It was the Huntsman who kissed Snow White to wake her up

movie poster art snow white and the huntsmanIn a popular movie now in theatres, and in a twist to the fairy tale, the Huntsman is ordered to take Snow White into the woods to be killed. But he winds up becoming her protector and mentor in a quest to vanquish the Evil Queen. In the traditional fairy tale, a handsome prince wakens the sleeping princess with a kiss. In this movie, the Prince’s kiss is a dud, but a follow up act by the rough hewn huntsman does the trick.

For months analysts who follow the world of commercial uranium enrichment for nuclear fuel have been expecting USEC (NYSE:USU) to succumb to the evils of financial collapse. With a stock price of less than a dollar, and the perils of delisting from the NYSE hanging over its head, the firm was on the verge of slipping into a deep and perhaps permanent slumber.

DOE to the rescue  Yet, through apparently heroic measures, the U.S. Department of Energy, usually known for its bar room brawling with applicants for loan guarantees, has adroitly steeped up to the challenge of rescuing USEC from the clutches of its creditors.

DOE had previously repeatedly denied USEC a coveted loan guarantee to build the 3.5 million SWU/year uranium enrichment plant. So there are two things going on here. First, role ambiguity about DOE's views about USEC have come to an end, and the agency has stepped up to addressing the future of the uranium enrichment technology itself.

U.S. Energy Secretary Steven Chu announced June 13 that the Obama Administration reached a major milestone in its efforts to secure an  domestic uranium enrichment capability for national security purposes. 

The Energy Department, USEC Inc. and the newly organized American Centrifuge Demonstration, LLC, have signed a set of agreements that will enable the research, development and demonstration (RD&D) project at the American Centrifuge Plant (ACP) in Piketon, Ohio, to move forward.

The RD&D at ACP will be managed under a new governance structure that strengthens the roles of other project partners including equity stake firms Babcock and Wilcox (B&W) and Toshiba Corporation, which will provide additional project management support and personnel for the program.

StevenChu“Today, after months of hard work, I am pleased to announce that the Obama Administration has reached a major milestone in our efforts to advance the technology at the American Centrifuge Plant and strengthen U.S. national security,” said Secretary Chu. (right)

“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," said John K. Welch, USEC president and CEO.

Government aims to take the risk out of the project  As part of the program, the Energy Department, USEC and American Centrifuge Demonstration, LLC (ACD) will work to reduce the technical and financial risks of the ACP project.  The RD&D project will integrate all aspects of the technology, including centrifuge manufacturing, operations and reliability, to demonstrate how the centrifuges and support systems operate as a whole at commercial scale.

The cooperative agreement provides a framework for a cost-shared multiyear RD&D effort to build out and test the first cascade and plant systems at ACP. 

DOE will provide approximately $88 million under the initial phase by taking title to and disposal responsibility for a quantity of depleted uranium tails from USEC. The project participants will provide an additional $22 million in the first phase of the project, representing a 20 percent cost share. 

DOE takes title to intellectual property  The agreements the Department of Energy has signed with ACD and USEC include significant taxpayer protections, including ownership of the centrifuges and other equipment, rights to intellectual property (IP) and technical data, and step-in rights for the Department to take over the program if necessary, should the private sector be unable or unwilling to commercialize the ACP technology.

The Department will immediately take ownership of the systems, equipment, and IP and will lease the equipment to USEC for the purposes of the RD&D program.  Under the agreement, if ACP is commercialized, DOE will transfer title of the equipment back to the ACP participants.  The Department has also put in place a series of technical milestones and performance metrics that will enable the Department to monitor progress and effectively oversee the project.

USEC deal by the numbers 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 passed by either chamber.

Paradoxically, none of this might have happened if Areva had moved forward with its plans to build a $3 million SWU/year uranium enrichment plant in Idaho. The French state owned nuclear giant suspended its capital construction effort last December as part of a strategic review of global commitments.