Profits down at Usec

Thursday, 2 August 2007 A net loss of $13.4 million has been reported by Usec in its second quarter results. The figures reflect higher uranium and electricity costs, said the American Centrifuge company.

The loss compares badly to a net income of $56.2 million for the same period last year, although Usec said that its forecast earnings for 2007 had improved to $70-80 million from the last break-even estimate.

A Usec statement said that its difficulties were down to a 50% hike in electricity prices, which has been taking effect since June 2006, and a 5% increase in the price of the uranium it purchases from Russia as part of the Megatons to Megawatts program which repurposes nuclear explosive fuel for civilian power reactors. Mainly driven by those two factors, it said, the cost of enriching uranium had increased by 34%, although prices billed to customers would only increase by 6-8%. "Higher power prices will put significant pressure on our gross profit margin this year and beyond," said the company.

One of the reasons Usec is vulnerable to electricity prices is that its uranium enrichment plant at Puducah uses the gaseous diffusion process, which is very energy intensive. The enrichment sector as a whole is expanding the use of gas centrifuges, which use only 5% as much power.

Usec said that its five-year electricity supply contract with Tennessee Valley Authority, signed in May, would allow it more flexibility and improve opportunities to produce more separative work units (SWU), to underfeed the enrichment process and to help balance the increased cost of uranium. The company could then have more uranium available for resale, providing "additional stability and predictability in power costs." It also intends to "opportunistically" sell from its uranium stocks.

Usec said it has optimized operations at Paducah to save money, which it has put towards the technology demonstration costs of the plant's successor, the American Centrifuge plant. 'Advanced technology expenses' for the six month period were $69.3 million, an increase of $22.2 million compared to last year. The American Centrifuge would use technology developed by the US Department of Energy in the 1980s and later refined, based on very large carbon-fibre centrifuges.

Usec has assembled the demonstration set-up of its centrifuge technology and is "spinning uranium gas at operational speeds." After tests, the gas will be fed from machine to machine in a cascade configuration. In coming weeks it will assemble the Lead Cascade, a closed loop cascade consisting of "fewer than 20 prototype machines, including spares." Following successful trials Usec would assemble larger-scale AC100 centrifuge machines, each capable of 350 SWU per year, in a modular fashion until the American Centrifuge plant building housed 11,500 of them, producing a total of 3.8 million SWU.

Further information

Usec

WNN: Usec nearly ready to demonstrate American Centrifuge