Canada’s Cameco has announced that acquisition of?Westinghouse Electric Company in a strategic partnership with Brookfield Asset Management alongside Brookfield Renewable Partners and institutional partners has been completed. Cameco now owns a 49% interest and Brookfield a 51% in Westinghouse.
Tim Gitzel, President & CEO of Cameco, said that, since first announcing this deal a year ago, “we believe the business prospects for Westinghouse have significantly improved”. He added: “The sustained and positive momentum for nuclear energy has been undeniable as countries and companies around the world strive to meet their net-zero commitments and growing energy needs through clean and secure supply.”
Westinghouse said: “The sale to Brookfield and Cameco cements the significant role that Westinghouse plays in enabling the world’s clean and secure energy goals and will further support Westinghouse’s development and growth. Brookfield’s global leadership across carbon-free energy technologies further positions Westinghouse and nuclear power in the clean energy transition worldwide. Cameco brings deep experience in the front-end fuel cycle, complementing Westinghouse’s robust capabilities in fabrication and services, and further enhancing security of nuclear fuel supply globally.”
Westinghouse President & CEO Patrick Fragman said Westinghouse “is strategically positioned with Brookfield and Cameco to leverage expertise in our respective areas to better serve our customers and achieve a carbon-free future”
Cameco’s 35 years of experience in uranium mining and nuclear fuel production combined with Brookfield’s expertise in clean energy is expected to provide a solid foundation for Westinghouse’s continued success in the provision of nuclear plant technologies, products and services, and to create a powerful platform for strategic growth across the nuclear sector, according to Gitzel
The total enterprise value of $7.9bn was adjusted for working capital balances at the close, resulting in a final enterprise value of $8.2bn, Cameco reported. Westinghouse has $3.8bn in outstanding debt commitments, for which it maintains responsibility after closing and which reduces the equity cost of the acquisition.
To finance its 49% share of the purchase price, valued at $2.1bn, Cameco used $1.5bn in cash and drew the full amount of both $300m tranches of the term loan put in place concurrently with the execution of the acquisition agreement, and which mature two years and three years from the date of close. The $280m bridge commitment that was secured concurrently with the acquisition agreement was not required to complete the transaction and has been terminated.
“The mix of capital sources to finance our share of the acquisition was chosen to preserve our balance sheet and ratings strength while maintaining healthy liquidity,” Cameco said. “We expect to maintain the financial strength and flexibility to execute on our strategy and take advantage of value-adding growth opportunities, while navigating by our investment-grade rating and self-managing risk.”
Gitzel said priorities over the coming weeks will include Cameco and Brookfield conducting the first Westinghouse board meeting focused on its strategic business plan. He noted that Cameco also has a number of international commitments to fulfil over the next month and, once those commitments have been fulfilled, Cameco will host a virtual investor day on 19 December “to further discuss the exciting business prospects we see moving forward for Westinghouse”.
Cameco said it expects the acquisition to enhance its participation in the nuclear fuel cycle “at a time when there is tremendous growth on the horizon for our industry”. Cameco is enhancing its ability” to compete for more business by investing in additional nuclear fuel cycle assets that we expect will augment the core of our business and offer more solutions to our customers across the nuclear fuel cycle”. Cameco noted that Westinghouse “has nuclear assets that are strategic, proven, licensed and permitted, and that are in geopolitically attractive jurisdictions”.
Westinghouse also “has a long-term contract portfolio, which positions it well to compete for growing demand for new nuclear reactors and reactor services, as well as the fuel supplies and services needed to keep the global reactor fleet operating safely and reliably”. This helps protect Westinghouse from macro-economic headwinds as utility customers run their critical nuclear power plants. “Its durable and growing business is expected to allow Westinghouse to self-fund its approved annual operating budget, to maintain its existing capacity to service its annual financial obligations from de-risked cash flows, and to pay annual distributions to its owners,” Cameco said.
However, Westinghouse has a long, and somewhat chequered history dating back to its founding in 1886 by George Westinghouse, originally named "Westinghouse Electric & Manufacturing Company”. It was renamed "Westinghouse Electric Corporation" in 1945. Following financial difficulties and acquisitions in the 1990s, its Power Generation Business Unit was sold to Siemens of Germany in 1997 and a year later its commercial nuclear power businesses were sold to British Nuclear Fuels Limited (BNFL). Certain rights to use the Westinghouse trademarks were granted to the newly formed BNFL subsidiary, Westinghouse Electric Company, which was then sold to Japan's Toshiba in 2006.
Westinghouse filed for Chapter 11 bankruptcy in 2017 in the face of extensive financial difficulties. The filing affected only its US operations, which included projects to build four AP1000 reactors – two each at Vogtle in Georgia, and the VC Summer site in South Carolina. In 2018, Brookfield Business Partners (together with institutional partners collectively known as Brookfield) agreed to acquire 100% of Westinghouse from Toshiba for about $4.6bn. Brookfield completed the purchase in August 2018. This marked Westinghouse's exit from Chapter 11 bankruptcy protection as a restructured company.