USEC Inc. Speech

Remarks by James R. Mellor,
Chairman, President and Chief Executive Officer

Annual Shareholders' Meeting of USEC Inc.
Bethesda, MD
April 21, 2005

While the officials are tallying the votes, I’d like to take a few minutes to bring you up to date regarding our Company and why I’m so excited about our future prospects.

Before I begin, however, our lawyers asked me to pass along these words of caution: some of the information that we discuss today may be considered “forward looking” information that involves risk and uncertainty, including assumptions about the future performance of USEC. Our actual results may differ materially, depending on a variety of factors that we have referenced in our news releases and periodic filings with the SEC. You can find all of these news releases and SEC documents on our web site.

For several years, I’ve been writing to shareholders and talking about the renaissance of the nuclear industry. Each year the momentum has been building. Today, government leaders from around the world are supporting the rebirth of nuclear power. So are the electric utilities who are our customers.

And recently the world’s press has written a steady stream of positive articles on expansion of nuclear power. The signs are literally everywhere. Let me point out just a few:

• In the United States, three groups are actively evaluating advanced reactor designs with an eye toward building nuclear power units. This review has the support of the Department of Energy, which is funding a portion of its cost. USEC is a member of one of these three groups. Our group includes major names in the nuclear power industry, such as:
  • General Electric,
  • Toshiba
  • TVA, and others.
• We have a unique relationship with TVA, as they are both an important customer and the supplier of much of our electric power. TVA is making great headway toward restarting their previously closed Browns Ferry unit in 2007. And, we expect to provide the fuel for the initial core at the Browns Ferry unit next year.
• Duke Power, another customer, said recently that it considers nuclear energy as its leading choice for new electric generation in the next decade.
• Three other US utilities are seeking early site permits from the Nuclear Regulatory Commission. That could result in additional reactors at existing nuclear power plant sites.
• The vast majority of America’s fleet of 104 reactors is expected to have their operating licenses extended for 20 years by the NRC. The operators of 75 reactors have already either received approval for a license extension, or are in the process of applying for an extension. That means many of USEC’s customers will need enriched uranium for at least the next three decades.
• Most of you know that we are also a leader in efforts to eliminate Russian nuclear warheads.
  
  We believe that even more can be done.
  
  USEC has proposed the Isaiah Project – a new American nuclear reactor fueled entirely by decommissioned warheads. This new non-proliferation initiative would work hand-in-glove with our existing Megatons to Megawatts program. To date, that program has achieved an impressive track record of success by eliminating some 9,500 warheads. We’ve recycled them into fuel that provides the United States with about 10 percent of its total electricity needs.
  
  During the operating lifetime of a new “Isaiah” reactor, some 2,000 warheads could be forever eliminated while providing valuable electricity to our citizens. As you can see, your company is helping to make the world a safer place to live.
  
  
• The outlook overseas is also exciting. There are presently 25 reactors under construction in 10 countries. Four are scheduled to be completed by 2007 by our customers in Japan, Taiwan and South Korea.
• In Europe, Finland will soon begin construction of its fifth reactor, its first nuclear plant in three decades.
• China has announced plans to quadruple its nuclear power capacity by 2020. The Chinese expect to build some 40 new reactors to meet the fast-growing demand for electricity by its population of more than a billion people. China’s construction schedule requires two to three new plants coming on-line every year for the next 15 years.
  
  The potential there is very attractive and we are taking initial steps to sell commercial nuclear fuel there. Breaking into the Chinese market isn’t going to be an easy task, but our Marketing team is already working toward that goal.
  
  
• India also plans a similar expansion of nuclear power to bring much-needed electricity to its growing population and commercial enterprises.

Taken alone, each of these events signals positive momentum for our industry. Taken together, the revitalization of nuclear power worldwide is clear. That’s why our Company is so intently focused on playing a leading role in the future of nuclear power. And, that’s why we are investing both our earnings and our energy into the American Centrifuge program.

In 2004 alone, we spent about 65 million dollars to demonstrate our state-of-the-art centrifuge technology. That had the effect of reducing last year’s net income – the bottom line – by about 36 million dollars. And that’s 43 cents a share. To put this investment into context, our net income in 2004 was 23.5 million dollars. I am pleased to report this was more than double our net income in 2003, even as we increased spending on demonstrating the American Centrifuge.

Looking ahead, in 2005 we expect our total investment in the American Centrifuge to grow to 110 million dollars.

As you can see, we’re truly committed to this program!

We expect the American Centrifuge to be the world’s most efficient uranium enrichment technology. Now, let me give you a brief report on our progress. We have begun manufacturing components for the centrifuge machines that will populate the lead cascade, slated to open late this year.

For those not familiar with the term, the lead cascade is the first group of centrifuges working together to demonstrate the enrichment capability of USEC’s machines.

Beginning to manufacture centrifuge components was the ninth milestone out of 15 in our agreement with the Department of Energy. And, we’ve met all of these on or ahead of schedule.

The USEC advanced technology team is working with an outstanding group of contractors to build the centrifuges: Boeing, Honeywell and ATK Space Systems. The machines will be assembled at our American Centrifuge Demonstration Facility in Piketon, Ohio late this year to form the lead cascade.

During 2006, the lead cascade will provide the Company with important cost, schedule and performance data. We then expect to begin building centrifuge machines in 2007 that will go into the commercial plant.

On a parallel path, we are working with the Nuclear Regulatory Commission on our application for a license to build and operate the commercial plant. We expect the NRC will approve that license by the end of 2006.

In a nutshell, that’s where this management team is focusing much of its attention – on the American Centrifuge. We will, of course, also:

• continue to manage our production costs at our Paducah plant,
• reduce our overhead costs at headquarters, and
• evaluate strategic opportunities to grow our business and enhance our position in the nuclear fuel cycle

In 2004, we took the first step to diversify when we acquired NAC International. NAC is a leading provider of spent fuel solutions, nuclear materials transportation and fuel cycle consulting. This acquisition provides USEC with a broader array of products and services to offer our customers. But while we continue to look for additional growth opportunities, I’ve told our management team that job number one is to successfully deploy the American Centrifuge.

While I’m addressing important tasks, let me bring you up to date on the Board’s search for a new chief executive officer.

We’ve hired an executive search firm to find a highly qualified individual to lead USEC. We are looking for a leader, someone with exceptional communications and people skills. Obviously, this leader will be comfortable running a large public company and running it successfully, someone with experience in bringing a major project in on-time and on-budget.

The Board is conducting this search in a systematic manner that I believe will result in finding a strong leader who can take USEC to the next level in its transformation. Our focus is to find the right person. If it takes a little time, so be it.

Meanwhile I'm working every day with what I believe is a superior management team. As I said earlier, I believe we are truly blessed with a talented and energetic group of officers. Together, we are moving aggressively ahead.

And Wall Street appears to think we are heading in the right direction. In 2004, our stock’s total return to shareholders including dividends was nearly 23 percent. That was more than double the return from the S&P 500. Although our stock price has pulled back some in recent days, along with the entire market, our total return in the first quarter of 2005 was nearly 70 percent while the S&P 500 was slightly negative.

Two years ago at this meeting of shareholders, I said I was not satisfied with a share price around 5 to 6 dollars. Yesterday, USU closed at $14.15. Obviously, that is much better. But while we are pleased with this improvement, the directors and executive officers know that we can do even better.

The good news is that we are focused on the right strategy for the long term and we are successfully executing our plans in the near term. These initiatives will, I believe, build long-term value for all of our shareholders. This Board, this management team and the nearly 3,000 employees of USEC never forget that we are working for you, the shareholders.