American Centrifuge RD&D Program Advances

Mon Jul 29, 2013 8:01am EDT

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American Centrifuge RD&D Program Advances

  • 120 AC100 centrifuges operating, preparing for demonstration of cascade operations
  • DOE funds next increment of program funding through September 30, 2013
  • Sixth RD&D program milestone completed; DOE certification pending
  • Program remains on budget and on schedule

The research, development and demonstration (RD&D) program to advance USEC Inc.’s (NYSE:USU) American Centrifuge, America’s next generation of uranium enrichment technology, continues to make solid progress in completing program milestones.

Five of the program’s nine milestones have been completed and certified by the Department of Energy (DOE). USEC successfully completed the sixth milestone to test the effects of a power loss to the uranium centrifuge machines earlier this month, and DOE certification of that milestone is pending. The three remaining milestones are scheduled for completion by the end of the program in December.

In addition, USEC and its subsidiary American Centrifuge Demonstration, LLC signed an amendment July 24 to the June 2012 RD&D cooperative agreement with DOE that provides an additional $29.9 million in government cost-share, bringing total DOE funding to $227.7 million, sufficient to fund the program through September 30, 2013. The cooperative agreement defines the scope of the RD&D program and establishes an 80 percent-20 percent cost sharing split between DOE and USEC of up to $350 million.

“To date, the program has achieved every milestone ahead of schedule and with solid results. The overall program remains on schedule and on budget,” said Paul Sullivan, vice president of American Centrifuge and chief engineer. “The technology works, and we are getting excellent results.”

Over the course of this summer, the program completed the integrated systems testing program for the 120-centrifuge commercial cascade, which would be duplicated 96 times in a proposed commercial plant. All of the commercial-grade centrifuges are now spinning individually at target speed, and the process of conditioning the centrifuges and related piping on uranium hexafluoride gas is underway. USEC expects to operate the centrifuges as an interconnected cascade in the fourth quarter, once startup and conditioning actions are completed in the third quarter.

The RD&D program is supported by 169 companies in 28 different states engaged in various construction, manufacturing and operations activities. Earlier this year as the 120-machine cascade was being assembled and installed, more than 300 jobs were added in Ohio, Tennessee and other states, raising the total project workforce to more than 1,100 workers. A full commercial build out of the technology would create more than 8,000 jobs at peak construction.

Beyond proving the reliability and readiness of the American Centrifuge technology, the RD&D program will ensure that the United States has its own indigenous uranium enrichment technology to meet national security needs. With the recent cessation of enrichment at the gaseous diffusion enrichment facility in Paducah, Ky., the United States for the first time in more than 60 years is without its own technology in operation to enrich uranium and today is completely dependent on foreign-controlled technologies for the production of new nuclear fuel that generates almost 20 percent of America’s electricity.

Funding

Under the 80-20 split, DOE’s total contribution would be up to $280 million, and USEC’s would be up to $70 million. With this latest increment, DOE’s funding now stands at $227.7 million, which takes the program through the end of the current federal government fiscal year on September 30.

DOE’s remaining cost share of up to $52.3 million is conditioned upon the availability of appropriations or other sources of consideration and on USEC continuing to meet all milestones and deliverables on schedule. The company is continuing to work with Congress and the administration to obtain funding for the remaining DOE cost-share needed to fund the RD&D program to completion in December 2013. The administration included transfer authority of $48 million to fund the program in the President’s Fiscal Year 2014 budget proposal and the same funding level is in the FY2014 Energy and Water Appropriations bill approved by the U.S. House of Representatives on July 10, 2013 and in the Senate version of the bill reported to the Senate by the Senate Appropriations Committee on June 27, 2013. USEC believes that this level of funding, if provided, would be sufficient to complete the RD&D program, though there are no assurances the additional funding will be made available.

An informational video on the RD&D program can be accessed at http://www.usec.com/video/american-centrifuge-investing-americas-energy-future. You can also view photographs of the full 120-machine demonstration cascade at http://www.usec.com/media/photo-gallery.

USEC Inc., a global energy company, is a leading supplier of enriched uranium fuel for commercial nuclear power plants.

Forward-Looking Statements

This news release contains “forward-looking statements” within the meaning of Section 21E of the Securities Exchange Act of 1934 – that is, statements related to future events. In this context, forward-looking statements may address our expected future business and financial performance, and often contain words such as “expects”, “anticipates”, “intends”, “plans”, “believes”, “will” and other words of similar meaning. Forward-looking statements by their nature address matters that are, to different degrees, uncertain. For USEC, particular risks and uncertainties that could cause our actual future results to differ materially from those expressed in our forward-looking statements include, but are not limited to: risks related to the ongoing transition of our business, including uncertainty regarding the transition of the Paducah gaseous diffusion plant and uncertainty regarding continued funding for the American Centrifuge project and the potential for a demobilization of the project; uncertainty regarding the timing, amount and availability of additional funding for the RD&D program and the dependency of government funding on Congressional appropriations; restrictions in our credit facility on our spending on the American Centrifuge project and the potential for us to demobilize the project; limitations on our ability to provide any required cost sharing under the RD&D program; uncertainty concerning our ability through the RD&D program to demonstrate the technical and financial readiness of the centrifuge technology for commercialization; uncertainty concerning the ultimate success of our efforts to obtain a loan guarantee from DOE and other financing for the American Centrifuge project and the timing and terms thereof and the potential for a demobilization of the project if financing is not in place at the end of the RD&D program; potential changes in our anticipated ownership of or role in the American Centrifuge project, including as a result of the need to raise additional capital to finance the project; the impact of actions we have taken or may take to reduce spending on the American Centrifuge project, including the potential loss of key suppliers and employees, and impacts to cost and schedule; the impact of delays in the American Centrifuge project and uncertainty regarding our ability to remobilize the project; the potential for DOE to seek to terminate or exercise its remedies under the RD&D cooperative agreement or the June 2002 DOE-USEC agreement; changes in U.S. government priorities and the availability of government funding, including loan guarantees; and other risks and uncertainties discussed in our filings with the Securities and Exchange Commission, including our Annual Report on Form 10-K and quarterly reports on Form 10-Q, which are available on our website at www.usec.com. We do not undertake to update our forward-looking statements except as required by law.

USEC Inc.
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