DOE cost-sharing will provide additional financial resources for continued demonstration and manufacturing activities;Targeting to update loan guarantee application this summer
- By Linton Levy -
USEC Inc. has reported on its progress during the first quarter of 2010 in deploying the American Centrifuge technology and its preparation to update its application pending before the Department of Energy’s Loan Guarantee Office.
“We had a very solid quarter of accomplishments for the American Centrifuge project. With our strategic suppliers, we completed assembly, installation and start-up activities for approximately two dozen of our AC100 machines, which are the production-ready commercial centrifuge machines. In March, we began operation of a cascade of AC100 machines in a commercial plant configuration. This accomplishment will provide substantial data and operating experience, and confirms that this technology is ready for commercial deployment,” said John K. Welch, USEC president and chief executive officer. “We are targeting to update our application with the Loan Guarantee Office this summer.”
Operation of the AC100 Lead Cascade is an important accomplishment in USEC’s efforts to respond to DOE’s technical concerns. These are production machines built by our suppliers, and the cascade’s operation highlights the continued progress we are making. The cascade has been operating successfully since it came on-line. Our objective is to accumulate significant cascade run-time while we continue to manufacture and install additional centrifuge machines.
Our centrifuge manufacturing suppliers have continued to build parts and have assembled approximately 20 additional machines that we are operating individually and that we may introduce into the current cascade later this year. These suppliers are continuing to make parts and assemble additional AC100 machines. As a result, the remaining machines in a cascade of prototype centrifuge machines that operated since August 2007 were taken out of service in April 2010 at the completion of the initial Lead Cascade testing program. We expect to replace the prototype machines taken out of service with these additional AC100 machines.
We also announced in March 2010 a cooperative agreement with DOE for pro-rata cost sharing to fund continued American Centrifuge activities. DOE has made $45 million available by taking the disposal obligation for a specific quantity of depleted uranium from USEC, which will release encumbered funds for investment in American Centrifuge demonstration that USEC had otherwise committed to future depleted uranium disposition obligations. Under the agreement, USEC will provide $45 million of cost sharing. This additional funding will support over 350 jobs in the continued operation of the Lead Cascade, manufacturing of additional AC100 centrifuge machines, and refinement to the rotor tube manufacturing process in preparation for full, high-rate production.
As of March 31, 2010 our investment in American Centrifuge totals approximately $1.8 billion. Since August 2007 we have operated centrifuges as part of our Lead Cascade test program for approximately 365,000 machine hours, giving us the data and expertise to begin the transition to commercial operation.
USEC’s operating plan for the Lead Cascade, as well as the commercial plant, calls for the ability to remove, replace and repair any centrifuge, as necessary, with a spare machine. Several spare machines are in position in our AC100 Lead Cascade and running at full speed with uranium gas. Under our Demonstration Facility license with the NRC we will need to remove the uranium from all machines in the Lead Cascade testing program during a two-week period in May 2010 to confirm the amount of uranium in the program’s inventory. The AC100 machines will continue to spin at speed during this period.
We need additional financing to complete plant construction and we have reduced the scope of project activities that were underway in 2009 until we have that financing. We believe the DOE Loan Guarantee Program, created by the Energy Policy Act of 2005, is the path for obtaining $2 billion in debt financing to build the American Centrifuge Plant. In March 2010, DOE indicated it plans to reallocate an additional $2 billion in loan guarantee authority to the front-end nuclear facilities loan guarantee program. However, we have no assurance that a DOE Loan Guarantee will be made available to us. In addition, to complete the project, USEC will require additional capital beyond the $2 billion loan guarantee program funding and internally generated cash flow.
In August 2009, DOE and USEC announced an agreement to delay a final review of our loan guarantee application for the ACP. As a result, we significantly demobilized and reduced construction and machine manufacturing activities in the American Centrifuge project in order to preserve liquidity. We continue to believe in the American Centrifuge technology and we are working to address DOE’s technical and financial concerns. In parallel, we are continuing American Centrifuge demonstration activities, evaluating how best to configure the project on a go-forward basis, and evaluating our strategic options for the future of the project. We are targeting to update our application with the DOE Loan Guarantee Program this summer.
Construction of the plant infrastructure and work to finalize the balance-of-plant design ceased in August 2009. However, we continued to incur costs associated with demobilization including procurement of materials under existing contractual obligations in accordance with reductions in the scope of work with our suppliers. The plant design work is approximately 80 percent complete and would be resumed following a decision to remobilize the project. We plan to continue manufacturing a limited number of centrifuge machines over the balance of 2010 as part of the scope of work under the March 2010 cooperative agreement with DOE to maintain our supplier base and demonstrate the capability to manufacture production ready centrifuge machines within our design specifications.
USEC Inc., a global energy company, is a leading supplier of enriched uranium fuel for commercial nuclear power plants.