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Critics question USEC's request for $200 million |
Thursday, November 04, 1999
By Jonathan Riskind
WASHINGTON -- The federal corporation created to cut the costs of running southern Ohio's uranium-enrichment plant wants a $200 million bailout from taxpayers.
Critics ranging from lawmakers to arms-control experts say the request is further evidence that officials made a bad decision in privatizing the United States Enrichment Corp.
At its plants in Piketon, Ohio, and Paducah, Ky., USEC converts low-grade Russian uranium into enriched uranium to be used as fuel for nuclear-power plants as part of a "swords-into-plowshares'' deal in 1993.
The bailout request might intensify the push for congressional hearings about the Clinton administration's decision to push forward with the privatization of the nation's uranium-enrichment operations. A privatization investigation launched by the House Commerce Committee first was disclosed in August by The Dispatch.
But the administration isn't looking kindly on USEC's request, either.
Secretary of Energy Bill Richardson told William H. Timbers Jr., the company's chief executive officer, in a letter obtained by The Dispatch that the company's request for $200 million is based on "questionable'' assumptions and "very general'' data.
Richardson said he is concerned USEC might be exaggerating its cost of implementing the agreement with Russia.
"We believe the true financial need may be much lower, or zero,'' he said.
Richardson also said he is concerned that USEC isn't taking the necessary actions to keep the Russian uranium flowing out of that country in large enough amounts.
Richardson said USEC's inefficiency makes him "uneasy about the stability of the path we are on in implementing this critical national- security agreement. It also clouds your request for assistance.''
Meanwhile, the head of the House committee probing the privatization also is critical of USEC's request for taxpayer aid.
"Last year, USEC convinced the Clinton administration that after privatization, it would maintain its obligations under the (Russian deal),'' said Rep. Thomas J. Bliley Jr., R-Va., commerce committee chairman. "Now, USEC is saying it cannot meet its responsibilities without federal help, and their bidding apparently starts at $200 million.
"The committee's investigation will continue to seek answers to why the Clinton administration and USEC did not anticipate or prepare for these problems and what the administration and USEC are doing to fix national-security issues, maintain long-term domestic uranium enrichment services and keep both plants open.''
Critics such as Rep. Ted Strickland, D-Lucasville, a commerce- committee member, note that USEC promised privatization, which occurred in 1998, wouldn't hinder the Russian deal or require taxpayer subsidies.
"What the government actually got out of this privatization deal is dissipating by the month,'' he said. "It calls into question the entire privatization process and decision.''
Strickland said the request for $200 million is on top of $325 million given to the Russians to subsidize the deal earlier this year.
USEC is seeking $200 million over the next two years because it can't afford to "subsidize national security'' by paying the U.S. government-negotiated price for uranium culled from thousands of Russian warheads, Timbers told The Dispatch yesterday after a shareholder's meeting in Washington.
The money would stem the financial losses USEC says it is suffering while the company negotiates a lower price with the Russians by the end of 2001. USEC isn't necessarily looking for a straight appropriation of money from Congress; for instance, it might seek a tax credit or have the government take over the liability for $200 million worth of radioactive waste left over from the enrichment process.
Timbers didn't mention the bailout request during the meeting and said USEC wants to continue as the federal government's executive agent in charge of carrying out the $8 billion, 20-year deal with Russia reached when the uranium plants still were government entities. But the deal "must provide a fair profit for USEC, and certainly not a loss,'' Timbers told shareholders.
After the meeting, Timbers said USEC must pay $88 per unit for the Russian enriched uranium, which, like the material USEC produces in its plants, is used at commercial nuclear-power plants. The market price is about $80 to $82 per unit, Timbers said.
"That's not a profitable situation,'' he said.
Plus, USEC's stock price has plunged to the $9 range since it went private with a stock offering at $14.25 per share.
However, key congressional staffers said it doesn't appear likely, particularly given the controversy over the privatization, that USEC will get its wish this fall before Congress adjourns.
USEC wouldn't need to worry about making profits or paying shareholders $100 million a year in dividends if it had remained under federal control, said Thomas Neff, the arms-control expert who crafted the Russian deal.
USEC simply wants to make a greater profit than it already is enjoying on the Russian material, said Neff, a senior member of the Center for International Studies at the Massachusetts Institute of Technology. That is because while the current market price is about $80 per unit, USEC's contracts pay it an average of about $115 per unit for the next several years, Neff said.
"They just want money from the government to give to the shareholders,'' Neff said. "They're using the national-security argument to justify money used to increase their profitability.''
Strickland said he would favor giving USEC the $200 million only if it can demonstrate its need.
Copyright © 1999, The Columbus Dispatch