Current Status

RD&D Program

USEC needs significant additional financing in order to complete the American Centrifuge Plant. The company applied for a $2 billion loan guarantee under the DOE Loan Guarantee Program in July 2008 and its efforts since then and throughout most of 2011 focused on obtaining a conditional commitment for a loan guarantee so that it could move forward with the commercialization of the American Centrifuge technology. However, DOE raised concerns regarding the financial and project execution depth of the American Centrifuge project that USEC was not able to overcome to DOE’s satisfaction during 2011.

Instead of moving forward with a conditional commitment for a loan guarantee, in the fall of 2011, DOE proposed a two-year cost share research, development and demonstration (RD&D) program for the project to enhance the technical and financial readiness of the centrifuge technology for commercialization. Under the cost-sharing arrangement, DOE’s total contribution would be capped at $300 million. DOE indicated that USEC’s application for a DOE loan guarantee would remain pending during the RD&D program but has given USEC no assurance that a successful RD&D program will result in a loan guarantee.
 
The RD&D program involves manufacturing and operating additional production-design machines so that key systems can be tested as they would operate at the scale necessary for full commercialization. The proposed RD&D program scope is to construct and operate at least one complete demonstration cascade of 120 commercial centrifuge machines. USEC is currently building additional machines and parts for the demonstration cascade. During the first quarter of 2012, USEC also continued engineering design and planning for the demonstration cascade and restructured its staff in Oak Ridge, Tennessee, to support the RD&D program.
 
The RD&D program is expected to be a two-year program implemented through a cost-sharing arrangement whereby DOE would initially provide up to 80 percent of the costs of the program. DOE has proposed funding one half of its $300 million contribution in government fiscal year 2012, with the remainder in government fiscal year 2013. USEC has been working with DOE and Congress to secure DOE funding for the RD&D program. However, DOE’s share of funding for the program has not yet been provided, and the source for such funding is uncertain. The current political environment in Washington has slowed the legislative process.
 
On March 13, 2012, USEC entered into an agreement with DOE that enables the company to provide interim funding of $44 million for the American Centrifuge project. This funding was provided by DOE acquiring from USEC U.S.-origin low enriched uranium in exchange for the transfer of quantities of USEC’s depleted uranium hexafluoride to DOE. This enables us to release encumbered funds of approximately $44 million that were previously provided as financial assurance for the disposition of such depleted uranium. This low enriched uranium acquired by DOE could be returned to USEC as part of DOE’s cost share under the RD&D program if government funding is provided for the RD&D program in government fiscal year 2012.  This transaction, combined with USEC’s expected cash flows from operations and access to funds under its credit facility, has enabled USEC to continue to fund American Centrifuge program activities as the company works to obtain government funding for the RD&D program.
 
However, USEC’s spending on the American Centrifuge project after May 31, 2012, is significantly restricted by USEC’s credit facility, and so continuation of the RD&D program beyond the end of May 2012 will require additional funding. USEC is working with DOE and Congress to provide funding for government fiscal year 2012.  Even if DOE funding were provided for the RD&D program for government fiscal year 2012, funding for the RD&D program beyond government fiscal year 2012 would be subject to future appropriations. President Obama’s fiscal year 2013 budget proposal includes $150 million for the RD&D program.

On April 25, 2012, the House Appropriations Committee reported out legislation that would provide $100 million of funding for the RD&D program in government fiscal year 2013.  On April 26, 2012, the Senate Appropriations Committee approved a bill that would provide DOE with authority to transfer up to $150 million in funds to the RD&D program in government fiscal year 2013.  However, USEC has no assurance when the final fiscal year 2013 appropriations bill will be enacted or that it will include funding for the RD&D program. USEC has no assurance that it will be able to reach agreement with DOE regarding any phase of the RD&D program or that any funding will be provided or that the low enriched uranium will be returned. USEC also has no assurance that it will ultimately be able to obtain a loan guarantee and the timing thereof. Any agreement for the RD&D program would likely require restructuring of the project and of USEC’s investment. In light of the significant uncertainty surrounding USEC’s prospects for finalizing an agreement and obtaining funding from DOE for an RD&D program and the timing thereof, in parallel USEC is preparing for a demobilization of the project.