Ann: Annual Report 2018, page-11

Hi Guys,

I certainly don't want to fall into the trap of being the U fan-boy and ignoring all sides to the argument.

However, for balance:

- I would be cautious about taking political rhetoric at face value. After Fukushima there was political mileage in stating Government's would move away from Nuclear Energy.

- However, in Germany, since they shut nuclear facilities their carbon emissions have increased materially due to coal fired plants required for base load power and power prices are now the highest in the OECD. German voters sentiment is now improving towards nuclear again as it has been shown that wind/ solar/ hydro cannot provide clean and cheap energy without nuclear.

- In Korea, they had to ramp up nuclear electricity generation during the recent heat wave as air-conditioner use surged. Again, voter sentiment is now firmly in favour of nuclear once again.

- In Japan, they have committed to having nuclear provide 20-22% of their total electricity supply by 2030, so this will require additional reactors to be turned on.

- In China and India in particular, air pollution is a major issue from fossil fuel use. This is a big issue for both countries and causes many deaths each year. As an aside, research released this week from China shows that prolonged exposure to air pollution can not only shorten your life expectancy but it also makes you dumber !

- Nuclear reactors are, like solar panels, impacted by high temperatures. Recent news (e.g. Sweden) shows that plants are being modified to cope with this (drawing water from deeper/ colder sources).

- As plants reach licence expiry, many are having their licences renewed. It is true, however, that some plants in the USA are uncompetitive with natural gas and there are planned retirements in the USA.

- Chinese U consumption is expected to rise c. 7.6% p.a. over the next three decades.

- There are 55 reactors currently under construction around the world.

- Contrary to Western narrative, nuclear demand is growing:



I don't see a risk with nuclear becoming extinct under 'business as usual' scenarios.

There are alway outlier risks however. For us as investors I think the two to consider are:

(1) It takes longer for the spot/ contract price to reach a level whereby mines can become profitable again. However, I think that this is simply a timing issue as it is a fact that if U prices do not rise then there will eventually be no U to fuel these reactors. U is a very small % cost of total reactor costs and thus utilities, who have spent billions in capex building these plants, will not turn them off because U has become too expensive.

(2) Another reactor accident. This is always a possibility, however, since Fukushima there have been >6,000 safety improvements across the c. 450 reactor fleet globally.

It is also important to recognize that at Fukushima, the reactors themselves survived the massive earthquake and resulting tsunami. It was the fact that the backup generators were located in the basement and were flooded that caused the meltdown.

Cheers
John