The Paducah Sun
The Paducah Sun
Thursday, September 14, 2000
Paducah, Kentucky

NRC: No action against USEC

By Joe Walker jwalker@paducahsun.com--270.575.8650
Although a new, proprietary Nuclear Regulatory Commission study describes USEC's long-term financial outlook as grim, the commission says it will take no action against the firm.

Rep. Ed Whitfield, R-Hopkinsville, confirmed that the report says the company is not expected to be profitable after 2005, which seriously jeopardizes the future of the Paducah Gaseous Diffusion Plant. Amid a glutted market with falling prices, USEC plans to shut down Paducah's sister plant near Portsmouth, Ohio, next summer and keep the Paducah plant open as its sole uranium enrichment facility.

"If it becomes obvious that for whatever reason, USEC or some other producer cannot enrich uranium profitably as a private entity, then I think we have to revisit the question of the government's taking back that responsibility," Whitfield said.

He said more hearings on the issue are a virtual certainty next year.

If the government intervenes, it must decide whether to "bail out USEC or develop new technology and see who else might want to deploy it," said Richard Miller, policy analyst for the plants' atomic workers' union.

Miller said he expects the Clinton administration to announce by next week that it take a direct role in deploying gas centrifuge as the eventual replacement for outdated, expensive gaseous diffusion used at Paducah and Portsmouth. Without a replacement technology in the near future, USEC's status is dire, as reflected by the NRC report, he said.

"The White House and the Department of Energy take this situation very, very seriously," Miller said. "We have made our views plainly and unequivocally known to the administration that any such deployment would have to be at Paducah and Portsmouth."

Miller, who said he was briefed on the NRC report but had not seen it, said one key fear by administration and congressional leaders is that USEC won't be able to meet legal requirements to provide enriched uranium to countries that get rid of nuclear weapons. As a result, those nations could switch to fueling nuclear power plants with plutonium, which also is used to make nuclear weapons, he said.

Because the report was based largely on sensitive financial information provided by USEC, it should not be publicly released, the NRC said. The agency reviewed the findings with congressional delegations earlier this week.

Whitfield, Miller and other sources gave these highlights of the report:

--USEC will be profitable through 2005 only by selling off much of its huge inventory of natural uranium in the form of uranium hexafluoride, or UF6. DOE gave USEC the stockpile as part of privatization. USEC won't be profitable enriching uranium after 2003 because of drastically lower prices under new contracts.

--USEC could be profitable after 2003 by closing both plants and becoming a broker for huge quantities of uranium taken from dismantled Russian warheads, assuming USEC can lower the price it pays for the Russian material. Price renegotiations are "running into serious trouble with the Russians," Miller said.

--Another way USEC could regain long-term profitability is to develop a cheaper alternative for gaseous diffusion. USEC is considering gas centrifuge as a replacement, but doesn't plan to have centrifuge on line until 2009.

"It's uncertain whether or not USEC would undertake the investment that centrifuge would require unless there is some government involvement," Whitfield said.

--The Paducah plant is up for recertification by NRC at the end of 2003. But USEC may be in such financial trouble then that it can't convince the commission it will be able to run the plant safely and reliably for another five years until 2008.

--A restriction that no owner can have more than 10 percent of USEC stock expires next July. As long as USEC's market price is below its break-up value, it is a target for takeover and liquidation.

The NRC investigated USEC's financial situation after the company's financial rating was downgraded to so-called "junk bond" status last spring. Although the commission regulates health and safety issues, USEC's certification with NRC requires it to maintain a reliable, economical national supply of uranium.

On Monday, NRC Chairman Richard Meserve wrote Rep. Tom Bliley, R-Va., chairman of the House Commerce Committee, saying the supply issue is mainly related to foreigners' possibly gaining control of and undermining USEC. Although that is an important concern, "it is not clear" that the issue should be addressed by NRC in recertification, he said.

Even if the concern were more broadly construed to mean preserving domestic supply, the NRC is "severely limited" in its actions, Meserve wrote, and denying certification "would shut down a domestic supply altogether."

A financial analysis included with the study is narrow and only touches on new technology, the letter said. Although the analysis could be expanded, "we do not believe that any more NRC study of the USEC situation is justified," especially considering NRC's limited options, Meserve said.

USEC spokeswoman Elizabeth Stuckle declined comment on the report, saying USEC senior managers had neither seen it nor been briefed on its contents. She referred response to remarks made last week by USEC President and Chief Executive Officer William "Nick" Timbers at the International Nuclear Materials Policy Forum.

In the speech, Timbers said "the doom and gloom scenarios about USEC's prospects are greatly exaggerated." Although USEC has had plenty of problems, it is resolving them as only a private-sector firm can do and remains "the global market leader with substantial cash flows and modest debt," he said.

Timbers said USEC has reached an agreement with Russia for market-based pricing, effective in 2002 for the remaining 13 years of the contract; secured a 10-year power contract to provide cheaper electricity for the Paducah plant; and pursued enrichment options including centrifuge and Silex laser technology.

"We expect to make a decision in the next 12 to 18 months on which technology to develop," he said.

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Copyright 2000, The Paducah Sun