The U.S. Enrichment Corp., operator of the nation’s only remaining uranium enrichment plant, faces at least two more years of weak profits and high debt, while lacking the ability to finance construction of a new enrichment plant, according to a new study by the Paper, Allied-Industrial, Chemical and Energy Workers International Union (PACE).
The failure to develop a new plant would make the U.S. dependent on foreign sources of enriched uranium to operate its existing nuclear power plants and jeopardize global efforts at nuclear disarmament, according to PACE.
PACE’s study describes a “perfect storm” of possible events over the next two years that could result in USEC being forced to halt production at the Paducah, Ky., plant and abandon the construction of a new plant. That would breach USEC’s agreement with the U.S. Dept. of Energy (DOE) and could result in loss of the profitable and exclusive contract to buy nuclear fuel from Russia under a government-to-government agreement running to 2013. Russia agreed to blend down its dismantled nuclear warheads into nuclear fuel and sell them to USEC as the exclusive agent for the U.S. government.
The sole purpose of the non-proliferation agreement is to reduce the threat of bomb-grade nuclear materials falling into the hands of terrorists or rogue nations. USEC received that exclusive and profitable contract as a quid pro quo from the U.S. government in return for maintaining enrichment at Paducah and building a new competitive enrichment plant at either Paducah or the site of the mothballed DOE enrichment plant near Portsmouth, Ohio.
That contract and the sale of natural uranium inventory USEC received as part of the privatization process are USEC’s only source of profit at the present time. USEC’s unit costs at the Paducah plant currently equal market prices for enriched uranium fuel, but that could turn to a loss under the “perfect storm” conditions.
An agreement in June 2002 with DOE requires USEC to operate the remaining enrichment plant at Paducah, until 2010 and build a new facility by that time. The federal government’s energy policy requires maintaining a reliable and economic source of uranium enrichment to help fuel the electric plants that provide more than 20 percent of this nation’s electricity. USEC was charged with achieving that goal when it was privatized. USEC is to have all the financing in place in just over three years, by Jan. 1, 2007. Cost is estimated at $1.5 billion.
PACE International Union’s study calls for cuts in high dividends as the only source of significant savings over the next three years to reduce debt and build equity for financing new plant construction. USEC currently plans no reduction of the $500 million debt used to buy the government operations in 1998 and no reduction in $45 million of annual dividends paid out, while being plagued by interest costs of $36 million a year and a “junk bond” credit rating. In addition, low-priced, long-term sales of uranium USEC made two to four years ago will keep profits low for at least two more years.
PACE offers this report as a “storm warning” to avert a potential national disaster, and calls for greater government oversight, particularly over the next three years, during this critical period for USEC.
According to PACE Region 8 Interna-tional Vice President Gerald Johnston, “If Congress and DOE regulators wait for USEC to be in the eye of the storm, it will be too late. Sound public policy should seek to steer USEC around the pending storm, rather than allowing USEC to drift directly into it.”
PACE represents over 1,172 skilled workers at both the Paducah, Ky. and Portsmouth, Ohio enrichment plant sites operated by USEC. More information on USEC can be obtained at www.usec-watch.org.