March 27, 2008: 11:38 AM EDT
Email | Print    Type Size  -  +

Nuclear power's white-hot commodity

Someone with such a strong vision and so much unbridled power in a single industry certainly may be prone to abusing it. Oversight, for example, falls to the national Committee on Atomic Energy, but it has never once cited a Kazatomprom facility for violations or declined to issue a new permit. Many regulators "are politically weaker than the heads of these big nationally owned companies," says Oraz Jandosov, a former Minister of the Economy, who adds that the ministries often don't have adequate authority either. "They cannot dream of actual control."

Kazatomprom has a reputation for integrity, but Dzhakishev has faced questions about his personal dealings. He was a groomsman at the wedding of Nazarbayev's son-in-law Rakhat Aliyev, now accused of kidnapping and corruption, charges he has denied. Last spring former Parliament member Tatyana Kvyatkovskaya accused Dzhakishev of funneling some of Kazakhstan's net uranium worth to offshore accounts or obscure foreign interests. Dzhakishev also raised eyebrows when some of his mines ended up in the hands of financier Frank Giustra, founder of Lionsgate Films and a friend of Bill Clinton. Giustra's group acquired a large share of two big uranium mines from a Kazakh investment group headed by Moukhtar Ablyazov, a former Energy Minister. It seems Ablyazov purchased the deposits from Kazatomprom when uranium prices were in the gutter. Ablyazov profited handsomely, as did Giustra, when Canadian company UrAsia subsequently acquired the properties. Dzhakishev says all his business dealings have been legitimate.

Indeed, foreign companies seeking access to Kazakhstan's uranium resources seem nonplussed by these issues. (Nor do they seem worried that Kazakhs will all turn out to be like the character Borat.) One night in his Almaty office - an oak-paneled fortress decorated with 16th-century samurai swords and staffed with pretty women - he rolled up his sleeves and walked to a whiteboard to explain an extravagantly bold wish list. He had uranium mining pretty well covered, but he wanted to guarantee market share. And then he needed the most coveted links in the nuclear fuel chain: a conversion facility; an enrichment plant, licenses, and technology to make fuel pellets; and a hand in building the actual reactors themselves. "Once he gets an idea in his head - a vision - then a lot of energy is going to be applied to it," says Jerry Grundy, CEO of Cameco. "He runs at 130% of warp speed almost all the time."

Armed with the knowledge that each of his foreign partners wanted more resources, Dzhakishev began to negotiate ruthlessly and tick off his list with extraordinary precision. Cameco had been wanting more access to Kazakh uranium for years and tried to leverage its production schedule at its new plant to get it. Dzhakishev upped the ante. In July, Kazatomprom struck a deal to borrow Cameco's conversion technology and jointly build a new plant in-country. "You don't do a deal in Kazakhstan anymore without bringing something that's geopolitically advantageous to the table," says Ralph Nodes, the Cameco executive who manages the new plant. "They don't have to give away the ranch, and he's been real smart about that." But that's just a small piece. Several months earlier Dzhakishev negotiated with China's Guangdong Nuclear Power Group to supply the uranium for one of every two reactors it builds, and it has since struck additional deals with other Chinese nuclear bodies. Next it signed a deal with the Russians, who are sensitive about losing access to Kazakhstan's uranium, to trade mining rights for a shared enrichment plant. While finishing the Cameco deal, Dzhakishev secured his stake in Westinghouse. Not bad for a summer's work.

Still, much of Dzhakishev's gain is on paper, and it remains to be seen how well he can execute, starting with the promised increase in production that would make Kazatomprom the world's leading uranium producer within four years. "Five years ago I would have been very skeptical," says Steve Kidd, director of strategy and research at the World Nuclear Association in London. "But look at what they have achieved. They've done what they said they were going to do, and I think now we have to believe them." But Kidd also warns that the market dynamics aren't as black-and-white as Dzhakishev would like to believe. A September report from Kidd's group puts the projected supply crunch in less urgent terms, even projecting a surplus until all the future power plants come online. That explains the price free fall, and it means that Dzhakishev, whose production numbers were tripped up by shortages of sulfuric acid last fall, will have to compete on the fundamentals - low-price production and smooth operations. To do that, he may have to lower his gaze to the near term and watch market growth in Australia or Canada more closely. "The danger," Cameco's Grundy warns, "is that if you are so single-minded and so focused on your own growth opportunities, you fail to understand what your competitors are doing."

As for Dzhakishev's vision of becoming a full-service nuclear provider, a Kazakh Areva, that's something that may have to wait. "They're just a uranium producer at the moment," Kidd says of Kazatomprom. "Dzhakishev's aims - they're not something they can do in five or even 15 years. It will take a whole lot longer." To top of page

Company Price Change % Change
Ford Motor Co 8.29 0.05 0.61%
Advanced Micro Devic... 54.59 0.70 1.30%
Cisco Systems Inc 47.49 -2.44 -4.89%
General Electric Co 13.00 -0.16 -1.22%
Kraft Heinz Co 27.84 -2.20 -7.32%
Data as of 2:44pm ET
Index Last Change % Change
Dow 32,627.97 -234.33 -0.71%
Nasdaq 13,215.24 99.07 0.76%
S&P 500 3,913.10 -2.36 -0.06%
Treasuries 1.73 0.00 0.12%
Data as of 6:29am ET

Most stock quote data provided by BATS. Market indices are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer. Morningstar: © 2018 Morningstar, Inc. All Rights Reserved. Factset: FactSet Research Systems Inc. 2018. All rights reserved. Chicago Mercantile Association: Certain market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved. Dow Jones: The Dow Jones branded indices are proprietary to and are calculated, distributed and marketed by DJI Opco, a subsidiary of S&P Dow Jones Indices LLC and have been licensed for use to S&P Opco, LLC and CNN. Standard & Poor's and S&P are registered trademarks of Standard & Poor's Financial Services LLC and Dow Jones is a registered trademark of Dow Jones Trademark Holdings LLC. All content of the Dow Jones branded indices © S&P Dow Jones Indices LLC 2018 and/or its affiliates.