Ukraine’s nuclear contract with Cameco is risky but lucrative. The Ukrainian state-owned utility Energoatom told Reuters that Ukraine’s 12-year arrangement to acquire enough uranium from Canadian miner Cameco Corp to run all its nuclear reactors allows each party to adjust sales amounts with two years’ notice.

The February deal’s extraordinary flexibility, which has not been disclosed, illustrates Russia’s battle with its neighbor and the high stakes for all sides.

Cameco’s financial concerns. Ukraine relies on one electricity supply, which limits its options.

In an interview with Reuters, Energoatom CEO Petro Kotin said, “There’s a lot of flexibility” in the arrangement. “The agreement is up to 2035, but two years prior to supply of the uranium, we are to (give) them an indication of what we will need, what volume we will require.”

Ukraine produced 55% of its power from Russian-fueled nuclear reactors before Russia invaded in February.

Ukraine no longer buys Russian petroleum and uses Cameco instead.

The Ukraine crisis and worldwide carbon emission reduction initiatives helped Cameco restart the world’s largest high-grade uranium mine in northern Saskatchewan last year.

The firm is counting on future Eastern European partnerships as they aim to minimize its dependency on Russian energy as it ramps up production for its biggest contract with Ukraine.

Since Jan. 31, 2022, Cameco, the world’s fourth-largest uranium producer, has rallied more than 50% on hopes Russia, a major producer, might invade.

Cameco (CCO.TO) will provide Ukraine uranium hexafluoride (UF6) from 2024 to 2035 under a $4 billion arrangement with Energoatom.

The arrangement will deliver nine Ukrainian and six seized reactors in southern Zaporizhzhia if Ukraine retakes them.

Kotin said Cameco, like Energoatom, may change uranium deliveries in two years.

Energoatom’s spokeswoman stated both sides might alter delivery freely.

Nick Carter, executive vice president of UxC LLC, an independent nuclear fuel cycle research organization, said the two-year opportunity to alter amounts without restriction gives flexibility beyond the regular uranium contract modifications of 5%-15% yearly.

Cameco’s largest risk is that Ukraine’s energy system and thermal power producers, which have been military targets since the invasion, may need less uranium if Russia captures or damages additional reactors.

“Find a home for this previously contracted material,” Carter said of Cameco’s next step.

“We have plenty of visibility and advance notice regarding the annual volumes required under the contract, which provides us with flexibility to adjust our plans, including for production if circumstances require,” Cameco spokesperson Veronica Baker said, declining to confirm deal terms.

Short-notice purchasers may be expensive.

Carter indicated that if Ukraine buys less uranium due to the war, Cameco may decrease contracted pricing, which is higher than spot prices.

Carter noted that if prices rise in the next 12 years, Cameco may be unable to capitalize with so much production allocated to Ukraine unless it cuts sales. He predicts two years of increasing costs.

“I think Cameco has more to lose here than the Ukrainians if the (market) price were to continue higher,” Carter said.

Kotin said Energoatom would acquire Cameco’s uranium at an equal market and fixed price. This mitigates price increases for Energoatom.

Baker said commodities price variations were natural for suppliers and purchasers.

Carter said Energoatom’s risk is that Cameco sells it less uranium to profit from higher prices elsewhere, which seems improbable.

Kotin claimed French state-owned Orano, Cameco’s biggest competitor, warned Energoatom it cannot deliver further uranium until 2030. Orano rejected the comment.

Kotin said Ukraine is expanding its nuclear sector to reduce dependence on a single source.

Ukraine has separate arrangements for processing uranium from Cameco.

It contracts with UK-based Urenco Group to enrich Cameco’s uranium and Westinghouse to make reactor fuel. Such arrangements may guarantee Ukraine’s energy needs throughout the war.

Carter said Poland and the Czech Republic also want to use Western reactors and fuels.

“There is considerable interest among many nations and utilities seeking to realign how they meet their future energy input needs, including in eastern Europe,” Cameco’s Baker said.

Cameco inked a 10-year contract with Westinghouse, which it and Brookfield Renewable Partners (BEP.N) are buying, to supply UF6 to Bulgaria’s sole nuclear-generating unit in April.

Canadian Natural Resources Minister Jonathan Wilkinson said Canada has “a huge role” worldwide. He claimed he spoke with European nations interested in abandoning Russian reactors and fuel.

“We have an abundance of uranium,” Wilkinson stated.