Despite the idea of a pact between competitors, USEC is moving ahead with plans for its own plant.
By Joe Walker firstname.lastname@example.org
USEC is racing with Louisiana Energy Services — a consortium led by Urenco, a European enrichment firm — to build a commercial gas centrifuge plant by the end of the decade at Hartsville, Tenn.
Timbers declined to speculate if the shrinking enrichment market can support two plants, but said he supports "free and open thinking" among USEC, Urenco and the two other major enrichment suppliers worldwide.
He spoke in an interview here Monday prior to a USEC board meeting today at the Paducah Gaseous Diffusion Plant.
"I think it's fair to say that over the years I have spoken both to Urenco management and owners of Urenco about ideas of working together in the industry," he said. "I have always been open to a creative approach about how the industry can be reconfigured and work together."
However, there has been no partnering discussion with LES, Timbers said, and USEC is moving ahead with plans for its own plant.
"I'm not going to sit around and wait for the realignment of the industry stars," he said. "I'm more interested in taking those steps necessary for our long-term strength and vitality."
USEC's commercial plant will require about 1,000 construction workers and 500 permanent jobs. Under a new agreement with the Department of Energy, construction will begin in Piketon in 2009 or Paducah in 2010.
But funding remains questionable.
USEC earnings dropped from $78.4 million in fiscal 2001 to $16.2 million last fiscal year, ending June 30. USEC is projecting $9 million to $12 million in net income this year, which reflects spending about $150 million during the next few years to prepare to build a test gas centrifuge plant in either Paducah or Piketon.
Timbers said that by 2005, the 240-centrifuge demonstration plant will have begun testing the cost-efficiency of the process, which uses far less electricity than outdated, expensive technology used at the existing Paducah plant.
"Then we'll have a much stronger base to raise capital on our own and perhaps join with others as partners on the program," he said.
Timbers said the $1 billion to $1.5 billion needed to build a commercial plant may come in a variety of forms, including partnerships. Whether a partner is needed will depend on results of the test plant, market conditions and the financial status of USEC, he said.
By 2005, USEC may well be a much more diversified firm than the enriched-uranium producer it is now, he said. Timbers said USEC already is doing environmental cleanup work for the Energy Department, mainly at a closed enrichment plant in Piketon.
Timbers said USEC's contract with Russia is another factor in the future "clearer picture" about the need for one or two centrifuge plants.
Through 2013, USEC is buying enriched uranium derived from former Soviet nuclear warheads. Timbers said mixing the lower-priced Russian material with the higher-cost material produced at Paducah helps keep the company competitive and preserves the plant.
But Russia could eventually pull out of the deal, which would change USEC's financial picture considerably, he said.
A year ago, USEC and the Paducah plant nuclear workers were at a stalemate in signing a new contract. The union — which had expressed worry that USEC would eventually become solely a broker of Russian uranium and close the plant — eventually signed a one-year extension that will be renegotiated soon.
Timbers said USEC will never be solely a broker of Russian uranium because of specific commitments made by the company and Energy Department in June, and because of economic factors. He said the agreement "carefully balances" domestic production, centrifuge development and the Russian deal by requiring USEC to run the Paducah plant at certain production levels.
"If we don't produce here at Paducah, if we only became a broker, the government's commitment to us as being the exclusive executive agent for the Russian deal would evaporate," he said. "The Energy Department's commitment to us on centrifuge technology would evaporate."
Economically, USEC makes the Russian deal work by having complementary production at Paducah, he said.
"We make and buy as a company," Timbers said. "It's OK from an economic standpoint if you just make it, but it's not OK if you just buy it."
He said a future White House administration could nix the Russian deal, or Russia itself could pull out. Russia has delayed deliveries four times.
"Do you realize the inventory we would have to maintain to protect ourselves based on that kind of scenario?" he said. "That's why from both a technical-agreement standpoint and a business standpoint, that claim that we're just going to be brokers doesn't hold any water."