Cameco threatening legal action after Japanese company cancels major uranium contract

Canadian uranium mining company Cameco is weighing its options after a major buyer has issued a termination notice.

Tokyo Electric Power Company has been major purchaser of uranium for years

Cameco says it will fight Japanese power company TEPCO in court. (Trevor Bothorel/CBC)

Canadian uranium mining company Cameco is weighing its options after a major buyer has issued a termination notice.

On Tuesday, Tokyo Electric Power Company (TEPCO) told Cameco it wouldn't be accepting a uranium delivery scheduled for today. It issued a contract termination notice last week.

TEPCO has been unable to operate its nuclear power generating plants for the past year and a half. The company blames tough government regulations arising from the Fukushima nuclear power plant meltdown in 2011.

The company is arguing the shutdown is a "force majeure" or unavoidable catastrophe that cancels the contract. However, Cameco disagrees, and plans to fight the company in court.

 "We can't see how TEPCO can claim Force Majeure due to government regulations when other Japanese utilities have successfully restarted their plants," said Cameco president and CEO Tim Gitzel in a conference call. "Nuclear power is not prohibited in Japan. In fact, three are operating right now, and seven have been approved to restart."

Cameco says the move is likely due to financial concerns.

"It is our opinion that TEPCO doesn't like the terms it committed to, particularly the price, and they want to escape the agreement," said Gitzel. 

Calls to TEPCO were not immediately returned.

Cameco said it successfully defended itself against a similar force majeure case in 2014. The company said it took roughly 30 months for the legal action to complete.

TEPCO has already received and paid for 2.2 million pounds of uranium since 2014. The contract termination would affect approximately 9.3 million pounds of uranium deliveries through 2028, worth roughly $1.3 billion.

Contracts with Japanese power utilities constitute roughly 11 per cent of its business.

Cameco said it has enough financial capacity to manage any loss of revenue in 2017 as a result of the dispute.

Including the revenue from TEPCO, Cameco expects 2017 revenues will range between $2.1 billion to $2.2 billion. More information on Cameco's financial position will be released next week.