USEC and Tenex strike a deal

3 April 2002

USEC and its Russian counterpart Tenex have finally reached terms for the continuation of the Megatons to Megawatts programme, ending a stand-off that could have led to a fuel shortage in the USA. USEC supplies 70% of the country's uranium for nuclear power.

Under the agreement, Russia will drop the price for low-enriched uranium (LEU) from $90 per separative work unit (SWU) by around $20, according to market prices. The signed 13-year contract has been referred to the US and Russian governments for approval.

Previous talks between the two parties floundered on the issue of negotiating a lower price for the Russian uranium (see NEI February 2002, p13). US representatives had demanded a 15% price reduction throughout 2001, which former Tenex chief Revnir Frayshtut resisted, prompting the expiration of the old contract without having a new one in place.

The price now agreed will be adjusted annually according to the market situation. The new contract will be effective for 13 years, but both sides will have recourse to review price parameters in 2007. More details about the agreement will be made public when it has been approved by both governments.

The Megatons to Megawatts pact provides for the sale of 500t of highly enriched uranium over 20 years. The Russian atomic ministry has earned some $2.9 billion under the agreement so far. This amounts to almost $500 million a year. It is likely to earn less under the terms of the new agreement.

Meanwhile, USEC has announced that it will bring the transfer and shipment operations of its Portsmouth, Ohio, facility into its Paducah plant in Kentucky this summer. The consolidation will eliminate 440 jobs (out of 1350) from the Portsmouth plant, and create 30 to 50 positions at Paducah. USEC said the move could save it around $40 million a year. Paducah is now being modified so that it can ship directly to fuel fabricators.

"We are taking this action to improve our operational efficiency," said Morris Brown, vice president of operations. "Consolidating these operations at Paducah will provide significant cost savings." The alterations, along with extra training at Paducah and severance and other benefits for staff leaving Portsmouth, are expected to cost $29 million.

USEC has reported low earnings for its second quarter ended December 31, 2001, of $9.5 million, or $12 per share, compared to $20.9 million, or $31 per share in the same period for the previous year.

Higher revenue for the period, $560.1 million compared with $387.1 million in the same quarter a year earlier, was due to the timing and movement of orders.

On page 44 of the March 2002 issue of NEI, USEC outlined its strategy for the future.

• Australian science and technology research and development company Silex is due to begin testing the uranium enrichment technology that it has developed for USEC. Silex said it would have a better understanding of the likely timing of USEC's decision on a pilot plant later this year.

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