U.S. Constellation seen as buyer of Nufcor Intl uranium
By Anna Stablum
LONDON, May 7 (Reuters) - U.S.-based utility Constellation Energy is poised to buy uranium marketing firm Nufcor International from its South African owners Rand Merchant Bank (RMB) and AngloGold Ashanti, sources close to the deal said.
As one of the leading nuclear power plant owners in the United States, Constellation's acquisition is significant as it could trigger a trend where utilities start to trade uranium as a commodity.
"The deal is expected to be concluded by the end of May," one uranium trader said this week. Constellation's two owners said in October last year they were considering the sale of their stakes of London-based Nufcor International, a marketing agent for uranium from South Africa.
Constellation Energy Group Inc (CEG.N) runs the Calvert Cliffs nuclear power station in the U.S. and operates a total of five reactors, and a Nufcor deal would secure uranium supplies.
"Nufcor has exclusive rights marketing certain material, from certain producers ... and with that they will get a flow of uranium," said another uranium trader closely following the deal.
RMB, the investment banking unit of South African financial group FirstRand Ltd (FSRJ.J), AngloGold Ashanti (ANGJ.J) and Constellation Energy declined to comment.
"It has been dragging on ... I don't know if they are going to buy the whole thing ... they might just be buying one of the shareholders out," a third uranium trader said.
Dealers said Constellation was likely to move its uranium risk management team to its London-based commodity trading arm.
"The motive for Constellation ... is to guarantee a stream of material - and it gives good communication links to the primary market for the guys on the trading side," the second trader said.
Nufcor International is the marketing agent for uranium from South Africa, through an agreement with AngloGold's fully-owned uranium unit Nuclear Fuels Corp of South Africa (Nufcor SA).
Also, Nufcor International holds 8 percent in AIM-listed Nufcor Uranium NU.L, which owns 2.3 million pounds of uranium.
The move by Constellation was seen as a long-term trend of utilities starting to trade uranium as a commodity.
"The developments, like what is taking place with Constellation setting up a uranium trading desk, is part of the evolution of the market," President Jeff Combs of leading uranium consultancy UxConsulting told Reuters. Dealers said there were other utilities looking at the option of moving over management and procurement of uranium to the utilities' trading desks.
"You are definitely seeing more utilities getting the approval to trade and setting up trading desks but the extent to which hedging takes off will be a function of the further commoditisation of uranium," UxC's Combs said.
However, some said they would be surprised by such a deal.
"It seems a strange one for me because in recent times U.S. utilities have tended to shy away from involvement of uranium," said Director of Strategy and Research, Steve Kidd, at the World Nuclear Association.
"But perhaps the big increase in price has changed them somewhat," he said, referring to spot prices UX-U308-SPT going up from $7 per pound in 2000 to peak at $136 in June 2007.
"Now when the price has risen maybe they are getting a bit more sophisticated in their investments," Kidd said.
Despite the long-term upward trend, some said the recent fall in the uranium price, down by over 50 percent from last year's peak to $63 this week, had been delaying the deal and made it more difficult for other utilities to follow suit.
"Now that the price has made such a downturn it makes it a bit more difficult on the utilities' side to justify that (the move from procurement to trading desk)," said President Treva Klingbiel at another leading uranium consultancy -- TradeTech. (Additional reporting by Scott DiSavino in New York, Editing by Peter Blackburn)
