USEC's Actions Should Terminate Contract

March 2, 2009 - By Roger Herried - USEC stock plunged a walloping 24.85 percent, from $5.03 to $3.78 per share, with market value dropping about $200 million in four days, hitting south Ohio especially hard.
USEC had a 50 percent profit loss in 2008 compared to 2007, but the company has larger issues. Its hypothetical centrifuge plant in Piketon now ranks fourth among competing domestic enrichment projects, out-classed by projects in New Mexico, Idaho and North Carolina in terms of cost, technical demonstration and schedule.
This comes just as the capital crisis severely restricts construction of nuclear reactors, reducing domestic demand forecasts to only two new enrichment projects. The others would produce uranium cheap enough to export. But USEC's chances of developing an export market are nil, not only for its high prices, but because USEC has alienated foreign customers through monopolistic support of protectionist measures to keep out foreign uranium.
Thus, the USEC speculative bubble, which now is bursting, as bubbles are destined to do. Feeding the idea that the Piketon plant is vaporware, USEC constantly pushes back its Lead Cascade "demonstration" until after it hopes to wrangle billions more in government subsidies.
The "Lead Cascade," postponed in successive six-month increments, was scheduled to operate in October 2005. Now USEC says "midway through 2009," but only if the Obama administration produces $2 billion in loan guarantees first. The "Lead Cascade" should be renamed the "Follow Cascade," because, according to USEC, it only will follow the money the "privatized" company was not supposed to need.
As for those loan guarantees, I interviewed Rob Portman, now running for U.S. Senate, last July, right after he hosted the McCain town hall meeting in Portsmouth, at which Portman thanked USEC for making that event happen. Portman had said enigmatically from the podium, "There's good news from Piketon!" As chief architect of the protectionist trade barriers that kept U.S. utilities from buying foreign uranium, Portman has a political stake in USEC.
"I live near Piketon. What's the good news?" I asked the former Congressman out in the hallway of Portsmouth High School.
"It's that USEC's grants look like a sure thing!" he said.
"Grants? What grants?" I asked.
He then acted as if I were the ignorant one. "USEC has applied for billions in federal grants, and the president says they are almost a sure thing." He clarified he meant the president of USEC, not of the United States.
Mr. Portman is right about one thing. If the administration guarantees loans to a company that refuses to demonstrate the commercial viability of its product, those guarantees convert to grants. There would be virtually no prospect of USEC repaying the loans.
USEC's remaining leverage is blackmail over Ohio jobs. "We are prepared to quickly resume the ramp up in funding becomes available," said USEC president John Welch recently. (USEC Inc. Q4 2008 Earnings Call Transcript - Seeking Alpha) Well gee, if the government gives me $2 billion, I will hire a lot of people, too.
Only temporary construction jobs can come from artificial resuscitation of USEC. The taxpayer-subsidized project would result in a federal facility crammed with contaminated USEC centrifuges producing uranium priced too high to sell. USEC would likely disappear, leaving us with an unusable site, tremendous bills for cleanup of its mess, and the bill for repayment of the guaranteed loans - the "grants."
This is exactly the scenario I warned about at public hearings during the USEC licensing process four years ago.
We can't afford this shameless waste anymore. No loan guarantees should be "granted," and USEC's lease of the site should be terminated for failure to meet the contracted schedule. Lease termination negates the wrongfully issued NRC license. We then would have a more or less clean and ideal industrial site, which could become a manufacturing center for renewable energy technologies, exactly the kind of site the Obama Administration now seeks.
That will bring permanent productive jobs - jobs that won't burst like a bubble or haunt employees at the end of the day.