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Delaware	52-2107911
(State of incorporation)	(I.R.S. Employer Identification No.)
Two Democracy Center,  6903 Rockledge Drive, Bethesda, Maryland 20817
(301) 564-3200

Title of each class	Name of each exchange on which registered
Common Stock, par value $.10 per share Preferred Stock Purchase Rights	New York Stock Exchange New York Stock Exchange

 

 

 

 

 

 

 

 

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supply LEU to both domestic and international utilities for use in about 150 nuclear reactors worldwide;

 

•

are deploying what we believe is the world’s most advanced uranium enrichment technology, known as the American Centrifuge;

 

•

enrich uranium at the Paducah gaseous diffusion plant (“GDP”) that we lease from the U.S. Department of Energy (“DOE”);

 

•

are the exclusive executive agent for the U.S. government under a nuclear nonproliferation program with Russia, known as Megatons to Megawatts;

 

•

provide transportation and storage systems for spent nuclear fuel and provide nuclear and energy consulting services; and

 

•

perform contract work for DOE and its contractors at the Paducah and Portsmouth sites.

 

 

 

 

 

 

 

 

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design, fabrication and implementation of spent nuclear fuel technologies including the high capacity MAGNASTOR™ system,

	•	except as provided in the 2002 DOE-USEC Agreement (described under “Business and Properties – 2002 DOE-USEC Agreement and Related Agreements with DOE”), we have the right to renew the lease at either plant indefinitely in six-year increments and can adjust the property under lease to meet our changing requirements. The current lease term expires in 2016;
	•	we may leave the property in an “as is” condition at termination of the lease, but must remove wastes we generate and must place the plants in a safe shutdown condition;
	•	the U.S. government is responsible for environmental liabilities associated with plant operations prior to July 28, 1998 except for liabilities relating to the disposal of some identified wastes generated by USEC and stored at the plants;
	•	DOE is responsible for the costs of decontamination and decommissioning of the plants;
	•	title to capital improvements not removed by us will transfer to DOE at the end of the lease term, and if we elect to remove any capital improvements, we are required to pay any increases in DOE’s decontamination and decommissioning costs that are a result of our removing the capital improvements;
	•	DOE must indemnify us for costs and expenses related to claims asserted against us or incurred by us arising out of the U.S. government’s operation, occupation, or use of the plants prior to July 28, 1998; and
	•	DOE must indemnify us against claims for public liability (as defined in the Atomic Energy Act of 1954, as amended) from a nuclear incident or precautionary evacuation in connection with activities under the lease. Under the Price-Anderson Act, DOE’s financial obligations under the indemnity are capped at $12.6 billion for each nuclear incident or precautionary evacuation occurring inside the United States to which the indemnity applies.

 

·	Operated our lead cascade of production-ready AC100 machines in a commercial plant cascade configuration and accumulated significant runtime;

 

·	Demonstrated that the cascade operates as designed and that a range of commercial product assays can be produced for our customers;

 

·	Executed an agreement with Toshiba Corporation (“Toshiba”) and Babcock & Wilcox Investment Company (“B&W”) for a $200 million strategic investment and closed on the first phase of funding totaling $75 million;

 

·	Initiated discussions with Japanese export credit agencies regarding financing up to $1 billion of the cost of completing the ACP;

 

·	Completed a March 2010 cooperative Research, Development and Demonstration Agreement with DOE for pro-rata cost sharing support for continued American Centrifuge activities with a total cost of $90 million;

 

·	Produced detailed updates to project scope, cost and schedule based on close collaboration with our suppliers;

 

·	Restarted limited engineering work on portions of the physical plant infrastructure related to feeding and withdrawing uranium to facilitate the ramp up of construction activities in the future;

 

·	Continued machine technology development in Oak Ridge in support of lead cascade testing, value engineering and increasing machine reliability and productivity; and

 

·	Submitted a comprehensive update to our DOE loan guarantee application in July 2010.

 

 

 

Milestones under 2002 DOE-USEC Agreement		Milestone Date				Achievement Date
Begin refurbishment of K-1600 centrifuge testing facility in Oak Ridge, Tennessee		December 2002				December 2002
Build and begin testing a centrifuge end cap		January 2003				January 2003
Submit license application for Lead Cascade to NRC		April 2003				February 2003
NRC dockets Lead Cascade application		June 2003				March 2003
First rotor tube manufactured		November 2003				September 2003
Centrifuge testing begins		January 2005				January 2005
Submit license application for commercial plant to NRC		March 2005				August 2004
NRC dockets commercial plant application		May 2005				October 2004
Begin Lead Cascade centrifuge manufacturing		June 2005				April 2005
Begin commercial plant construction and refurbishment		June 2007				May 2007
Lead Cascade operational and generating product assay in a range usable by commercial nuclear power plants		October 2007				October 2007
Secure firm financing commitment(s) for the construction of the commercial American Centrifuge Plant with an annual capacity of approximately 3.5 million SWU per year		November 2011
Begin commercial American Centrifuge Plant operations		May 2014*
Commercial American Centrifuge Plant annual capacity at 1 million SWU per year		August 2015*
Commercial American Centrifuge Plant annual capacity of approximately 3.5 million SWU per year		September 2017*

* USEC and DOE have agreed to discuss adjustment of this milestone as may be appropriate based on a revised deployment plan to be provided to DOE by January 30, 2012 following completion of the November 2011 financing milestone.

 

 

	•	USEC,
	•	Urenco, a consortium of companies owned or controlled by the British and Dutch governments and by two German utilities,
	•	a multinational consortium controlled by Areva, a company approximately 90% owned by the French government, and
	•	the Russian government’s State Atomic Energy Corporation (“Rosatom”), which sells LEU through TENEX, a Russian government-owned entity.

			No. of Employees
			at December 31,
Location			2010				2009
Paducah GDP	Paducah, KY			1,185				1,210
Portsmouth site	Piketon, OH			1,157				1,106
American Centrifuge	Primarily Oak Ridge, TN and Piketon, OH			453				442
NAC	Primarily Norcross, GA			60				57
Headquarters	Bethesda, MD			94				93
	Total Employees			2,949				2,908

	Number of Employees	Contract Term
Paducah GDP:
USW Local 5-550	574	July 2016
SPFPA Local 111	85	March 2012
Portsmouth site:
USW Local 5-689	522	May 2015
SPFPA Local 66	95	August 2012

 

 

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Matters relating to the Transactions require substantial commitments of time and resources by our management, whether or not the remaining Transactions are completed, which could otherwise have been devoted to other opportunities that may have been beneficial to us, including pursuing other strategic options or sources of capital;

 

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The second closing of the Transactions is conditioned on our obtaining a conditional commitment for a loan guarantee of not less than $2 billion from DOE.  The securities purchase agreement may be terminated by any party if the second closing does not occur by June 30, 2011.  If the second closing is not consummated, our ability to continue to spend on the American Centrifuge project would be limited and our anticipated sources of near term liquidity could be affected;

 

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Our loan guarantee application includes the $200 million investment as part of the sources of funds for the American Centrifuge project.  The strategic investment was also intended in part to address financial concerns of DOE with respect to the ability of the American Centrifuge project to mitigate cost and other risk.  If the remaining Transactions are not consummated or are delayed significantly, this would adversely affect our ability to obtain a loan guarantee (which is a condition to the third closing);

 

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We need significant additional financing to complete construction of the American Centrifuge Plant beyond the DOE loan guarantee and the proceeds of the Transactions, and we will need to demonstrate the availability of that funding in order to obtain the DOE loan guarantee (which is a condition of the third closing).  We have initiated discussions with Japanese export credit agencies (“ECAs”) for additional financing of up to $1 billion.  Our ability to obtain Japanese ECA financing is highly dependent on the strategic investment by Toshiba. If the remaining Transactions are not consummated or are delayed significantly and our ability to obtain Japanese ECA financing is adversely affected, this would subsequently adversely affect our ability to obtain a DOE loan guarantee, consummate the third closing and complete the Americ an Centrifuge project; and

 

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If the remaining Transactions are not consummated, we may be unable to raise capital from alternative sources on terms favorable to us, if at all.  If the remaining Transactions are not consummated or are delayed significantly and we are unable to raise capital from alternative sources, our business and prospects (including the American Centrifuge project) may be substantially harmed and our stock price may decline.

 

·	Success in potential efforts to sell our low enriched uranium in connection with Toshiba’s nuclear power plant proposals, including Toshiba’s success in nuclear reactor sales;

 

·	Success of efforts to identify potential opportunities in our contract services segment; and

 

·	Our success in achieving cost savings and other benefits through the manufacturing joint venture with B&W.

 

 

·	our ability to get loan guarantees or other support from the U.S. government,

 

·	our ability to meet the closing conditions of the second and third phases of the $200 million strategic transaction with Toshiba and B&W and to otherwise address the financial concerns identified by DOE,

 

·	our ability to satisfy DOE that efforts we have taken, including with respect to lead cascade operations and efforts to reduce risk have addressed their concerns,

 

·	the estimated costs, efficiency, timing and return on investment of the deployment of the American Centrifuge Plant (described below),

 

·	our ability to secure and maintain a sufficient number of long-term SWU purchase commitments from customers on satisfactory terms, including adequate prices,

 

·	the level of success of our current operations,

 

·	SWU prices,

 

·	USEC’s perceived competitive position and investor confidence in our industry and in us,

 

·	projected costs for the disposal of depleted uranium and the decontamination and decommissioning of the American Centrifuge Plant, and the impact of related financial assurance requirements,

 

·	additional downgrades in our credit rating,

 

·	market price and volatility of our common stock,

 

·	general economic and capital market conditions,

 

·	conditions in energy markets,

 

·	regulatory developments, including changes in laws and regulations, and

 

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our reliance on LEU delivered to us under the Russian Contract and uncertainty regarding deliveries and market based components of prices under the Russian Contract, and restrictive covenants in the agreements governing our credit facility and in our outstanding notes and any future financing arrangements that limit our operating and financial flexibility.

 

 

 

·	November 2011 – Secure firm financing commitment(s) for the construction of the commercial American Centrifuge Plant with an annual capacity of approximately 3.5 million SWU per year;

 

·	May 2014 – begin commercial American Centrifuge Plant operations;

 

·	August 2015 – commercial American Centrifuge Plant annual capacity at 1 million SWU per year; and

 

·	September 2017 – commercial American Centrifuge Plant annual capacity of approximately 3.5 million SWU per year.

 

	•	increase our costs for the project, both on an overall basis and in terms of the incremental costs we must incur to recover from delays;
	•	cause us to fail to meet one or more milestones under the 2002 DOE-USEC Agreement (including any potential adjustments to the remaining three milestones that we may agree to with DOE following satisfaction of the November 2011 financing milestone), which could cause DOE to exercise the remedies described in the risk factor relating to the 2002 DOE-USEC Agreement;
	•	make it more difficult for us to attract and retain customers and adversely affect our ability to compete with other enrichment plants being built in the U.S.;
	•	make it more difficult for us to maintain key suppliers for the ACP and the manufacturing infrastructure developed over the last several years; and
	•	extend the time under which we are contractually or otherwise required to continue to operate our high-cost Paducah GDP.

·	The success of our efforts to optimize the machine we expect to deploy in the ACP;

 

·	The performance and reliability of individual components built by our strategic suppliers;

 

·	Issues with respect to the performance of our strategic suppliers; and

 

·	Differences in actual commercial plant conditions from the conditions used to generate our test data.

 

 

·	Our ability to negotiate an acceptable power arrangement with TVA or other suppliers of power;

 

·	Our success in obtaining a contract with DOE for enriching a portion of the DOE’s depleted uranium stockpile on satisfactory terms, in sufficient amount, or at all; and

 

·	SWU supply and demand and the outcome of discussions with customers about their near term SWU supply needs.

A significant delay in, or stoppage or termination of, deliveries of LEU from Russia under the Russian Contract or a failure of the LEU to meet the Russian Contract’s quality specifications, could adversely affect our ability to make deliveries to our customers. A delay, stoppage or termination could occur due to a number of factors, including logistical or technical problems with shipments, commercial or political disputes between the parties or their governments, a failure or inability by either party to meet the terms of the Russian Contract, or a failure or inability of the parties to agree upon, or maintain, arrangements for physical withdrawal by the Russian Executive Agent of natural uranium delivered by us in the United States for the feed component of LEU after the current arrangements expire at the end of 2011.