Centrifuge plans moved up a year
USEC Inc. has moved a year ahead toward building a 500-job gas centrifuge plant and will announce by late this year whether Paducah or Piketon, Ohio, will get the nod.
Bid requests for the $1.5 billion commercial plant will go out in mid-August. The company will open a 50-job demonstration plant in Piketon in 2005 rather than 2006, and start building the commercial plant in 2006 instead of 2007.
The development carries huge weight for Paducah, which USEC says is disadvantaged because of earthquake concerns and because Piketon has had a test centrifuge plant mothballed for nearly 20 years. Starting next year, USEC will refurbish the Piketon plant, using as many as 240 centrifuges, said William "Nick" Timbers, president and chief executive officer.
USEC will apply in August 2004, seven months ahead of schedule, for a commercial plant license from the Nuclear Regulatory Commission, he said. The commercial plant is slated to be in full operation by early next decade and ultimately replace the outdated, 1,200-worker Paducah Gaseous Diffusion Plant.
USEC's decision, announced Wednesday afternoon with its earnings statement, is contrary to hopes expressed by gubernatorial opponents Ernie Fletcher and Ben Chandler that the firm would not alter the schedule until after the Nov. 4 election. Each wrote the company, asking that his administration be engaged in site selection and have a chance to land the commercial plant in Paducah.
However, Timbers said USEC is moving ahead "so that we might shave significant time off our ultimate goal of operating the most efficient commercial centrifuge plant in the world."
Community Development Commissioner J.R. Wilhite, who led Kentucky's bid last year for the test plant, said the faster schedule should not hinder putting an incentive package together for the commercial plant.
"The quicker time frame is really not a problem for us as long as the (request for proposals) gives us enough time to assemble a package," he said. "If they run it as they did last year, we'll have sufficient time."
Wilhite said it will help if USEC has more information on the added cost of making a Paducah commercial plant earthquake-resistant. Having been through the proposal process once should help the state try to overcome the seismic problem and Piketon's having a test plant facility, he said.
"Obviously, those are real issues, and we'll have to take them into account when we put our proposal together to compete with Ohio," he said. "We'll do our best to address it and have a very competitive proposal for Paducah and for Kentucky."
Ken Wheeler, chairman of the Greater Paducah Economic Development Council, said local leaders "will be fully supportive and expect to put together a very positive and aggressive bid."
Timbers said USEC has already met or exceeded the first four milestones and should meet a fifth — manufacturing a centrifuge rotor tube — well ahead ahead of the November target. Increased spending will lower near-term earnings but should mean lower production costs for many years to come, he said.
Gas centrifuge, which spins at high speed to enrich uranium for nuclear fuel, uses only a fraction of the massive power costs of gaseous diffusion. Stable seismic conditions are critical to centrifuge, and Paducah is in the New Madrid Fault area.
Long before USEC was formed, the Department of Energy built the Piketon test plant but stopped short of commercial production to study laser-based technology. USEC took over the laser study and determined gas centrifuge was more cost-efficient.
Under a June 2002 agreement with the Energy Department, USEC must run the Paducah plant at a certain annual production level until it is within six months of operating a replacement centrifuge plant with the same capacity. The target is 2010 if the commercial plant is in Piketon, and 2011 if it is in Paducah.
Leon Owens, president of the Paducah nuclear workers' union, said he expected USEC to accelerate the schedule.
"We all understand the position we're in," he said. "USEC said early that the lead cascade (test plant) proposal should include information relative to the commercial plant. I think that's the path the state took."
Owens said the union, representing more than 500 plant workers, is focusing on keeping the diffusion plant open regardless of who gets the centrifuge plant. He said USEC's "pivotal" years are 2006-07, when it must pay $500 million in federal debt from privatization and find a partner to share the huge commercial plant cost.
"By no means is the corporation out of financial trouble," Owens said.
USEC reported second-quarter earnings of $4.3 million, compared with $7.1 million during the same period last year. Because of the faster schedule, it spent nearly $7.5 million more on centrifuge technology. Higher spending means that 2003 earnings are projected to be roughly $10 million.