Cameco Corp.
and Brookfield Asset Management Inc.’s renewables company will acquire nuclear company Westinghouse Electric Co. for US$4.5-billion plus more than US$3-billion in assumed debt. The seller is another Brookfield unit, Brookfield Business Partners, which says it’s had a sixfold return on its 2018 investment.
The sale reflects nuclear power’s hot status. The global campaign to reduce emissions from fossil fuels ran headlong into the disruption caused by Russia’s invasion of Ukraine. Skyrocketing energy prices in Europe have prompted a rethink by some of a long-standing reluctance to rely on nuclear power.
Brookfield Renewable Partners LP is among the world’s largest investors in clean energy and transition assets. Cameco is one of the largest global suppliers of uranium fuel for nuclear energy, with extensive uranium mining and milling, refining and conversion facilities.
Brookfield Renewable, with its investors, will own a 51-per-cent interest in Westinghouse and Cameco will own 49 per cent. The two will split the US$4.5-billion investment proportionally.
Brookfield will house the investment in its Global Transition Fund I, led in part by former Bank of Canada governor Mark Carney. Brookfield Renewable will invest about US$750-million to own 17 per cent directly.
Brookfield Renewable chief executive officer Connor Teskey said in an interview that he wasn’t privy to any other bids for Westinghouse that Brookfield Business Partners may have received, but that the deal was struck through a standard process led by bankers at RBC Dominion Securities Inc. and BMO Nesbitt Burns Inc.
“This was a full auction process,” Mr. Teskey said. “Start to finish this was run with third-party sell-side bankers just like every other competitive auction.”
Mr. Teskey said the resurgence of nuclear is tied to the increasing urgency of the decarbonization, electrification and security of energy, a set of tailwinds that have intensified since Russia invaded Ukraine last February. “No doubt what has happened in Europe, both the conflict and the energy shortage, is a very good illustration of those events,” he said.
Cameco said it has available liquidity and committed financing, but also will be pursuing a “permanent financing mix” of cash, debt and equity so it can preserve its balance sheet.
Saskatoon-based Cameco completed a bought deal Tuesday of US$650-million for 29.6 million shares, or US$21.95 apiece.
In after-hours trading in the United States, Cameco shares fell more than 10 per cent from Tuesday’s close of US$25.82.
Tim Gitzel, president and CEO of Cameco, told investors that the deal will capitalize on the momentum that nuclear power is enjoying, as more customers return to signing long-term contracts and new business opportunities emerge in Eastern Europe.
Countries such as Ukraine, Poland, Romania and Slovakia “that forever have been reliant on the Russians … are all turning away and saying, where else can we go? Who can help us?” he said in an interview. “We’re seeing those countries turning to other suppliers like us, so certainly there’s room to grow there.”
Brookfield Business Partners – the industrials and services business of Toronto-based Brookfield Asset Management – acquired the energy industry business out of bankruptcy in 2018 from Toshiba Corp. for US$4.6-billion, purchased with US$1-billion in cash, the rest financed by borrowings.
As part of a turnaround plan, Brookfield Business Partners narrowed the focus of the century-old Westinghouse to nuclear, while reducing its operating costs and pursuing several acquisitions.
In a statement, Mr. Carney said that, “Every credible net-zero pathway relies on significant growth in nuclear power,” and the partnership between Brookfield and Cameco “will help drive forward the growth of nuclear power the world needs for its clean energy transition.”
Brookfield Business Partners said Tuesday that when combined with distributions received to date, it will get back about six times its invested capital, giving it a 60-per-cent annual return and US$4.5-billion of total profit. Brookfield Business Partners will get US$1.8-billion in proceeds from its 44-per-cent stake, with the balance distributed to institutional partner investors.
Brookfield Business Partners has been exploring options for U.S.-based Westinghouse, including the sale of a minority stake, since at least April, 2021. No sale immediately followed, but in May, the Pittsburgh Post-Gazette reported that Brookfield Business Partners was ready to try again, quoting Brookfield’s CEO of private equity, Cyrus Madon, as saying, “Look, we’ve made many times our investment in Westinghouse. We’ve already pulled out more than our invested capital just through regular dividends. And I would say our job is sort of done here.”