Interview of Mr. G.V. Efremov, the General Director to Interfax agency

June 26, 2017

The growth of the uranium prices is inevitable: there is simply no other option - head of the IUEC

Moscow. June 26 INTERFAX - JSC International Uranium Enrichment Center, which 70 % belong to Russian Rosatom and by 10 % to Kazakhstan, the Ukraine and Armenia, is completing the negotiation process on engagement of new participants and prepare the contracts with the shareholders for supplies of the uranium raw materials. The IUEC enriches the uranium for non-nuclear states, which is then used for fabrication of fuel elements and fuel supplies to the countries-shareholders. Mr. Gleb Efremov, the General Director of the IUEC, told of new parameters of the agreement with the Ukraine, forecast of the uranium prices in his interview to Interfax at the International forum Atomexpo-2017.

- The IUEC has been holding negotiations on involvement of new shareholders from the countries of Europe, Asia and Africa for a long time. Have you achieved already any specific agreements?
- We have some, but I am always very careful in covering these issues. When we publish the information regarding negotiations with our partners with respect to joining the IUEC, they, in turn, are started to be asked with awkward questions concerning the relationships of their states with Russia. In the light of what is now happening in the world, these are sensitive issues for our partners. Sometimes, these are alike the concept of trade secrets for an organization that tries to establish business relations with Russian companies in nuclear industry.
We are very careful in our comments, but the contacts are going on, developing, the geography is expanding. Europe, Asian region, Asia-Pacific region, Africa, those regions, where the development of nuclear market today is at highest pace, where appear so-called "newcomers". This is the whole geography of our negotiations, these are the countries, which we are engaged in the dialog.
- Saying «we», do you mean Rosatom?
- We are a part of the Rosatom integrated offer, which proposes to the newcomers to create the nuclear industry at its territories. This is an integrated offer of the Rosatom starting with the projects of the NPP construction, establishment of research centers, personnel training centers, it also contains the offer of the IUEC.
When do you forecast involvement of a new participant?
- We are looking at the next year with optimism, by my feelings it will be a breakthrough one. In 2017 we will strengthen our negotiation positions with the potential partners, and in 2018, I think, the geography of the IUEC will be expanding. Once that happens, we will announce of it and this will be a media event of the world scale.
- How a new member is accepted from the technical point of view?
- Technically, the process consists of two stages. The first stage is of purely political nature, it takes place at the level of the Ministries for foreign affairs of the countries that are going to join the IUEC and the IUEC member-countries, they start negotiations. If the state that wishes to join IUEC receives approval from the current shareholders, upon completion of the political process, so called exchange of diplomatic notes, the next stage begins.
The practical entry is the second stage. The state that is joining IUEC authorizes its national company to become a shareholder of our Center, and this company purchases the shares of the IUEC from the Rosatom. The entry is effected by reduction of the Rosatom share in the capital of IUEC.
- Is the revaluation of the IUEC anticipated prior to accession of a new participant?
- The valuation is constant, the shares were priced in rubles at the date of the International Center foundation in May 2007, the emission was registered in September. To date, the share capital of the IUEC is 26 million rubles, then it used to be $1 million. Today, the countries that become the Center shareholders have the additional preferences due to significant change of the exchange rate of the ruble against the dollar.
- Are not going to raise the price?
- We intentionally left the symbolic price for accession to the IUEC, because this project is not of commercial but of political nature. Our objective is to engage the states into nuclear power by giving very preferential conditions of entry. Our most important objective is to contribute to strengthening of the global non-proliferation regime, since the IUEC initiative is first of all aimed at it.
- What is the forecast of the IUEC and personally yours with respect to the uranium prices, when it is possible to expect a global recovery of the market depressive already for several years?
- In my view we currently see just a large market overheating. The market overheating is the situation, when at the low uranium prices, which we saw the late years, the traders purchased large stocks and now are trying to sell it by any ways at any opportunity.
There is a trend to substantial development of nuclear power, the future belongs to it doubtlessly, the forecast of the generation growth by 2050 is multiple in effect. We are talking of coverage by means of NPPs up to 900 GW of electricity demand of the population of the Earth. There is no alternative. If we continue to generate by means of hydrocarbon energy sector, we will suffocate because of the amount of CO2 emissions to the atmosphere.
As the demand for nuclear industry grows, accordingly, the demand for the uranium constituents of the fuel will also grow, so the uranium prices will surely grow up. My personal forecast, as soon as we see the trends for growth of the generation, and this will inevitable happen in the nearest future, we well see the growth of the uranium prices.
- What period do you expect?
- The world is on the verge of commissioning of new generating capacities, respectively, all of this will require additional quantities of raw materials for fuel fabrication. We will exactly receive the growth of prices for natural uranium within five-years period, there is just no other way.
- Earlier it was reported on anticipated revision of the contract between Russia and the Ukraine for supplies of raw uranium materials after 2017. Was the new contract signed?
The cooperation with the Ukraine is built up by us in the format of two documents. The first document is a long-term agreement on provision of the IUEC to the shareholders, and, in particular, to the Ukraine. The agreement was signed in 2012, it was valid until 2017 for the period of validity of the basic agreement on establishment of the International Uranium Enrichment Center. This year, the agreement on establishment of the International Uranium Enrichment Center was prolonged for the next 10-years period, but under conditions of confusing current prices of uranium and components of uranium fuel, we have decided and agreed with the Ukraine and with all our other shareholders that the next period of the long-term agreement will be 3 years. The conditions of cooperation between the IUEC and its shareholders are identical, we do not make special any provisions for each individual shareholder.
The signature of three-years agreement is anticipated in July-August this year. Currently, the procedure of corporate approval is in the progress, because the agreement is specified with the characteristics of a deal.
In the framework of this agreement, we sign annual contracts, i.e. every year we determine the quantity of the products that will be needed to our shareholder. The contract for 2017 will be signed in parallel with this long-term three-years agreement. Both documents have already been verified and initialed. We have already started the corporate approval procedure in the Board of Directors of our company. That is, we plan as envisaged by the company procedures to accomplish within 2-months period the approval of the deal and come to actual signature of the document.
- What are the quantities of the new agreement?
- The quantity remains the same and is 60 thousand of SWU (separative work unit). The quantity of raw materials, which we have received from the Ukraine for all the years since the signature of the first agreement remained unchanged, the scope of services we render in reprocessing of this raw material, everything remained unchanged.
- Was the contract price changed?
- The price, by the way, remains the same. Despite the current descending price trends at the markets, decreasing quotations, we managed to maintain for the Ukraine the same conditions of cooperation, the Ukraine will receive our services for the same coordinated prices. These prices, surely depend on the current market quotations, but the shareholder discount remains at the same level.
- Is there any problem with payment by the Ukraine, as it was in 2016, which might result in delays of deliveries?
-I wouldn't call it problems, these are difficulties. That year the delivery was postponed to a later date due to violation by the Ukraine of payment dates for services on enrichment of its raw materials. I am hopeful that the Ukrainian party has improved the situation and there will be no delays this year. Anyway, there was no special comment in this respect from the Ukrainian party, the initialed revision of the document, which was put submitted corporate approval contains the terms that corresponds to normal schedules of delivery and payments of services.
- More than six months have already passed since you were appointed the General Director of the IUEC after many years in the position of the Commercial Director. How do you feel in the new position?
- Good. Surely, it is a great responsibility, but I was prepared to it. I try to resolve many problems that was not understandable for me before, these are the arts of big team management and identification of priorities. Time to manage everything is very short, I have to learn on the go. Now I have a totally different lifestyle, the changes between «before” and “now” are radical. The time will tell us where these changes lead, but I am an optimist in my character and ready for such achievements.



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