March 22, 2000
Hearing set for USEC financial woes
By Joe Walker
A hearing is set for April 6 to investigate financial trouble that 1st District U.S. Rep. Ed Whitfield fears could trigger closing the Paducah Gaseous Diffusion Plant or its sister plant near Portsmouth, Ohio.
Whitfield, R-Hopkinsville, said he expects to chair much of the hearing, before the House Commerce Committee's Oversight and Investigations Subcommittee, because of its significance to Paducah. Whitfield is a member of the subcommittee, regularly chaired by Rep. Fred Upton, R-Mich.
Rep. Ted Strickland, D-Ohio, whose jurisdiction includes the Portsmouth plant, also will be involved, Whitfield said.
The hearing, scheduled in Room 2322 of the Rayburn House Office Building in Washington, is designed to explore the financial status of USEC Inc., which operates the plants to enrich uranium for nuclear fuel.
When USEC was privatized in July 1998, it signed an agreement with the Treasury Department to keep the plants running until 2005 unless certain "significant events" occurred - one being that the long-term corporate credit rating of the firm "is or is reasonably expected in the next 12 months to be downgraded below an investment grade rating."
On Feb. 3, USEC announced numerous cost cuts, notably eliminating 850 jobs at the plants this year. A day later, Standard and Poor's dropped the firm's credit rating below investment grade, prompting the plant atomic workers' union to accuse USEC of planning the move to prepare to close a plant.
The Nuclear Regulatory Commission is investigating the situation, but Treasury Department officials say they will look into the matter only if USEC formally notifies them of a significant event.
Whitfield said the credit drop and the NRC's involvement are among the reasons for the hearing. He said the Treasury Department "doesn't act particularly interested" or informed about the developments.
"From my perspective, I have not found the Treasury Department particularly helpful at this point," Whitfield said. "... It's obvious to everyone that this significant event has occurred."
Besides the credit downgrade and job cuts, Whitfield pointed to USEC's buyback of 20 million more shares of stock for a total of 30 million shares and having $500 million in bonded debt due in about five years.
"We need to have clear understanding of their ability to meet that long-term debt and explore that issue in more detail," Whitfield said.
The hearing is expected to last a day. Although a witness list had not been compiled, Whitfield said it would include financial analysts as well as officials of USEC, the Clinton administration and plant employee groups.
USEC also has cut its $1.10 dividend in half and anticipates much lower earnings for fiscal 2001 starting July 1. Earnings were expected to be $35 million to $45 million, compared with $48.7 million for the first half of fiscal 2000.
Whitfield said the hearing is not intended "to pound USEC into the ground," but Congress is entitled to answers, particularly since the firm continues to ask for federal funding.
USEC failed to get money from Congress last year to help offset its financial burden as the agent for enough Russian uranium to equal the production of one of the plants. The uranium, derived from warheads, is being imported under a nuclear disarmament agreement.
The company is now asking for money from the Department of Energy for various research projects, Whitfield said.
The Russian agreement requires the Clinton administration to report to Congress by the end of each year on the deal's effects on USEC business and plant operation, and on proposed actions to lessen any adverse impacts, Whitfield said.
"Congress has not received anything from the administration relating
to that," he said.