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Non-Tech : USU: USEC Inc. -- Ignore unavailable to you. Want to Upgrade?

To: Dennis Roth who wrote (11)	5/9/2008 12:11:42 PM
From: Dennis Roth	Read Replies (1) \| Respond to of 21

USEC Inc. (USU): DOE loan guarantee implementation plan a positive for USEC - Goldman Sachs - April 14, 2008 What's changed On Thursday (4/10), the US Department of Energy (DOE) submitted its implementation plan for the loan guarantee program under the Energy Policy Act of 2005 to Congress. We are encouraged that under the plan, the first solicitations for loan guarantees would include $2 bn for advanced nuclear facilities for the “front end” of the nuclear fuel cycle. This directly applies to USEC’s American Centrifuge Project (ACP) and we see few if any other candidates. Separately, the GAO concluded that the DOE’s stockpile of depleted uranium could be worth as much as $7.6 billion and recommended a sales strategy be completed “as soon as possible.” We believe this could potentially lead to an enrichment contract with USEC, enabling USEC to capture some of the economics. Implications While American Centrifuge Project (ACP) execution and risk remains our primary focus, we see two potential catalysts that provide valuation support at current levels. First, the path to a DOE loan guarantee is becoming increasingly clear. We believe USEC could be awarded a loan guarantee by the end of 2008 or early 2009. Second, re-stripping of DOE high assay tails could be a meaningful opportunity for USEC. We believe USEC is well suited to bid on any re-stripping contract which could create $1 billion of total value over four years. If USEC were to capture 30% of the economics, we believe this would add approximately $1.50/share of upside value versus our current estimates. Valuation Our $6.50 price target is based on scenario analysis, normalized earnings, and DCF. Key risks (1) ACP performance/cost/timing could differ significantly from our current expectations, driving upside/downside risks; (2) Early termination of the Russian Suspension Agreement; (3) Competitor capacity additions.