Funding

 USEC is re-evaluating its plan and alternatives for proceeding with the financing and commercialization of the American Centrifuge project. Factors that can affect this plan and the economics of the project include key variables related to project cost, schedule, the status of the supply chain for centrifuge manufacturing and plant support systems, market demand and market prices for low enriched uranium (LEU), financing costs and other financing terms.

The economics of the project are severely challenged by the current supply/demand imbalance in the market for LEU and related downward pressure on market prices for SWU which are now at their lowest levels in more than a decade. At current market prices, USEC does not believe that its plans for commercialization of the American Centrifuge project are economically viable without additional government support beyond the $2 billion loan guarantee funding that the Company has applied for from the U.S. Department of Energy (DOE).

Although the economics of the American Centrifuge project are severely challenged under current enrichment market conditions, USEC continues to believe that the deployment of the American Centrifuge project represents its clearest path to a long-term, direct source of domestic enrichment production, and therefore the long-term viability of USEC's LEU business.

USEC has provided various options to DOE related to preserving the American Centrifuge technology for national security needs, which may enable USEC to maintain the option to deploy the technology for commercial purposes at some point in the future. Over the past two years, USEC confirmed the technical readiness of the American Centrifuge technology through a cooperative cost-sharing RD&D Program with DOE. The continuation of the RD&D Program in 2014 includes work primarily related to additional cascade testing. The program continuation also supports DOE analysis of the technology while sustaining program capabilities as DOE considers its options for meeting national security needs. USEC could make a decision in the near term to reduce, demobilize or terminate the American Centrifuge project if additional DOE funding or support is not available or if USEC determines there is no longer a viable path to commercialization of the American Centrifuge project.

Under the amended cooperative agreement, the RD&D Program is extended through April 15, 2014. The latest funding was included in the omnibus appropriations bill for government fiscal year 2014 passed by Congress and signed by the President in January 2014. This appropriated $62 million for the RD&D Program, including $29.3 million that had been previously provided under the cooperative agreement pursuant to the continuing resolutions that previously funded government operations in government fiscal year 2014 and the additional $22.6 million provided under the cooperative agreement by DOE since its passage. The omnibus appropriations bill also provides DOE with authority to transfer up to an additional $56.65 million of funding within DOE’s National Nuclear Security Administration appropriations to fund the RD&D Program or a successor program. Such transfer authority is subject to further approval of the House and Senate Appropriations Committees after a minimum 30-day review period. To obtain such approvals, the Secretary of Energy must notify Congress and submit to the Appropriations Committees a cost-benefit analysis of available and prospective domestic enrichment technologies for national security needs and the scope, schedule and cost of the Secretary’s preferred option.

Funding for the RD&D Program has only been provided through April 15, 2014, and DOE has stated that it does not plan to extend the RD&D cooperative agreement beyond such date. USEC continues to discuss with DOE its options for maintaining a domestic enrichment capability and DOE’s plans for the American Centrifuge project post-April 15, as well as USEC’s potential role in such options and during any transition. However, the scope of and USEC's role in a program after April 15 are uncertain, and USEC has no assurance that the U.S. government will continue to support the project beyond April 15, 2014. Due to the absence of clarity regarding both DOE funding and DOE’s plans for the American Centrifuge project beyond April 15, USEC Inc. issued notices to all of its employees working on the American Centrifuge project as required by the WARN Act of the potential for layoffs.

American Centrifuge: Investing Today for Long-Term Competitiveness

Deploying the American Centrifuge will ensure a reliable and diversified supply of enriched uranium while preserving competition and stability.