Regardless of the decision on continued operation of Paducah, USEC has significant sales of SWU in our backlog for delivery in 2012. Revenue from the sale of SWU is expected to be in a range of $1.45 and $1.50 billion, or roughly $100 to $150 million more than 2011. Uranium revenue will be dependent on the level of Paducah production in 2012 because uranium available for sale is a function of underfeeding the enrichment process. We anticipate buying 5.5 million SWU from Russia under the Megatons to Megawatts program during 2012. Under the pricing formula, the price paid to Russia will increase 2 percent compared to deliveries in 2011.
In prior years, contract work at the former Portsmouth GDP for DOE represented approximately three-quarters of revenue for the contract services segment. USEC’s contract services work at Portsmouth was largely completed in September 2011 and revenue for that segment is expected to decline significantly in 2012. Contract services segment revenue will also be affected by any decision regarding continued production at Paducah, and our subsidiary NAC will represent a growing percentage of revenue for the segment.
The Company expects to make a decision regarding operation of the Paducah plant by May 2012, although WARN Act notices to affected employees could be sent out well before that date. USEC is engaged in a multi-faceted review regarding the facility that involves customers, DOE and power supplier TVA. USEC has significant inventory of LEU and expects to continue to purchase LEU from Russia. However, based on our current view of the market, USEC does not see sufficient demand to support production of low enriched uranium for utility customers after our power contract with TVA expires. A decision to cease commercial enrichment would affect financial results for 2012. For example, expensing certain assets at Paducah, such as previously capitalized leasehold improvements, machinery and equipment located there could be accelerated. USEC could also incur significant costs related to severance costs and curtailment charges related to our postretirement benefit plans. Such costs would likely result in a significant net loss for the year. Alternatively, in lieu of a decision to cease full Paducah commercial operations, the company could pursue reduced operations or take actions to reduce fixed costs at the plant that could have negative consequences on results of operations and financial condition.
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