January 24,2000

USEC talking with DOE about cooperation in developing U.S. Centrifuge Plant

USEC Inc. has been talking with DOE about a partnering arrangement to build a gas centrifuge plant at Portsmouth, Ohio, sources said, and USEC's board is likely to discuss the idea when it meets this Tuesday.

The idea is still very much embryonic, but it was apparently raised at a meeting earlier this month between USEC officials and Energy Secretary Bill Richardson (NF, 10 Jan., 12). If the board gives USEC management the go-ahead, the next step would be to form a joint working group to flesh out issues and how any USEC-DOE collaboration/cooperation might proceed, sources suggested. Among other things, DOE still owns the Gas Centrifuge Enrichment Plant (GCEP) building at Portsmouth and that could be leased by USEC, which would save the company construction time, said one source.

Since it canceled its atomic vapor laser isotope separation (AVLIS) program last summer, USEC has been struggling to come up with a strategy for deploying an advanced technology to replace the aging and increasingly higher cost gaseous diffusion plants. The company announced that it was looking at all centrifuge options, including restarting a U.S. centrifuge program that was abandoned in 1985 when DOE opted to develop the AVLIS technology. Some sources speculated that USEC would look at all the centrifuge designs that DOE still owns and try to modify them to produce a small and efficient centrifuge that USEC could build itself.

Whether some announcement that it was pursuing centrifuge talks with DOE would reassure investors is unclear. USEC's stock hit another 52-week low Jan. 20, closing at $6.50 a share on the New York Stock Exchange, down about 19 cents.

Some market sources have their doubts. Said one: "Even if everything broke right for USEC," the best it could hope to do would be to have a plant up and running in five to seven years producing SWU at about $80/SWU, which would not even be competitive with SWU produced by today's Urenco centrifuges.

And then there are the issues of what DOE gets out of any collaboration with USEC and whether DOE would run into legal difficulties if it collaborated with USEC without giving others a chance to bid on any new centrifuge project. "A sweetheart deal...won't fly," said one source.

USEC's other centrifuge options involve some type of deal with either Urenco or Russia. Most market observers say they believe Urenco is not interested in selling its machines to USEC. And trying to hook up the smaller Russian centrifuges in a U.S. plant would require so much piping that the output would be uneconomic, said a knowledgeable source. USEC is likely to continue to fund the Silex Systems Ltd. laser enrichment process. But deployment of that system on a commercial scale-if that is feasible-is still years away, in the opinion of a number of enrichment experts. (written by Michael Knapik, Washington; Ray Silver, Toronto)