The American Centrifuge

USEC's Loan Guarantee Application

The DOE Loan Guarantee Program was created by the Energy Policy Act of 2005, and 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 subsequently reallocated an additional $2 billion in loan guarantee authority to the front-end nuclear facilities loan guarantee solicitation.

In July 2008, USEC applied to the DOE Loan Guarantee Program for $2 billion in U.S. government guaranteed debt financing for the ACP. USEC believes a loan guarantee under the DOE Loan Guarantee Program is critical to raising the capital needed to complete 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. DOE announced in May 2010 that it has provided Areva with a conditional commitment for a loan guarantee from the reallocated funding authority. DOE has said that $2 billion in funding for projects in the front end of the nuclear fuel cycle remains available but USEC has no assurance that a DOE Loan Guarantee will be made available to the Company.

The success of the Lead Cascade testing program of AC100 machines and the strategic investment by Toshiba and B&W are positive steps towards addressing the technical and financial concerns raised by DOE in 2009. In July 2010, USEC updated its application with the DOE Loan Guarantee Program. The update reflects the significant steps taken by USEC to address concerns expressed by DOE about USEC’s application for a $2 billion loan guarantee last year.

A Well-Qualified Project

USEC believes the project is a compelling candidate for a loan guarantee:

• The project fully qualifies as an eligible project under the criteria set out in the Energy Policy Act of 2005. It qualifies as both an advanced nuclear energy facility and an efficient end-use energy technology project.
• The project involves a technology for an advanced nuclear facility in the front end of the fuel cycle.
• It employs new or significantly improved technologies as compared to commercial technologies currently in service in the United States.
• Because the plant will use 95% less electricity than the existing gaseous diffusion plant operated by USEC in Kentucky, it will avoid or reduce air pollutants and anthropogenic emissions of greenhouse gases associated with producing low enriched uranium.

Evaluation Factors

USEC believes the project meets all the mandatory evaluation factors set out DOE’s Loan Guarantee Solicitation, including:

• In 2007, USEC secured the necessary license from the NRC in order to build and operate the plant;
• Piketon, Ohio, is the site of the plant, and construction of the plant is underway. USEC has secured a long-term lease with DOE for the plant facilities, which are being refurbished as part of the construction activities.
• Production trials are complete. Since 2007, the project’s centrifuge machines have been tested in a Lead Cascade test program at the Piketon site. In March 2010, USEC began operation of its AC100 Lead Cascade. As of August 3, 2010, these machines have operated for more than 480,000 machine hours, providing data on equipment reliability and machine and cascade design.
• USEC has invested approximately $1.8 billion in the project through June 30, 2010 and is prepared to continue to provide a substantial equity contribution to the project.
• The plant will be built in the United States and is ready to be deployed to produce a commercially viable product - low enriched uranium.

Desired Outcomes for Loan Guarantee Program

USEC believes the project also will meet all of the desired outcomes listed in DOE’s solicitation:

• Reasonable assurance of repayment
• Optimization of technological diversity
• Accelerated deployment of new uranium enrichment capacity and distribution
• Provides the best use of the DOE’s Loan Guarantee authority in supporting this and other front-end nuclear projects
• Ensures a stand-alone domestic provider
• Meets U.S. government requirements for a domestic provider that can accommodate relevant national security needs

Though the American Centrifuge project merits serious consideration for a DOE loan guarantee, USEC has no assurance that the project will be selected for a guarantee and in what timeframe.