Sole U.S. Company That Enriches Uranium Is Struggling to Stay in Business
Michael Temchine for The New York Times
By MATTHEW L. WALD
Published: June 12, 2007
WASHINGTON, June 11 — Seventy years after the United States invented uranium enrichment, the sole American company in the business is struggling to survive, while nuclear power experts worry that its failure would leave the Russians dominant in the market for fuel processing.
USEC is developing a centrifuge plant in Piketon, Ohio. The centrifuges are expected to cost $2.3 billion, up from around $1.7 billion.
The company, USEC, has liquidated some of its valuable uranium inventories to stay afloat, as its income has declined because of changing market conditions. But it had also maintained a high dividend, bought back stock and spent heavily on severance payments after frequent purges in the executive suite. The company spent more than $100 million on two new technologies for enrichment before abandoning them and embarking on a third.
“USEC has been a four-letter word in some circles,” said its president, John K. Welch, who was hired in October 2005 to save the company. Though he has taken steps to strengthen the company, he said the problem now is to find a way to finance new technology and become competitive in the world market.
Enrichment means sorting two types of uranium to raise the proportion of uranium 235, a step essential for use in American nuclear reactors. The government is promoting nuclear as a step toward energy independence.
The United States invented the process and used it to build the bomb that destroyed Hiroshima in August 1945. Later, the United States offered enriched uranium to civil nuclear programs worldwide.
In the 1990s, the government privatized its antiquated enrichment plants. USEC closed one, in Piketon, Ohio, and still runs the other, in Paducah, Ky.
But the Paducah plant is a heavy user of costly electricity, which now amounts to more than 70 percent of USEC’s costs. Centrifuges, which are used by almost all other enrichment plants, use only 5 percent of the electricity used by the Paducah plant.
In February, USEC announced that the centrifuges it was developing would cost $2.3 billion, up from a previous estimate of $1.7 billion, and would take an extra year to deploy. The company has already spent about $400 million on the centrifuges and is looking for financing to complete the project, which it is trying to build in Piketon, Ohio.
“Most people expect that $2.3 billion is going to go up,” said Paul R. Clegg, a stock analyst at Natexis Bleichroeder Inc.
The company has been involved in merger talks with several companies in the nuclear business, and the trade press has carried reports of other negotiations. But two people with knowledge of the talks said that they did not appear to be leading anywhere.
In addition to USEC’s Paducah plant and its planned centrifuge project, a European consortium is building a centrifuge plant in Hobbs, N.M., that it calls the National Enrichment Facility, and General Electric is trying to make an Australian enrichment technology called Silex commercially feasible.
Despite the challenges, and the fact that Mr. Welch eliminated the dividend, the stock price is strong. Market analysts say one reason is that the price of virgin uranium is so high that customers are demanding more enrichment work, thus driving up the price of the service that USEC provides. Some investors also see the company as a takeover target, or a likely beneficiary of government help.
USEC would like to acquire uranium from the Energy Department on favorable terms, to help provide funds for its centrifuge project. But the Energy Department appears to want a signal from Congress, and the company faces questions there about its previous performance, and about the wisdom of bailing out its stockholders.
The government still owns the Paducah plant, and could take it over and give it to a contractor to run. Or it could allow USEC to operate in bankruptcy, although that would probably eliminate the company’s ability to build a more modern plant.
The assistant secretary of energy for nuclear energy, Dennis R. Spurgeon, was USEC’s executive vice president and chief operating officer until he left in 2003, receiving a payment of more than $5 million, according to Securities and Exchange Commission filings. Mr. Spurgeon, through a spokesman, declined repeated requests for an interview.
According to people close to the company, Mr. Spurgeon had clashed with the chief executive, William H. Timbers, as had other top officials. Mr. Timbers left the company in December 2004, after disagreements with the board. In February 2006, USEC agreed to pay him $14.5 million, according to S.E.C. filings.
Some Democrats in Congress are demanding a full explanation of the departures of Mr. Timbers and others before they proceed with a discussion about how to help the company.
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