Despite the action, a shareholder's meeting is upbeat as USEC says it will decide on gas centrifuge in Paducah next year.
By Joe Walker email@example.com
While defending a federal lawsuit alleging securities fraud, USEC Inc. will decide next year whether to proceed with gas centrifuge technology to replace the expensive, outdated process used at Paducah's uranium enrichment plant.
USEC President and Chief Executive Officer William H. Timbers, a defendant in the lawsuit, told shareholders in a meeting Wednesday that the claims against the firm in U.S. District Court at Paducah are groundless.
"We believe the complaint is without merit and we will act appropriately," USEC Communications Vice President Charles Yulish said Friday.
The suit was filed Oct. 27 by two of the lawyers — Bill McMurry of Louisville and Joe Egan of Washington, D.C. — who sued former operators of the Paducah plant for billions of dollars, alleging they poisoned workers and the public with radiation and toxins. USEC is not part of the environmental suits.
The securities complaint, filed for shareholder Paul Spirgel, seeks unspecified damages on behalf of other stockholders, alleging they were misled about financial risks. The suit seeks to be declared a class action.
In July 1998, USEC was privatized through the sale of 100 million shares in a $1.9 billion stock offering. Since then, its securities have plummeted from $14.25 per share to roughly $4.50. The lawsuit alleges the stock dropped after USEC failed to adequately disclose that the uranium-enrichment market was in serious decline and downplayed the likelihood that a long-term contract to buy overpriced Russian uranium would become unprofitable.
USEC also is accused of misleading shareholders by abandoning a promising laser-based technology known as AVLIS only months after highly touting it, and by not fully revealing environmental liabilities.
Instead, USEC claimed in a prospectus to be financially strong and that the world enrichment market would be stable for 10 to 15 more years, the lawsuit claims.
Other defendants in the suit are seven Wall Street financial firms — including Morgan Stanley Dean Witter and Merrill Lynch — who were chief underwriters of the huge stock offering.
Although the complaint was filed before Judge Edward Johnstone, he withdrew Tuesday in favor of Judge Thomas Russell.
Despite the allegations, Timbers' address to shareholders Wednesday was upbeat, saying USEC will decide next year about gas centrifuge, which is much cheaper to operate than the 50-year-old gaseous diffusion technology used at Paducah. Centrifuge and SILEX, a less-developed process using lasers, are being considered as replacements for gaseous diffusion.
USEC and the Department of Energy are working to build a demonstration centrifuge plant at Piketon, Ohio, where USEC operates another uranium enrichment plant. The Piketon plant will be closed in June as USEC upgrades the Paducah plant. Federal lawmakers from Kentucky are insisting that Paducah have an equal chance for a centrifuge facility.
According to a USEC news release, Timbers told shareholders that USEC is awaiting government approval of a new agreement it has reached with Russia to lower prices. The new pact would take effect in 2002.
Under the existing 20-year agreement, USEC is paying more for the Russian material than the production costs of the Paducah and Piketon plants.
At the shareholders meeting, James Mellor, chairman of the USEC board, said the company expects to lower production costs by closing the Ohio plant and upgrading the Paducah plant. USEC also has a a new 10-year power contract with the Tennessee Valley Authority to eliminate summer spikes in the cost of electricity at Paducah, he said.
Besides the centrifuge project, USEC is considering working with DOE to process depleted uranium, and clean up and shut down unused nuclear facilities at the plants, Timbers said.