Cameco has a 31.6% interest in the Bruce Power Limited Partnership (BPLP), which operates the four Bruce B nuclear reactors and manages the overall site located in southern Ontario. BPLP's business is the generation and sale of electricity into the Ontario wholesale market. BPLP's four B reactors have a combined net generation capacity of about 3,200 MW, and supply about 17% of Ontario's electricity needs.

NUCLEAR ELECTRICITY GENERATION BUSINESS RESULTS

Ontario Electricity Spot Price

Bruce Power Limited Partnership (BPLP) sold 52% of its output on the Ontario spot market during 2005.

The 2005 results reflect the new partnership structure that was created on October 31, 2005, following the division of the Bruce Power site assets between Bruce B operations (Bruce Power Limited Partnership or BPLP) and Bruce A operations (Bruce A Limited Partnership or BALP). Effective November 1, 2005, Cameco's 31.6% interest in BPLP includes the four Bruce B units and does not include the A units.

Immediately following the restructuring, Cameco began to proportionately consolidate its share of BPLP's financial results. Our move to this new method of accounting was driven by incremental changes to the partnership agreement, which resulted in joint control among the three major partners. Proportionate consolidation is required for investments in jointly controlled entities. For the first 10 months of 2005, our financial results reflect a six-unit operation that is accounted for on an equity basis. For the last two months in the year, our results reflect a four-unit operation, accounted for on a proportionate basis.

NUCLEAR ELECTRICITY GENERATION BUSINESS HIGHLIGHTS

EARNINGS

For 2005, BPLP earnings before taxes were $520 million prior to the loss resulting from the Bruce Power restructuring compared to $338 million in 2004. This increase primarily reflects higher realized electricity prices as a result of strong demand, partially offset by a 3% decrease in capacity factor compared to 2004. In 2005, Cameco's share of earnings before tax from BPLP amounted to $170 million (of which $165 million was accounted for under the equity method) compared to $121 million in 2004.

REVENUE

In 2005, revenue totalled $1,858 million, up 17% from 2004. BPLP's realized price averaged $58.00 per MWh from a mix of contract and spot sales, a 23% increase over last year. The Ontario electricity spot price averaged about $68.00 per MWh during 2005 compared to $50.00 per MWh a year earlier. During 2005, about 48% of BPLP's output was sold under fixed-price contracts, the same as in 2004.

The BPLP units achieved a total capacity factor of 79% in 2005, down from 82% in 2004. These units produced 30.8 TWh in 2005, a decrease of 2.8 TWh over the previous year. This decrease reflects:

• the removal of units A3 and A4 output after October 31, 2005 from BPLP results due to the restructuring,
• planned outages of units A3 and A4 prior to the restructuring,
• planned outages on units B5 and B7, and
• unplanned outages, including the 29-day outage of unit B6 to replace its main output transformer and 17-day outage on unit B6 to repair the refuelling machine.

COSTS

For 2005, operating costs were $1,273 million compared with $1,178 million in 2004. About 95% of BPLP's operating costs are fixed. As such, most of the costs are incurred whether the plant is operating or not. On a per MWh basis, the operating cost in 2005 was $40.00 per MWh, compared with $35.00 per MWh for 2004. The increase in unit cost is primarily due to lower output because of higher planned and unplanned outages, related outage costs, and higher depreciation and amortization costs in 2005.

CASH FROM OPERATIONS

For 2005, BPLP generated $771 million in cash from operations compared to $446 million in 2004 due to higher prices.

CAPITAL EXPENDITURES

In 2005, capital expenditures were $335 million compared to $359 million in 2004 and down from the $375 million expected in 2005. The decrease in capital expenditures was due to the deferral of some capital programs to 2006 and to the reorganization of Bruce Power, with the Bruce A-related capital expenditures, now the responsibility of the Bruce A Limited Partnership.

OUTLOOK FOR 2006

Nuclear energy generated at Bruce Power is clean, reliable and affordable.

BPLP earnings in 2006 are projected to be marginally higher than in 2005 mainly as a result of fewer outages. This earnings outlook assumes the B units will achieve their targeted capacity factors and that there will be no significant changes in current estimates for costs and prices.

2006 PLANNED OUTAGES

In 2006, capacity factors for the B units are expected to average in the low 90% range compared to 79% in 2005. A significant reduction in time and expenditure on refurbishment programs is anticipated, with only one planned Bruce B outage. This outage is expected to last for two months, beginning in the third quarter.

2006 CAPITAL EXPENDITURES (100%)

Bruce Power capital expenditure program for the four B units is expected to total $123 million. This includes $69 million for sustaining capital with the balance for power uprates, infrastructure and improvements.

Cameco expects that funding of these projects will come entirely from BPLP cash flows. However, available funds will depend on the electricity market prices and the operational performance of the four B units.

ELECTRICITY PRICE SENSITIVITY ANALYSIS

BPLP has 13 TWh sold under fixed-price contracts for 2006. This would represent about 50% of Bruce B's generation at its planned capacity factor. A $1.00 per MWh change in the spot price for electricity in Ontario would change Cameco's after-tax earnings from BPLP by about $3 million.