USEC and DOE Sign $350 Million Cooperative Agreement for American Centrifuge Research, Development and Demonstration Program
USEC Inc. and the Department of Energy (DOE) have signed agreements to move forward with a $350 million cooperative research, development and demonstration (RD&D) program to confirm the technical readiness of the American Centrifuge, the next-generation U.S. uranium enrichment technology.
“Our agreements reflect the importance of this U.S. technology to our national security and will validate the readiness of the American Centrifuge technology for commercial deployment,” said John K. Welch, USEC president and CEO. “Over the last several months, we have been preparing our demonstration facility for installation of a full-scale commercial cascade with related plant infrastructure. With this RD&D agreement in place, we will move rapidly to build additional AC100 machines and related support systems to complete the demonstration cascade.
“The program will demonstrate the American Centrifuge technology as the next generation of U.S. enrichment technology that is essential to meet our nation’s future national security requirements. Upon completion by the end of next year, this RD&D program will fully demonstrate that the American Centrifuge technology is ready for commercial deployment. I would like to thank members of Congress for their bipartisan support for this project and DOE for its commitment to this vital technology,” Welch said.
The cooperative agreement between USEC and DOE defines the scope, funding and technical goals for the program. The total investment in the program will be up to $350 million, with DOE providing 80 percent, or $280 million, and USEC providing 20 percent, or $70 million, of the total. The RD&D program will support building, installing, operating, and testing commercial plant support systems and a 120-machine cascade that would be incorporated in the full commercial plant in Piketon, Ohio, which is planned to operate 96 identical cascades. The program will enhance the technical and financial readiness of the centrifuge technology for commercialization and support more than 1,000 direct jobs during the RD&D program.
USEC and DOE will initially provide $110 million in cost-shared funding for the program. This is intended to last through the end of November. DOE’s portion of the funding will come from taking the disposal obligation for a quantity of depleted uranium tails from USEC, releasing $87.7 million in cash for use in the RD&D program that USEC had previously committed as security for future tails disposition obligations. USEC will continue to work with Congress and DOE to pursue opportunities for funding the balance of the RD&D program. Appropriations bills providing FY 2013 funding have been approved by the House of Representatives and the Senate Appropriations Committee but have not yet been finalized.
USEC recently formed American Centrifuge Demonstration, LLC (ACD) to carry out the program and has agreed to put in place a governance structure for ACD to provide enhanced program management and execution for the performance of the RD&D program, subject to USEC’s requirements under its license from the Nuclear Regulatory Commission. This structure is anticipated to include a board of managers of ACD that will not be controlled by USEC.
As an added measure of protection for taxpayers, USEC has granted DOE an irrevocable, non-exclusive royalty-free license in centrifuge intellectual property for government purposes. USEC and DOE also signed an agreement that grants DOE title to certain existing equipment used in the RD&D program as well as all equipment, such as centrifuge machines, produced or acquired as part of the RD&D program. USEC will lease the equipment from DOE, and DOE will transfer title of the equipment back to USEC if USEC proceeds with the deployment of the commercial plant.
Finally, DOE and USEC have signed an amendment to the 2002 agreement to add milestones related to the successful completion of the RD&D program and to extend the existing milestones under the 2002 agreement related to the financing and construction of the American Centrifuge Plant.
Additional information can be found in the current report on Form 8-K filed by USEC today with the Securities and Exchange Commission. In addition, USEC is currently evaluating the accounting treatment of these transactions, which will be reflected in filings for the quarter ending June 30, 2012.