2012 Outlook Update
On June 27, 2012, USEC provided an update to its financial outlook for 2012. We are providing a further update to our 2012 outlook and additional details specifically related to the RD&D program. During the second quarter of 2012, we signed agreements with DOE and others that have enabled us to provide an updated view of financial projections for the remainder of the year. In May, USEC entered into a multi-party arrangement with Energy Northwest, the Bonneville Power Administration, the Tennessee Valley Authority and DOE to extend uranium enrichment operations at the Paducah, Ky. plant. In June, we also entered into an agreement with DOE regarding a two-year, cooperative research, development and demonstration program for the American Centrifuge technology. The RD&D program includes an 80 percent DOE and 20 percent USEC cost-sharing of expenses with a total estimated cost of $350 million. This agreement will be incrementally funded, and to date, DOE funding is limited to $87.7 million.
Under the Paducah agreement, Energy Northwest is providing USEC with approximately 9,000 metric tons of high-assay depleted uranium. USEC will enrich the depleted uranium tails to make about 480 metric tons of LEU. The program, combined with other USEC commercial obligations, will require approximately 5 million SWU. Production of the LEU, 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 guidance in the first quarter of 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. As a result of 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 first quarter guidance. We anticipate the average price per SWU billed to customers will increase 5 percent compared to 2011. Uranium revenue in 2012 is expected to be less than $50 million, subject to timing of sales, which is $80 million less than in 2011.