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Closing Piketon is an option, USEC says |
Saturday, December 11, 1999
By Jonathan Riskind
WASHINGTON -- The president of the company running America's two uranium-enrichment plants has let Wall Street know he aims to maximize corporate profits -- even if that means shutting down one of the facilities.
The company, USEC, would choose between the plant in Piketon, Ohio, which employs about 2,000 workers, or a sister plant in Paducah, Ky., that employs about 1,800. The Paducah plant is being upgraded to match Piketon's capacity.
Before closing either plant, USEC would have to show that it wasn't violating the terms of an agreement with the federal government promising to keep both sites open until at least 2005.
But William H. Timbers Jr., USEC's president and chief executive officer, said the company "will not put anything off the table where profitability is concerned,'' according to an Oct. 11 report by a Morgan Stanley Dean Witter analyst obtained by The Dispatch.
"In its single-minded focus on profitability, Mr. Timbers said the company is analyzing whether to shut down one of its two production plants,'' the report said. "Savings might be around $100 million annually.''
Morgan Stanley managed the $1.9 billion stock offering that turned the federal United States Enrichment Corp. into the private USEC.
After the privatization last year, 500 people at the plants were laid off. About another 850 people will reportedly lose their jobs after the government's privatization restrictions on further layoffs are removed in July.
USEC unsuccessfully sought a federal bailout of up to a $200 million this fall. It complained its role as the executive agent in charge of carrying out a Russian arms-control deal on behalf of the U.S. government was costing it money. That is part of the reason, USEC officials have said, layoffs might be needed.
Secretary of Energy Bill Richardson rejected the bailout partly because he questioned USEC's need for the money and partly because the company refused to tie worker protections to government assistance.
While Richardson "continues to be concerned about of the future of the workers . . . we fully expect USEC to meet its obligations'' to operate the plant through 2004, an energy department official said.
Critics say the company's need to pay a $100 million annual dividend to shareholders -- a group already steaming because the company's current stock price of about $7.50 is down from its $14 initial offering value -- is the main reason big cost reductions are required.
The critics also note that USEC officials said before privatization they could carry out the Russian deal -- which involves buying Russian enriched uranium culled from nuclear warheads and selling it as commercial nuclear power plant fuel.
A USEC spokeswoman stressed there is no imminent plan to shut down a plant, but acknowledged many cost-cutting options are being considered.
"In an effort to remain competitive in the global market USEC is evaluating its costs and looking for possible ways to reduce its costs,'' Elizabeth Stuckle said. "USEC is looking across the board at everything.''
But the law allowing for privatization requires USEC to keep both plants open until at least January 2005 unless certain financial conditions are met, Stuckle said.
Those conditions include operating at less than a 10 percent profit margin for 12 consecutive months and having the company's credit rating downgraded to lower than investment grade value.
Profit margins twice have dipped below that level, but not in consecutive quarters, and USEC's credit rating has been downgraded but remains above the minimum for investment grade.
USEC's most recent financial report filed with the Securities and Exchange Commission doesn't predict any of the conditions required to close a plant being met soon.
But Rep. Ted Strickland, D-Lucasville, is worried that USEC has "little regard'' for its commitment to keep both plants.
Strickland said he wants a meeting with Richardson to discuss the possibility of the federal government buying back the nation's uranium-enrichment industry to ensure a long- term domestic source of the material is safeguarded.
Meanwhile, in light of Timbers' comments, "I hope this information is compelling enough to cause any decision-makers in the federal government to hold the company's feet to the fire in terms of the commitments it has made,'' Strickland said.
Piketon workers, already bracing for more layoffs, are hoping USEC decides to invest in new technology for its long-term future instead of closing a plant for short-term profits, said Dan Minter, president of the Paper-Allied Industrial, Chemical and Energy Workers International Union, which represents workers.
Copyright © 1999, The Columbus Dispatch