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Since 2002, USEC has been developing and demonstrating a highly efficient uranium enrichment gas centrifuge technology that we call the American Centrifuge.
This technology was initially developed by DOE during the 1970s and 80s and successfully demonstrated, but was ultimately not commercially deployed for reasons unrelated to the technology itself.
USEC has modified and improved this technology through the use of modern materials, advanced computer-aided design, digital controls and state-of-the-art manufacturing processes.
USEC has a construction and operating license issued by the NRC and has been building the American Centrifuge Plant in Piketon, Ohio since May 2007. USEC is deploying the American Centrifuge Plant to replace its gaseous diffusion uranium enrichment plant and to be well positioned to meet growing demand for low enriched uranium (LEU). Deploying the American Centrifuge technology will substantially reduce USEC’s power costs and modernize its production capacity, enabling USEC to stay competitive in the long term.
USEC believes that the machine it deploys in the ACP will be the most advanced uranium enrichment machine in the world. USEC refers to its production centrifuge machine design as the AC100 series centrifuge machine. This machine is designed to produce an output per machine that is substantially greater than the per machine output of USEC’s competitors’ centrifuges.
As of March 31, 2010, USEC had invested approximately $1.8 billion in the American Centrifuge project. USEC has operated centrifuges as part of the Lead Cascade test program for approximately 365,000 machine hours, giving USEC the data and expertise to begin the transition to commercial operation. USEC has also secured $3.1 billion in committed sales for the output of the ACP. However, USEC needs additional financing to complete plant construction and has significantly demobilized construction and machine manufacturing activities for the project until it has that financing.
The DOE Loan Guarantee Program was created by the Energy Policy Act of 2005. In December 2007, federal legislation authorized funding levels of up to $2 billion for advanced facilities for the front end of the nuclear fuel cycle, which includes uranium enrichment. DOE released its solicitation for the Loan Guarantee Program on June 30, 2008 and in July 2008, USEC applied to the DOE Loan Guarantee Program as the path for obtaining $2 billion in U.S. government guaranteed debt financing for the American Centrifuge Plant.
Areva, a company that is more than 90% owned by the French government, also applied for $2 billion of U.S. government guaranteed financing under this program for a proposed plant in the United States, and its application is also being considered by DOE.
In March 2010, DOE indicated it plans to reallocate an additional $2 billion in loan guarantee authority to the front-end nuclear facilities loan guarantee program, allowing for the possibility that both USEC and Areva could receive U.S. government guaranteed debt financing for their planned domestic enrichment facilities. However, USEC has no assurance that a DOE Loan Guarantee will be made available to the Company.
In February 2009, USEC initiated steps to conserve cash and reduce the planned escalation of project construction and machine manufacturing activities due to a lack of clarity on potential funding under the DOE Loan Guarantee Program.
In August 2009, DOE and USEC announced an agreement to delay a final review of USEC’s loan guarantee application for the ACP until at least early 2010. As a result, USEC significantly demobilized construction and machine manufacturing activities for the American Centrifuge project in order to preserve liquidity.
USEC continues to believe in the American Centrifuge technology and is working to address DOE’s financial and technical concerns so that USEC will be in a position to update its application. In parallel, USEC is continuing American Centrifuge demonstration activities, evaluating how best to configure the project on a go-forward basis, and evaluating strategic options for the future of the project.
Since August 2009, more than 1,300 project jobs have been lost as a result of the demobilization. These include approximately 120 jobs at USEC and the remainder from direct jobs at USEC’s suppliers. Several thousand indirect jobs have also been affected. Job losses have occurred in eight states, with Ohio and Tennessee having the largest job losses.
Construction of the plant infrastructure and work to finalize the balance-of-plant design ceased in August 2009. The plant design work is approximately 80% complete and would be resumed following a decision to remobilize the project. Because USEC has delayed high-volume machine manufacturing, work at all of its strategic suppliers has also been sharply reduced. USEC plans to continue manufacturing a limited number of centrifuge machines over the balance of 2010 as part of the scope of work under the March 2010 cooperative agreement with DOE to maintain its supplier base and demonstrate the capability to manufacture production ready centrifuge machines within the Company’s design specifications.
Demonstration and manufacturing activities are underway at several facilities located in Oak Ridge, Tennessee. USEC initiated testing of centrifuge components in 2003 and began testing individual prototype machines in highly specialized test equipment in 2005.
USEC refers to its production centrifuge design as the AC100 series machine. In 2008, USEC released the initial design for the AC100 machine to its strategic suppliers to begin manufacturing the AC100 machines to be installed in a Lead Cascade in the Piketon, Ohio, demonstration facility.
In March 2009, USEC completed a second design release for the production-ready AC100 series machine. This updated design reflects some value-engineering improvements from the initial AC100 design released in 2008. Value engineering lowers the cost or improves the reliability of the machine without adversely affecting its functional requirements. The Company plans to continue its value-engineering efforts and other efforts to optimize the machine going forward.
Centrifuges have been operating in USEC’s Lead Cascade test program in Piketon for more than two years. Initiated in August 2007, the test program initially involved the integrated testing of multiple prototype machines in a cascade configuration and demonstrated the ability of the technology to generate product assays in a range useable by commercial nuclear power plants.
Through the Lead Cascade test program, USEC obtains data on machine-to-machine interactions, verifies cascade performance models under a variety of operating conditions, and obtains operating experience for its plant operators and technicians. Data from this testing program has provided valuable assembly, operating and maintenance information, as well as operations experience for the American Centrifuge staff.
In March 2010, USEC began operation of our AC100 Lead Cascade in Piketon. Approximately two dozen AC100 machines are operating in a cascade in a commercial cascade plant configuration, which demonstrates USEC’s strategic suppliers' capability to manufacture production ready centrifuge machines and provides the Company with significant additional operational data. This is an important accomplishment in USEC’s efforts to respond to DOE’s technical concerns. These are production machines built by USEC’s suppliers, and the cascade’s operation highlights the continued progress the Company is making. The cascade has been operating successfully since it came on-line. USEC’s objective is to accumulate significant cascade run-time while it continues to manufacture and install additional centrifuge machines.
USEC’s centrifuge manufacturing suppliers have continued to build parts for and have assembled approximately 20 additional machines that are operating individually and that may be introduced into the current cascade testing program later this year. The suppliers are continuing to build and assemble additional AC100 machines. As a result, the remaining machines in a cascade of prototype centrifuge machines that has operated since August 2007 were taken out of service in April 2010 at the completion of the initial Lead Cascade testing program and in preparation for replacing them with these additional AC100 centrifuges that will be tested and operated individually.
Although this cascade is operating in a closed-loop configuration, where the enriched and depleted streams are recombined after going through the cascade, the flow of uranium feed and tails between individual machines in the cascade is similar to those expected in commercial plant operations. This cascade is intended to provide additional data on equipment operation and reliability that could identify opportunities to further optimize the centrifuge and cascade design.
The NRC issued the Construction and Operating License for the American Centrifuge Plant in April 2007 and USEC began construction on the American Centrifuge Plant in May 2007.
Most of the buildings required for the commercial plant were constructed in Piketon during the 1980s by DOE. These existing structures include a centrifuge assembly building, a uranium feed and withdrawal facility, and two enrichment production buildings. USEC began renovating and building the American Centrifuge Plant following receipt of a construction and operating license from the NRC. Fluor Enterprises, Inc., a subsidiary of Fluor Corporation manages the engineering, procurement and construction management activities. Construction of the plant infrastructure and work to finalize the balance-of-plant design ceased in August 2009. However, USEC continued to incur costs associated with demobilization including procurement of materials under existing contractual obligations in accordance with reductions in the scope of work with USEC’s suppliers.
Construction of the American Centrifuge Plant includes various systems including electric, telecommunications, HVAC and water distribution. Prior to the demobilization of construction and machine manufacturing activities, service modules that provide utilities to groups of approximately 20 centrifuge machines were being delivered by Teledyne Brown Engineering, Inc. Other plant infrastructure that must be completed include the piping that enables UF6 gas to flow throughout the enrichment production facility, process systems to support the centrifuge machines and cascades, a distributed control system to monitor and control the enrichment processing equipment, and facilities to feed natural uranium into the process system and withdraw enriched uranium product.
The two production buildings have space for approximately 11,500 centrifuges. During 2008 and 2009, contractors prepared the floor of the production buildings for machine mounts to support the centrifuges.