Sunday, October 21, 2012

Carlyle to Bid for Uranium Enricher?

The Liverpool Daily Report stated:

The biggest names in private equity are circling Cheshire-based nuclear group, Urenco, according to a national newspaper report.

The report claims Apax, KKR, Carlyle and CVC are considering bids for the company which is owned by the UK, German and Dutch governments.

Urenco specialises in enriching uranium to provide fuel for nuclear power utilities at its four sites in Germany, the Netherlands, the US and the UK and is based in Capenhurst near Chester.
Carlyle is The Carlyle Group, a politically connected private equity underwriter (PEU) with way more than $156 billion under management.

Whoever buys Urenco will finish building the company's Tails Management Facility.

During the uranium enrichment process, depleted uranium hexafluoride (UF6), or “tails”, are created as a by-product.

The tails have potential for future re-enrichment and Urenco currently stores UF6, pending future re-enrichment or de-conversion for long-term storage.

Urenco USA began operations in June 2010, according to its website.  It's over a third of the way to its stated production goals

It is anticipated that at full capacity the facility can produce sufficient enriched uranium for nuclear fuel to provide approximately 10% of America’s electricity needs
Carlyle co-founder David Rubenstein likes disequilibrium, which applies to uranium enrichment given Japan's Fukushima and the international concern over Iranian enrichment.  China wants foreigners to train them, while Russia ponders opening up their enrichment to western companies.

Consider Urenco's Chairman's statement from their 2011 annual report:

Emerging markets such as the Middle East, India, China and South East Asia represent key opportunities in the coming decades. They can more than replace falling demand from those countries that have decided to phase out nuclear power.

What if someone knew Iranian nuclear enrichment capabilities would be destroyed and any new regime had to rely on the West to fuel their nuclear plants?  That kind of insider information would be worth billions to an opportunistic investor..

As for the notion that private equity helps companies "manage better," Urenco's stellar results and outstanding outlook are below. 
Could this be a timely theme?  Nefarious private equity firm takes over nuclear enrichment firm; global havoc follows..It would follow another compelling story involving Urenco,  the tragic accident of the Dutch Prince, the company's CFO.  Either are compelling story lines...

Update 11-14-12:  Fitch downgraded Urenco from "A" to "A-" due to balance sheet deterioration and a dividend increase. 

Update 3-16-14:  Another uranium producer USEC filed for bankruptcy.  Uncle Sam will recapitalize the new USEC via $241 million in funding for a new production facility.  The Energy Department is paying for 80% of the new facility in Ohio.