“The write-off does not affect future investment in ACP. It is not an abandonment of the project or a decision not to proceed with the project. It does not involve the cooperative research, development and demonstration program, which is referred to as the RD&D program. No taxpayer funds are at risk.
“We are on schedule and on budget for RD&D program,” Welch said. “We continue to be committed to moving forward with commercialization of the American Centrifuge. We believe the technology is the path to USEC’s long-term competitiveness in the uranium enrichment business and the best way to maximize value for all stakeholders.”
USEC evaluates the carrying value of the assets on its books for impairment annually or whenever there is a triggering event. Based on this annual review, $1.1 billion of previously capitalized costs related to the American Centrifuge project were expensed as of December 31, 2012. We continue to make progress in the deployment of the American Centrifuge technology, including the effective execution of the RD&D program with the U.S. Department of Energy (DOE) during 2012, and we are planning to update our DOE loan guarantee application during 2013. The expense of previously capitalized costs is based on an assessment of our ability to recover the full amount of this prior capital investment. In light of the significant remaining capital needed to deploy the ACP and our view of our anticipated cash flow from operations available to finance the ACP given our other anticipated cash needs during that period, we anticipate that our ultimate share of the ownership of the ACP will likely be reduced by third parties investing capital to complete the ACP, which affects our likelihood of recovering this past investment.
We are also currently developing a revised cost estimate and schedule for the project and several factors are putting pressure on the economics of the ACP, including delays in deployment and related carrying costs and other cost pressures as well as uncertainty regarding financing. This expense of previously capitalized costs does not affect any future capital investment in ACP. We would anticipate that capitalization of amounts related to the ACP would resume if and when commercial plant deployment resumes.
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