USU - USEC, opens at 10, up a buck oh 5. found this news from yesterday:
NEW YORK -- Shares of USEC Inc. (USU) continued their ascent Wednesday,
adding another 10% to Tuesday's gains, after the U.S. and Russian presidents
agreed on a nuclear arms reduction treaty.
While USEC officials told Dow Jones Tuesday that the U.S.-Russia deal itself
won't directly affect USEC Inc.'s earnings in the near term, the treaty may mean
the U.S. and Russia will agree to lift price controls on enriched uranium that USEC
buys from its Russian partner Techsnabexport Co., thus improving USEC's
earnings.
"The hope is clearly that - as part of all these other talks between the Russia and
the U.S. - the governments will finally approve the tentative agreements USEC has
with its Russian trading partner," Standard & Poor's analyst Scott Sprinzen said.
"The agreement would tie enriched uranium to market pricing, which, in certain
environments, would make it cheaper for USEC to buy enriched uranium."
USEC, which converts used uranium from atomic warheads into nuclear fuel, had
been banking on approval of the contract amendments since February, but said in
its April 24 earnings release that "it had agreed to a higher, fixed-price methodology
for one more year," adding that, "the calendar year 2001 purchase price of $90.42
will be applicable for calendar year 2002 (i.e., the last two quarters of fiscal year
2002, and the first two quarters of fiscal year 2003.)"
USEC said it agreed to the higher prices for one year thinking of the long-term
benefit that market-based pricing would provide from 2003 through 2013, the
remaining term of the contract.
Sprinzen cut his credit rating on USEC following the company's first-quarter
earnings miss to double-B from double-B plus, citing the fact that USEC lowered
its 2002 and 2003 earnings guidance due to delays in getting the contract changes
approved.
The analyst noted that USEC, at the beginning of the fiscal year, projected earnings in the $35 million to $40 million
range for fiscal 2002, but has since lowered its projections to between $9 million and $12 million due to the delays.
"Even with the modifications to the contract, the earnings are going to be relatively weak," Sprinzen said.
The contract changes won't have an immediate impact, but if Russia approves the amendment to USEC's contract,
subjecting enriched uranium to market prices, the improved pricing "bolsters USEC's long-range viability because it
would be able to carry out its business more profitably," Sprinzen said.
It would also "increase long-term stability in the arrangement between USEC and its trading partner," according to the
analyst.
Russia's incentive to approve the pricing changes "in theory, at least," is to make the arrangement economical for
USEC so it won't back out of the deal, Sprinzen said.
As reported earlier, USEC has been the U.S. government's exclusive agent for purchasing bomb-grade uranium
stripped from Russian warheads since 1993, as part of a nuclear deproliferation treaty between the two governments.
USEC, the only U.S. enrichment company, has so far produced enriched uranium fuel for nuclear power plants from
6,000 such warheads, USEC spokesman Steven Wingfield said Tuesday.
Wednesday, Wingfield told Dow Jones Newswires there has been no indication from the U.S. government that USEC
will be chosen to be the executive agent to the new U.S.-Russia treaty, though USEC has "done a very good job as the
executive agent for the 1993 treaty, and we're ahead of schedule with the number of warheads we'll be introducing
into the market."'
For now, USEC is just "watching to see how it develops," Wingfield said, adding that he doesn't think the terms of the
pending agreement or the timeframe in which the market-based pricing will go into effect will be affected by the
U.S.-Russia treaty.
Shares of USEC recently traded at $8.55, up 70 cents, or 9%, on volume of 3.3 million. Average daily volume is
214,318 shares.
still holding, but probably not for long. larry |
