USEC Provides American Centrifuge Plant Update

11/02/10

Initial discussions on term sheet begin with DOE

More than half million machine hours accumulated in lead cascade test program

Additional AC100 machines being assembled

BETHESDA, Md., Nov 02, 2010 (BUSINESS WIRE) --

USEC Inc. (NYSE:USU) has begun talks with the U.S. Department of Energy (DOE) Loan Guarantee Program office using a draft term sheet as a framework for discussion as the next step toward a conditional commitment to finance construction of the American Centrifuge Plant. The project will support nearly 8,000 jobs during its construction.

In late October, DOE provided USEC a draft term sheet after DOE largely completed its initial technical review of USEC's application for a $2 billion loan guarantee. During the third quarter, DOE had been reviewing a comprehensive update submitted July 30 of USEC's loan guarantee application that reflected the significant steps taken by USEC in the past year. Completion of due diligence by DOE and negotiation of terms and conditions with DOE are the next steps toward the potential issuance of a conditional commitment, and we will be working with DOE to complete those in an expeditious manner.

"In the past year, we have made good technical and financial progress with the ACP," said John K. Welch, USEC president and chief executive officer. "We believe that record of accomplishment, and the cooperative environment that we've established with DOE, will move the process forward toward a timely and mutually agreeable conditional commitment."

USEC is investing in advanced centrifuge technology to meet the growing U.S. energy needs of a growing U.S. population, and to provide a long-term, reliable and secure fuel source for domestic and international nuclear power plants. We believe that the AC100 centrifuge machine that USEC will deploy in the American Centrifuge Plant will be the most advanced uranium enrichment centrifuge machine in the world. As the only domestic enrichment facility using U.S. centrifuge technology, the American Centrifuge Plant will help to rebuild U.S. nuclear manufacturing capabilities and support several U.S. government policy objectives.

As of September 30, 2010, USEC had invested approximately $1.9 billion in the American Centrifuge program, which includes approximately $738 million charged to expense over several years for technology development and demonstration. We have operated centrifuges as part of our lead cascade test program for more than 500,000 machine hours. This experience gives us confidence in the performance of our technology, and provides operating data and expertise to support our loan guarantee application as we transition to commercial operation.

Accomplishments in 2010

Due to the uncertainty of funding, beginning in August 2009, we substantially demobilized and reduced construction and machine manufacturing activities in the American Centrifuge project. Because we deferred high-volume machine manufacturing, work at all of our strategic suppliers has been sharply reduced. Over the past year since the project was demobilized, we have worked aggressively to strengthen the project, address DOE's concerns and attract additional sources of capital. Key actions include:

Produced detailed updates to project scope, cost and schedule based on close collaboration with our suppliers;
Submitted an update to our DOE loan guarantee application, incorporating the updated project cost and schedule;
Closed on the first phase of the $200 million strategic investment by Toshiba Corporation and Babcock & Wilcox Investment Company (B&W);
Initiated discussions with Japanese export credit agencies regarding financing a portion of the cost of building the plant;
Operated our lead cascade of production-ready AC100 machines in a commercial plant cascade configuration and accumulated significant runtime;
Worked under a March 2010 cooperative agreement with DOE for pro-rata cost sharing support for continued American Centrifuge activities with a total estimated cost of $90 million, including continued operation of the AC100 cascade, manufacturing of additional AC100 centrifuge machines, and refinement to the rotor tube manufacturing process in preparation for full, high-rate production;
Refurbished machine positions in the area used for the initial lead cascade that operated starting in August 2007 in preparation for installation of additional AC100 machines during the next several months to accumulate additional operating hours; and
Continued machine technology development in Oak Ridge in support of lead cascade testing, value engineering and increasing machine productivity.

We have also re-started limited engineering work on portions of the physical plant infrastructure to facilitate the ramp up of construction activities in the future. In 2011, we expect to continue assembling and operating AC100 machines in our lead cascade that reflect improvements identified in prior testing. These machines are expected to support our target production level of approximately 350 SWU per machine, per year.

Go-forward Estimate to Complete the American Centrifuge Plant

We have been working with our suppliers to update the scope, cost and schedule to build the American Centrifuge Plant. In August 2010, we announced our estimated cost of approximately $2.8 billion to complete the American Centrifuge project from the point of closing on financing. This estimate includes AC100 machine manufacturing and assembly, engineering procurement, and construction costs and related balance-of-plant work, start-up and initial operations, and project management. We believe we have substantially reduced risk in the American Centrifuge project since our initial baseline project budget in 2008, and our new cost estimate is based on a significantly more mature project scope.

The $2.8 billion estimate is a go-forward cost estimate and does not include our investment to date, spending from now until closing on financing needed to complete the plant, overall project contingency, financing costs or financial assurance. We expect to continue to invest at a rate consistent with our anticipated spending indicated in our outlook for the remainder of 2010, while taking into account our anticipated cash flow from operations and other available liquidity. We are currently evaluating the appropriate level for the overall project contingency taking into account the level of risk given the maturity of the project. We are also evaluating the financing costs and financial assurance required for the project, which will be affected by, among other things, the overall financing plan for the project, the amount of the credit subsidy cost for any DOE loan guarantee, and the amount and sources of the additional financing we need to complete the project.

We continue to work with suppliers to refine our estimates, while seeking reductions in the project cost and greater schedule certainty. We anticipate it will require 18 to 24 months to begin initial commercial operations upon receiving financing to complete the plant. We also anticipate that it will require 30 to 36 months to complete the plant after initial commercial operations.

Additional Funding Required

As noted earlier, on September 2, 2010, the $75 million first phase of a $200 million total investment by Toshiba Corporation and B&W closed. The second phase of the investment of $50 million and the third phase of the investment of $75 million are subject to additional conditions. We will need additional financing to complete plant construction. We believe a loan guarantee under the DOE Loan Guarantee Program is essential to raising the capital needed to complete the American Centrifuge Plant. In addition, to complete the project, we will require additional capital beyond the $2 billion DOE loan guarantee, proceeds from the investment from Toshiba and B&W, and internally generated cash flow. In order to obtain a DOE loan guarantee, we will need to demonstrate that sufficient capital is available to complete the project. We have initiated discussions with Japanese export credit agencies regarding financing a portion of the cost of building the plant. Their willingness to provide financing is closely tied with our obtaining a DOE loan guarantee. Funding under a DOE loan guarantee will only occur following conditional commitment, final documentation and satisfaction of conditions to funding. We have no assurance that we will be successful in obtaining any or all of the financing we are seeking.

USEC Inc., a global energy company, is a leading supplier of enriched uranium fuel for commercial nuclear power plants. For more information on the project, visit www.americancentrifuge.com.

Forward Looking Statements

This news release contains "forward-looking statements" - that is, statements related to future events. In this context, forward-looking statements may address our expected future business and financial performance, and often contain words such as "expects," "anticipates," "intends," "plans," "believes," "will" and other words of similar meaning. Forward-looking statements by their nature address matters that are, to different degrees, uncertain. For USEC, particular risks and uncertainties that could cause our actual future results to differ materially from those expressed in our forward-looking statements include, but are not limited to: risks related to the deployment of the American Centrifuge technology, including risks related to performance, cost, schedule and financing; our success in obtaining a loan guarantee for the American Centrifuge Plant, including our ability to address the technical and financial concerns raised by the U.S. Department of Energy ("DOE"); our ability to reach agreement with DOE on acceptable terms of a conditional commitment, including credit subsidy cost, and our ability to meet any required conditions to funding; our ability to raise capital beyond the $2 billion of DOE loan guarantee funding for which we have applied; the impact of the demobilization of the American Centrifuge project and uncertainty regarding our ability to remobilize the project and the potential for termination of the project; our ability to meet the November 2010 milestone under the June 2002 DOE-USEC Agreement related to financing the American Centrifuge project and other remaining milestones under that agreement; restrictions in our revolving credit facility that may impact our operating and financial flexibility and spending on the American Centrifuge project; risks related to the completion of the remaining two phases of the three-phased strategic investment by Toshiba Corporation ("Toshiba") and Babcock & Wilcox Investment Company ("B&W"), including our ability to satisfy the significant closing conditions in the securities purchase agreement governing the transactions and the impact of a failure to consummate the transactions on our business and prospects; certain restrictions that may be placed on our business as a result of the transactions with Toshiba and B&W our ability to achieve the benefits of any strategic relationships with Toshiba and B&W pricing trends and demand in the uranium and enrichment markets and their impact on our profitability; changes in U.S. government priorities and the availability of government funding, including loan guarantees; the impact of government regulation; the competitive environment for our products and services; changes in the nuclear energy industry; and other risks and uncertainties discussed in our filings with the Securities and Exchange Commission. For a discussion of these risks and uncertainties and other factors that may affect our future results, please see Item 1A entitled "Risk Factors" and the other sections of our quarterly report on Form 10-Q and our annual report on Form 10-K, which are available on our website, www.usec.com. We do not undertake to update our forward-looking statements except as required by law.

SOURCE: USEC Inc.

USEC Inc.
Investors:
Steven Wingfield, 301-564-3354
or
Media:
Paul Jacobson, 301-564-3399

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