Friday, Aug. 10, 2007

USEC denies buyout talk; congressmen question contract

Nuclear fuel supplier lost $13.4M in second quarter

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Shortly after releasing poor quarterly results, Bethesda uranium-enrichment company USEC is dealing with reports that it could be acquired by a Utah nuclear business.

Energy Solutions of Salt Lake City would make a buyout offer for USEC, a former federal government entity that supplies fuel to commercial reactors, if they win a joint bid for a 15-year, $9.5 billion U.S. Department of Energy contract, two congressmen wrote in an Aug. 1 letter.

But a USEC spokeswoman said this week that the company is not a ‘‘co-sponsor of any proposal to DOE.”

‘‘We have engaged in no material agreement with Energy Solutions,” Elizabeth Stuckle said.

The alleged potential purchase was discussed in a letter by Michigan Democrats John D. Dingell, chairman of the House Committee on Energy and Commerce, and Bart Stupak, chairman of the Subcommittee on Oversight and Investigations, to Energy Secretary Samuel W. Bodman.

The lucrative contract involves the decontamination and decommissioning of uranium-enrichment plants in Ohio and Kentucky, according to the congressmen.

‘‘After taking over USEC, Energy Solutions claims it would deploy the uranium enrichment centrifuge technology that USEC is currently testing” in Ohio, they wrote.

The Energy Department has received materials containing ‘‘confidential and business proprietary information” from Energy Solutions, said Megan Barnett, a department spokeswoman. ‘‘However, DOE has made no decision to award any contract to Energy Solutions based on the materials received.” Energy Solutions specializes in handling nuclear waste, including spent nuclear fuel.

USEC reported on Aug. 2 a second-quarter net loss of $13.4 million, compared with a profit of $21.6 million for the same period last year. Higher power costs and an increase in the price of uranium from Russia contributed to the loss, officials said. USEC purchases uranium from Russia under a contract with the U.S. government.

Revenue declined by 60 percent for the quarter to $211.1 million. Earnings and revenue can also vary on the timing of when nuclear plants refuel, Stuckle said.

In USEC’s first quarter, net income and sales both increased over the previous year, and in 2006 overall net earnings more than quadrupled over 2005 to $106.2 million, while revenue rose by 19 percent to $1.85 billion.

USEC still is on schedule to begin commercial operations of the $2.3 billion uranium enrichment plant in Ohio using the centrifuge technology by 2009, Stuckle said. The Ohio plant has been closed, although USEC is testing the new technology to enrich uranium at that plant.

Concerns over higher costs

But USEC is facing higher power costs and spending on the centrifuge project, company officials said in the second-quarter report filed with the U.S. Securities and Exchange Commission.

USEC expects to spend about $320 million on the centrifuge project this year and about double that next year, executives said.

‘‘We expect that we will need participation by third parties and⁄or the U.S. government to finance and complete the project under our revised deployment schedule,” USEC executives said. ‘‘There can be no assurance that we will attract the capital we need to complete the American Centrifuge project in a timely manner or at all.”

As for the alleged sole source contract, it would be ‘‘deeply troubling” if Energy Solutions and USEC were awarded that contract to do the work on a non-competitive basis, Dingell and Stupak wrote.

‘‘Full and open competition is the only way to objectively assess if the government is receiving the best value,” they wrote. ‘‘If this sole source contract were approved, would the contract price paid to Energy Solutions constitute an indirect subsidy to fund a takeover of USEC and the financing of the centrifuges plant?”

USEC officials are also concerned about an Energy Department proposal to reduce its backing of debt on new nuclear reactors from 100 percent to 90 percent, Stuckle said. Some proposed new nuclear plants might not be built without the full backing of the government, she said.

USEC started in the early 1990s as a federal government entity and became a private company a few years later.