Funding

USEC has invested more than $2.2 billion in the American Centrifuge Project. 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.  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. Additional capital beyond the $2 billion of DOE loan guarantee funding that USEC has applied for and its internally generated cash flow will be required to complete the project. USEC has had discussions with Japanese export credit agencies regarding financing up to $1 billion of the cost of completing the American Centrifuge Plant. However USEC has no assurances that it will be successful in obtaining this financing and that the delays the company has experienced will not adversely affect these efforts.

During late 2011 and early 2012, USEC’s American Centrifuge project efforts shifted to focus on the planning and implementation of the RD&D program and efforts that are currently underway in Piketon, Ohio and Oak Ridge, Tennessee are based upon the proposed program scope. USEC is currently building machines and parts that would be part of the complete demonstration cascade that would be built and operated as part of the RD&D program.

In parallel, USEC has been working with DOE and Congress to secure 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 significantly slowed the legislative process. The two houses of Congress are each held by a different political party and in an election year the necessary bipartisan support will be difficult to achieve.

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 LEU in exchange for the transfer of quantities of USEC’s depleted uranium tails to DOE. This enabled USEC to release encumbered funds of approximately $44 million that were previously provided as financial assurance for the disposition of such depleted uranium. The LEU 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, have enabled USEC to continue to fund American Centrifuge program activities as USEC 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 its credit facility, and so continuation of the RD&D program beyond the end of May 2012 will require additional funding. As described above, 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 LEU 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.