USEC Inc. (NYSE:USU) is providing an updated view of financial projections for 2012 following a recently signed agreement to extend Paducah Gaseous Diffusion Plant operations through May 31, 2013.
In May, USEC entered into a multi-party arrangement with Energy Northwest, the Bonneville Power Administration, the Tennessee Valley Authority and the U.S. Department of Energy (DOE) to extend uranium enrichment operations at the Paducah, Ky. plant.
The Company has also entered into an agreement with DOE regarding a two-year, $350 million cooperative research, development and demonstration (RD&D) program for the American Centrifuge technology. USEC is evaluating the accounting treatment for the transfer of certain assets to DOE in connection with the RD&D program and the government’s cost-sharing contributions for the RD&D program. Therefore, this update does not include the effects of the RD&D program and does not include earnings guidance.
Under the Paducah agreement, Energy Northwest is required to provide USEC with approximately 9,000 metric tons of high-assay depleted uranium and 600 metric tons of natural uranium. USEC will enrich the depleted uranium tails to make about 480 metric tons of low enriched uranium. The program, combined with other USEC commercial obligations, will require approximately 5 million separative work units (SWU), a standard measure of uranium enrichment that represents the effort that is required to increase the concentration of the U-235 isotope in the uranium. The work, which began in early June, will take about 12 months. The overall tails disposal liability of the U.S. government will be reduced as a result of the agreement and subsequent processing.
USEC’s prior guidance for 2012 did not assume Paducah operations beyond May 31, 2012, and included an expectation that 2012 SWU deliveries would be roughly equivalent to 2011 deliveries. Under the new contract, USEC expects to increase SWU deliveries in 2012 by approximately 30 percent compared to last year and roughly equal to the volume of SWU sold in 2009. Revenue from the sale of SWU is expected to be approximately $1.8 billion, an increase of $300 million to $400 million over prior guidance. We anticipate the average price per SWU billed to customers will increase 5 percent over 2011. The average price billed to customers for sales of SWU increased 3 percent in each of 2011 and 2010, reflecting the particular contracts under which SWU were sold during the periods, as well as the general trend of higher prices under contracts signed in recent years. Uranium revenue in 2012 is expected to be as much as $50 million, subject to timing of sales, which is $80 million less than in 2011.