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WARHEADS ELIMINATEDWhat was the origin of this HEU purchase agreement?
In 1993, the United States and Russia signed a government-to-government agreement to convert 500 metric tons (MT) of highly enriched uranium (HEU) from Russian nuclear warheads into low enriched uranium (LEU) used to fabricate fuel for commercial nuclear power plants. The HEU would be converted in Russia and purchased by the United States over a 20-year period. The total value of the enrichment component of the program is about $8 billion (the natural uranium or "feed" component is about $4 billion). In 1994, a commercial implementing contract was signed by executive agents of both governments. This national security program achieves destruction of weapons and conversion of HEU into LEU for use in fabricating nuclear fuel to generate electricity.
Why was a commercial implementing contract chosen?
Both governments agreed that they wanted the program to be sustained through commercial purchases and sales of the LEU. This meant that a government appropriations process was not necessary.
Has the U.S. government paid or subsidized USEC for implementing any part of this national security agreement?
No. USEC derives its compensation solely from profits of selling the Russian material to its customers.
To whom do the executive agents report?
USEC reports to the Department of State and the Department of Energy, as well as other agencies, regarding the implementation of the Megatons to Megawatts program. TENEX, the Russian executive agent, is a Russian government company owned by Rosatom, the Russian equivalent of DOE, and reports to Rosatom and other Russian agencies.
What is USEC’s status as a government entity?
USEC Inc. is not a U.S. government corporation, nor is it chartered by the government, although the predecessor of USEC's subsidiary, United States Enrichment Corporation, was owned by the U.S. government . The government holds no financial shares in the company. In July 1998, the government sold its interest in United States Enrichment Corporation to investors in a public offering. USEC Inc. and its subsidiaries are entirely in private hands.
What is USEC’s status as executive agent?
USEC is the U.S. government’s exclusive executive agent for the Megatons to Megawatts program. The executive agent may resign by giving the government sufficient notice. Similarly, the government may replace the executive agent or appoint additional executive agents by giving USEC 30 days' notice.
Why was there initially a controversy over payment for the enrichment and uranium components?
The original 1993 agreement and 1994 contract specified that Russia would receive payment for the enrichment component of purchases upon delivery. The natural uranium component was to be paid for only when used or sold, with the balance to be returned to Russia at the conclusion of the contract. However, the Russians requested payment for the natural uranium immediately. Although the contract terms were clear, this generated a controversy.
How was this controversy resolved?
In 1996, Congress passed the USEC Privatization Act, which relieved USEC of responsibility for paying for the natural uranium portion of the purchases. Instead, TENEX was given the option to require USEC to deliver to TENEX an amount of natural uranium equal to the natural uranium component of the LEU delivered to USEC. For more than two years, Russia negotiated with various companies for the sale of this natural uranium. In March 1999, Russia reached agreement with three Western companies for purchase of this material at market-based prices. Congress appropriated an additional $325 million for DOE to purchase from Russia the two years' worth of unsold natural uranium. USEC had no responsibility in the sale of the natural uranium given to TENEX, nor did it receive any funds from this action.
Does USEC convert and process the warheads into fuel?
No. All of the HEU is converted into LEU by Rosatom workers at three plants in Russia. USEC buys the LEU and delivers it to fabricators, where it is used to fabricate fuel for commercial nuclear power plants owned by USEC's utility customers.
At what point does USEC take control/ownership of the LEU?
USEC takes title when the cylinders of the product are loaded onto ships in St. Petersburg, Russia. Once the material arrives at a U.S. port, it is transported by truck to USEC’s Paducah, Kentucky facility, where the cylinders are sampled, weighed and then incorporated with USEC's other inventories, which are used to meet customer orders as needed.
Why are the 500 metric tons of highly enriched uranium in the agreement so important?
Taken from Russian warheads, this amount of HEU is the equivalent of about 20,000 nuclear weapons.
Has the agreement always been self-sustaining as originally envisioned by the parties?
No. After signing the 1996 purchase agreement at fixed price purchase terms in the $90 per SWU range, the market price for enrichment dropped to the low $80 range. USEC was losing money under this agreement.
In February 2002, USEC and TENEX signed an amendment to the HEU contract in Moscow. In June 2002, the U.S. and Russian governments approved implementation of the contract amendment for the remaining 12 years of the program. The amendment introduces new, market-based pricing terms that went into effect in January 2003. (See USEC's June 19, 2002, press release.) The amendment should make the agreement self-sustaining through its scheduled conclusion in 2013.