get more clarity on the Dutch government's intention, a reluctant seller so far, before tabling indicative offers, said one of the sources.

Advisers are now asking potential buyers to sign confidentiality clauses and to provide details on how they want to proceed, but the sellers have not communicated as yet how much is for sale, what the terms of any sale would be or what the procedure would be, said one of the sources.

Buyers will have to be approved by all three owners, as stipulated by the Almelo treaty between Germany, Britain and the Netherlands that regulates the use of uranium enrichment for civil purposes.

Following Germany's decision to move out of nuclear power, in January 2013, Berlin said that German utilities E.ON and RWE which own its 33 percent Urenco stake, wanted to sell.

RWE management recently said they're working hard on the sale, but don't expect a deal before 2015. E.ON has stopped giving guidance. In 2013 E.ON said it expected a deal in 2014.

Britain has nine nuclear plants and plans more by 2025. But the government does not see utilities services as part of its role and wants to privatise as much as possible.

In April 2013, Britain announced it would sell some or all of its 33 percent stake.

Dutch authorities are more cautious and say they want to keep the company in safe hands.

Sources familiar with the process previously told Reuters the three governments could sell their stake without giving access to the secret enrichment technology and that they would remain responsible for preventing proliferation.

With a market share of 31 percent, Urenco is the world's second-largest uranium enrichment firm after Russia's Tenex. Areva and U.S. USEC are also major nuclear fuel producers.

Urenco enriches uranium into nuclear fuel sold to power stations in Europe, the United States and Asia.

Other bidders for the company could include uranium miners from Australia or Canada, infrastructure funds or even China.

Areva, weighed down by heavy debt and in fear of losing its investment-grade credit rating, would struggle to make a bid on its own and would have to link up with a partner.

For Areva, buying into Urenco would be a defensive move, since it already partners with the firm. Areva and Urenco jointly own Enrichment Technology Company (ETC), which produces uranium enrichment centrifuges exclusively for its two shareholders. Last year, Areva Chief Executive Officer Luc Oursel was quoted as saying that Areva would have to be interested if ever something were to happen in terms of Urenco's capital.

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