First Reserve in nuclear venture

By Martin Arnold in London
Published: August 25 2008 23:30

First Reserve, the US private equity group specialising in energy, will this week unveil plans to invest hundreds of millions of dollars in a nuclear fuel venture headed by two uranium industry veterans.
The venture, Accord Nuclear Resources, will buy and merge companies across the commercial nuclear power sector, focusing on uranium mining, production and services.
A reactor at Russia’s Rostov plant. First Reserve believes the industry’s efficiency can be improved

First Reserve believes the nuclear fuel market is plagued by inefficiency and suffers from the recent drop in uranium prices, creating an opportunity to vacuum up assets at cheap prices and improve efficiency in the industry. The Merrill Lynch Uranium Equity index is at its lowest level for almost three years, and has halved from its peak.
To lead its venture, First Reserve has hired Charles Scorer, former head of Nufcor, the London-based uranium trading group, and David Sloan, the former director of business development at Nukem, the German nuclear engineering group.
Mr Scorer, chief executive of Accord, said nuclear fuel was a “strange” part of the energy industry. “Coupled with this introspection and conservatism, there has been a remarkable under-investment in the supply chain.”
He said that because the nuclear industry had been in government hands, it was “parochial”. For instance, countries stockpile five to 10 years’ supply of uranium for their nuclear power stations and there is no commercial exchange for trading uranium or identifying an accurate spot price.
Mr Scorer said that while Accord would be involved in brokerage and trading of uranium, this would not be the core focus. It would not enrich uranium but would seek assets in uranium mining logistics, arrangement and brokerage.
Alex Krueger, First Reserve managing director, said: “There is a large opportunity out there, and we are looking to invest hundreds of millions of dollars to create a fairly large industry player.”
Accord is likely to snap up some of the many uranium mining groups listed on Aim in London when the uranium price was surging and are now struggling after the price more than halved from highs above $130 per pound last year.
Copyright The Financial Times Limited 2008