Infrastructure

USEC Wins on Nuclear Extension Terms, Deadline Still Looms (USU)

USEC Inc. (NYSE: USU) is soaring on news that it may have a bit of a reprieve on its capital needs for the construction of the American Centrifuge Plant in Piketon, Ohio.  The company has announced that it entered into a standstill agreement with its strategic investors Toshiba America Nuclear Energy Corporation, and Babcock & Wilcox Investment Company to provide a limited additional period of time in order to obtain a conditional commitment from the U.S. Department of Energy for a $2 billion loan guarantee.

The loan guarantee program for USEC has been nothing short of a mess and this has been an ongoing issues for far too long.  USEC was also a victim of the nuclear backlash after the quake and subsequent tsunami in Japan that took out the nuclear reactor and sent governments scrambling over how they would treat their existing nuclear policies.

USEC said in the press release that it “expects to work with DOE to complete the loan guarantee review process and obtain a decision from DOE on the conditional commitment by the end of July 2011.”  It is trying to conclude the review process for its loan guarantee application, but so far it has not been able to conclude the conditional commitment process.  Today, June 30, was supposed to be the outside date for the next stage of the Toshiba and B&W investment and the standstill agreement provides some additional time needed for the Department of Energy to complete its review and to finally reach a decision during July.

Toshiba, B&W and USEC each had the right to terminate its obligations under the agreement if the $50 million second phase of the strategic investment by Toshiba and B&W did not close by June 30, 2011. This conditional commitment for the loan guarantee by the Department of Energy is called “the key remaining condition to closing of the second phase of the Toshiba and B&W investment.”  The companies have agreed not to exercise its right to terminate the Securities Purchase Agreement prior to August 15, 2011. This standstill provides a limited additional period of time to finalize and enter into the DOE conditional commitment and then close the second phase of the strategic investment.

We noted earlier that this has been going for too long.  USEC applied back in 2008 for a $2 billion loan guarantee from the Department of Energy so that it could construct the American Centrifuge Plant in Piketon, Ohio.  The company now says this will support approximately 8,000 U.S. jobs during the construction phase and will ultimately provide low enriched uranium to fuel nuclear power reactors in the United States and internationally.  USEC has already invested somewhere around $2 billion to date in this project alone.

USEC shares are currently up about 10% at $3.50 and the 52-week trading range is $2.97 to $6.35.

JON C. OGG