Financing a concern for American Centrifuge Plant

10 November 2008

USEC has said that, despite "substantial progress" with constructing the American Centrifuge Plant (ACP), it remains uncertain how the uranium enrichment plant will ultimately be financed.

The company reported that all of its major suppliers have been fully qualified to begin manufacturing components and have been preparing their facilities for high-volume manufacturing. USEC is preparing to install its next cascade of 40 to 50 AC100 centrifuge machines. The company said, "Under our current schedule, we expect to receive the first AC100 machines from our manufacturers in November and begin AC100 Lead Cascade operation by the end of the first quarter of 2009.

John Welch, USEC president and CEO, commented: "This is a crucial time period for the American Centrifuge programme. We have finalized the initial design for our state-of-the-art machine and our strategic suppliers are manufacturing components." He added, "The centrifuges we install over the next few months for the cascade of AC100 machines are anticipated to be the initial building block for the 3.8 million SWU plant."

USEC has completed a review of the cost to build the ACP and in August announced a project budget of $3.5 billion. This budget includes amounts already spent but does not include financing costs or financial assurance. The company has already spent just over $1 billion on the project.
In a statement, USEC noted, "If project management determines that costs will exceed the budget (including the built-in management reserve), and such costs cannot otherwise be offset or financed, we may elect to deploy fewer centrifuge machines in the plant to mitigate such potential cost growth."


Financing issues
The company plans to begin commercial operations at the plant at the end of the first quarter of 2010, and reaching 1 million SWU capacity in the first quarter of 2011 and the full 3.8 million SWU capacity at the end of 2012. However, USEC said, "Our ability to stay on schedule will depend on several factors, including expected cash flow from operations, the anticipated spending profile for the project, and our progress with respect to obtaining financing or a financing commitment under the Department of Energy (DOE) loan guarantee programme, each of which is uncertain."

USEC said it still needs to raise the remainder of the capital needed to construct the ACP and "this has been and will continue to be a focus of management." The company does not "believe public market financing for a large capital project such as ACP is available to us given current financial market conditions. We view the DOE loan guarantee program as the path for obtaining the debt financing to complete the American Centrifuge project."

The company applied for $2 billion in federal loan guarantees in July and its application is under review by the DOE. However, USEC commented, "we have no assurance that our project will be selected to move forward in the programme and it could take an extended period for the loan guarantee and funding to be finalized. Accordingly, on a parallel path, we continue to evaluate alternative sources of capital, including potential third-party investment at the project level."

USEC said, "If we are not able to obtain timely action from DOE or obtain an alternate capital commitment, we will be forced to slow spending on the project, which will result in potentially significant schedule delays and increased costs, or take other actions to ensure that we have adequate liquidity for our ongoing operations."

In September, USEC created new wholly-owned subsidiaries to carry out future commercial activities related to the American Centrifuge project. These subsidiaries will own the ACP and equipment, provide operations and maintenance, manufacture centrifuge machines and conduct ongoing centrifuge research and development. "This corporate structure will separate ownership and control of centrifuge technology from ownership of the enrichment plant and also establish a separate operations subsidiary," USEC said. "This structure will facilitate DOE loan guarantee financing and potential third party investment at the project level, while also facilitating any future plant expansion," according to the company.