Michael Copeland of Business 2.0 calls Jerry Grandey of Canada’s Cameco the Crown prince of nuclear power:
Six years ago the spot price of a pound of processed uranium ore, or yellowcake, was less than $10 a pound. Today it has soared to more than $130, and some analysts see it going even higher.Which puts little-known Cameco and its CEO, Jerry Grandey, in position not just to scoop up easy profit but to grow into a blue-chip energy company on par with giants like Entergy and PG&E.
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Most of the world’s 434 nuclear power plants already get their fuel from companies like Cameco, but the demand curve is due for a radical shift. Worldwide, more than 30 new nuclear plants are already under construction. And 200 others are in various stages of planning, including 49 in the United States, where the last new plant was approved in 1979.
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Cameco already accounts for 20 percent of worldwide production, owns the world’s biggest uranium refinery, operates a handful of conversion factories, and sells the finished fuel rods. Its customers include more than 20 utilities around the globe.Beyond those assets is a veritable gold mine of untapped reserves. Sixty miles north of McArthur River, several hundred Cameco workers are busy prepping another site, called Cigar Lake, to open in 2010. Part of a $500 million joint venture with French nuclear power giant Areva, Cigar Lake holds the most highly concentrated uranium reserves in the world — and at 226 million pounds, its size ensures that Cameco’s 20 percent market share is only headed north.
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Geologic happenstance filled this part of Saskatchewan, known as the Athabasca Basin, with the world’s highest-grade uranium ore — rock that’s 21 percent uranium, compared with an industry average of 0.15 percent.The region in which the majority of Cameco’s reserves lie has been called the Saudi Arabia of nuclear power, and Grandey is its crown prince. As Fadi Shadid, an analyst for Virginia-based investment bank Friedman Billings & Ramsey, puts it, “Of the publicly traded uranium companies, nobody is anywhere near the scale of Cameco. They are by far the biggest and baddest.”
An interesting bit of uranium market history:
Despite the accidents at Three Mile Island and, in 1986, Chernobyl, nuclear remained the world’s fastest-growing mode of electrical generation throughout the 1980s. Far more disastrous, ironically, for players like Energy Fuels was the fall of the Berlin Wall in 1989, after which hidden inventories of weapons-grade uranium began flooding the energy market, pushing prices below $10 a pound.The supply that everyone thought would come from mining was coming instead from dismantled weapons. Grandey chose this moment to bail out of the mining business, selling Energy Fuels in 1990 for some $75 million.
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So, while other top uranium producers like Power Resources and Uranerz sold or folded altogether during the 1990s, and with prices stalled out around $10 a pound, Michel and Grandey poured every dollar they could raise or borrow into an $800 million buying spree.“When nobody wanted uranium assets, we acquired every decent property in Canada, Wyoming, Nebraska, Kazakhstan, and Australia,” Grandey says.
During a five-year stretch, Cameco worked to lock down assets at McArthur River and Cigar Lake, purchased the company’s first stake in a power plant, and watched as sales began to take off with European and Asian utilities. By 2003, Cameco’s revenue had hit $778 million and Grandey was appointed CEO.
“When the industry was in the doldrums, Jerry was a go-getter and pushed things forward,” says Julian Steyn, president of Energy Resources International, a consulting company in Washington, D.C. “Nuclear didn’t look like it was going to have a great future unless you were an optimist. Jerry was one of them.”
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Since then, Grandey’s down-market bets have paid off in every way: Cameco’s stock has jumped from $4 a share to $54. Profit has gone from $196 million to $353 million on revenue growing from $778 million to $1.7 billion. By late 2006, the moment for nuclear that Grandey had awaited throughout his entire career seemed to have arrived.
Incidentally, as a law student, Jerry Grandey worked to shut down nuclear power plants.