-- Lead Cascade Machines Are Installed, Spinning and Undergoing
Integrated Testing
-- Lead Cascade Operations Expected to Begin in the Coming Weeks
-- Demonstration to Show Capability of Cascade to Generate
Product Assay in a Range Useable by Commercial Nuclear Power
Plants
-- Development Continues of First Series of Commercial Plant
Centrifuges, the AC100
BETHESDA, Md.--(BUSINESS WIRE)--Aug. 1, 2007--USEC Inc. (NYSE:USU) today updated progress in the demonstration of the American Centrifuge uranium enrichment technology as the Company prepares to move into the next phase of integrated testing involving multiple machines in a cascade configuration, which has been referred to as the Lead Cascade.
After extensively testing centrifuge components and individual full-size prototype machines in special test facilities in Oak Ridge, Tenn., USEC has commenced a demonstration and integrated testing phase where full-size prototype machines will be connected in a closed-loop cascade configuration in Piketon, Ohio. The machines were assembled and installed in recent weeks and are spinning uranium gas at operational speeds at the American Centrifuge Demonstration Facility. USEC expects to begin Lead Cascade operations in the coming weeks.
"We have introduced uranium hexafluoride gas into the individual centrifuge machines and are running a series of tests. If the start-up process continues to go well, the staff at the demonstration facility will begin piping the gas from machine to machine in a cascade configuration," said John K. Welch, USEC president and chief executive officer.
"While this is an important juncture in our demonstration of the American Centrifuge, we view the Lead Cascade as another step in a longer journey that we believe will result in a reliable and efficient domestic nuclear fuel supply based on U.S.-owned technology," Welch added.
USEC has begun building a commercial uranium enrichment plant using centrifuge technology that requires approximately 95 percent less electric power for each unit of enrichment compared to the gaseous diffusion process used today in the Paducah, Ky., uranium enrichment plant. The new plant will consist of hundreds of cascades. A cascade is an arrangement of centrifuge machines designed to increase the level of the U-235 isotope in uranium from the 0.71 percent level found in nature to the 4 to 5 percent level of U-235 typically required by commercial nuclear power plants.
The Lead Cascade consists of fewer than 20 prototype machines, including spare machines, and is located within an existing building that will also house the commercial plant. Because the American Centrifuge machine is the most efficient in the world, with an output much greater than the next best competitor's machine, far fewer machines are required in a cascade to produce low enriched uranium. As USEC transitions to the commercial plant, subsequent cascades will have more machines to provide additional operational flexibility and capacity.
The Lead Cascade will provide valuable information for the development of the first series of plant production centrifuges, which we refer to as the AC100 series machines.
The Lead Cascade is intended to achieve a number of key objectives, including:
-- Provide information on machine-to-machine interactions and
integrated efficiency of the full cascade;
-- Demonstrate the capability of the cascade to generate product
assays in a range useable by commercial nuclear power plants;
-- Confirm the design and performance of the centrifuge machine
and cascade support systems;
-- Verify cascade performance models under various operating
conditions;
-- Provide information on the performance of centrifuge
components over time; and
-- Give operators and technicians hands-on experience assembling,
operating and maintaining the machines.
The Lead Cascade of prototype machines is expected to help identify improvements in design, assembly and operations that will be integrated into the AC100, helping to ensure its reliability and achieve lower costs. In 2008, USEC will begin deployment of a cascade of several dozen AC100 machines within the demonstration facility. The first AC100 machines will operate initially in a closed-loop configuration and may later be used in commercial operations. The AC100 series is expected to be the first centrifuges used to produce enriched uranium for sale when commercial operations begin, scheduled for late 2009.
The ACP Journey - Moving from Prototype to the AC100 Series Centrifuges
The United States Department of Energy (DOE) developed centrifuge technology over a 20-year period through 1985. USEC has significantly updated and improved the technology through the use of high-tech materials, advanced computer-aided design and analytic modeling tools for the uranium separation process, improved equipment design and rotor balancing, highly accurate digital controls, and computer-aided manufacturing processes to exacting tolerances. The first new centrifuge component tests began in 2003 and the first tests of a full-size centrifuge began in January 2005. These centrifuge tests were conducted in specially equipped test stands in Oak Ridge. Testing validated USEC's initial performance target of 320 separative work units (SWU) per machine per year, which has been further optimized to achieve 350 SWU per machine per year.
Before freezing the design of the prototype machine, several centrifuges were shipped from Oak Ridge to Piketon. These are referred to as verification and reliability machines. These machines were used by the Piketon staff in 2006 and early 2007 to obtain valuable experience testing and assembling centrifuge machines, confirming the functionality of support systems, and testing the machines without uranium gas during start-up, steady state and shut-down operations.
The machine design for the Lead Cascade prototype machine was frozen in December 2006. This prototype machine is not intended to achieve our optimized target performance but rather to achieve the goals that USEC set for the Lead Cascade, listed earlier, across a range of operating conditions. Most of the components for the machines in the Lead Cascade have been manufactured by USEC's team of scientists, engineers, technicians and subcontractors who worked side-by-side with our strategic suppliers in Oak Ridge. Some of the components were made by one or more suppliers as the transfer of technology from USEC to its suppliers has been underway for a number of months.
The AC100 production machines will be built by USEC's strategic suppliers. The design of the various components for the initial AC100 is expected to be frozen over the next year. The design of the AC100 series machine is expected to be completed in 2008 with an initial performance level of approximately 350 SWU per machine per year. USEC plans to leverage the experience of our strategic suppliers and use the results of the optimization and value engineering process by reducing the number of individual machine components for the AC100. This combined effort of USEC's team and industry high-volume manufacturing expertise will help the AC100 achieve its expected SWU performance at a target cost that is less than the prototype machine, while maintaining a high degree of reliability through quality manufacturing.
Lead Cascade Operations
USEC is following a methodical process to prepare for Lead Cascade and commercial plant operations. During the spring of 2007, ACP teams in Piketon assembled and installed prototype machines for the Lead Cascade. These machines are being operated individually and continue to be tested extensively as our team resolves the assembly and technical issues that typically emerge during startup and initial operations of complex machinery. The operation of the cascade involves evacuating the system piping and the centrifuges to create a vacuum, energizing the machines to begin spinning the rotors at high speeds, conditioning the piping with process gas, introducing process gas into individual machines and then opening connecting valves between machines.
As the next step, we expect the amount of gas inventory in the individual machines to increase to approximately half of the planned operating inventory. Thereafter, we will gradually transition to a closed-loop cascade configuration. Over the following months, we expect to gradually increase the gas flow to 100 percent of planned operating inventory. Out of this testing process, USEC expects that commercial grade separation capability can be demonstrated. We expect the Lead Cascade operation will position USEC to meet the revised October 2007 milestone under our 2002 agreement with DOE. That milestone is to have the Lead Cascade operational and generating product assay in a range usable by commercial nuclear power plants. The Lead Cascade is expected to operate for an extended period at various operating conditions to provide further reliability data, aid in confirming design parameters for the AC100 machine, and provide additional training to operators.
The license issued by the U.S. Nuclear Regulatory Commission for the demonstration facility specifies that the machines be operated in a closed-loop configuration where the uranium gas is enriched, depleted and re-combined in a repetitive cycle. The demonstration facility license only permits test samples of enriched uranium to be withdrawn. The separation of uranium isotopes can be tested by analyzing these small samples. It is through this test data that we expect to demonstrate the achievement of the October 2007 milestone. The size of the initial cascade of prototype machines was intentionally limited to fewer than 20 machines. This cascade arrangement can achieve the Lead Cascade objectives at a lower cost, demonstrates the design's reliability and allows USEC's strategic suppliers to begin working toward building the AC100 machines.
USEC's Deterministic Approach
USEC will assure the long-term reliability of its American Centrifuge machines by using an analytical method known as the "deterministic approach." The deterministic approach is typically used to assure long-term reliability in the introduction of complex, highly engineered systems, such as new aircraft. Rather than testing a large number of high cost, complex systems over an extended period of time, the deterministic approach focuses on identifying failure modes and designing the components and systems with safety margins exceeding expected stresses of the operating environment.
Testing over a relatively short time period is conducted on a smaller number of the engineered designs to ensure they operate safely and effectively. This approach is supplemented with the results of failure analyses and a corrective action process during this initial testing period and subsequent demonstration tests of the completed system under full operating conditions. As the centrifuge design evolves, and as test, field, and repair data are gathered during centrifuge manufacturing, assembly and operation, the information is fed back to designers. The problem identification and correction action process, together with periodic detailed inspections of machines removed from service, aims to ensure that the expected high reliability and manufacturing quality objectives are reached, which should provide a high degree of confidence in the reliability of the American Centrifuge.
The Next Steps - A Preview
In April 2007, USEC received a 30-year construction and operating license for the American Centrifuge Plant and on May 31, 2007, officially commenced construction.
On a parallel path with Lead Cascade testing operations, USEC has been refining the design of the AC100 centrifuge that we expect to populate the commercial plant. USEC has built about 90 percent of the components for the American Centrifuge machines assembled thus far. Beginning in late 2006, USEC began working with its suppliers to transfer the technology. Going forward, this technology transfer will continue as USEC and its suppliers prepare manufacturing capacity for the classified components and carbon fiber rotor fabrication, and transfer responsibility for rotor balancing. USEC will focus on developing expertise in centrifuge technology and efficient, safe operations and will outsource the manufacturing to high-volume fabrication experts. In Honeywell International, ATK Composites and BWX Technologies, we believe we have a highly qualified, strong team. As they gain manufacturing experience, these industrial leaders will integrate changes, implement improvements to the machine design, and work to lower the capital cost per machine.
Essentially all of the buildings required for the commercial plant were constructed in Piketon in the 1980s by DOE. These existing structures, as well as the supporting infrastructure, are being evaluated and will be refurbished as necessary by our balance of plant contractor, Fluor Corporation. Construction and refurbishment work by Fluor began in May.
As the integrated testing program of the Lead Cascade continues, USEC and its suppliers will be developing manufacturing infrastructure and capacity to position the suppliers to commence high-volume manufacturing in late 2008. Design and early construction of the feed and withdrawal facility, where the natural uranium is fed into the commercial centrifuges and enriched product is removed, will continue into 2008.
Earlier this year, USEC completed a comprehensive review of the cost of deploying the American Centrifuge Plant and established a target cost estimate of $2.3 billion. That target cost estimate includes amounts already spent on the project and estimates for cost escalation, but does not include financing costs or a reserve for general contingencies. Based on information currently available to the Company, including initial bids and procurements from suppliers, feedback from consultants and other third parties, and our analysis of material, commodity and labor cost trends, we believe that some of our costs could be higher than provided for in our target cost estimate, particularly for the first centrifuge machines being manufactured by our suppliers. Working closely with key project suppliers, USEC is seeking to reduce the capital cost per machine while maintaining performance objectives to help achieve our target cost estimate. We continue to simplify the design of the centrifuge machines in order to reduce costs as well as to take advantage of technological advancements to improve performance.
We believe that success in these value engineering efforts by our strategic suppliers may help to offset higher materials costs seen in some of the initial procurements. Using information collected from these efforts, we expect to complete an update of our target cost estimate for deployment of the American Centrifuge Plant in early 2008. The cost estimate resulting from that review will include a reserve for general contingencies that will reflect the maturity of the project as well as our evaluation of material, commodity and labor cost trends at that point. The reserve for general contingencies, which is not included in our target cost estimate of $2.3 billion, will take into account variations in the project plans that we believe may occur and associated increased costs that we cannot specifically identify at the time the estimate is prepared.
The 3.8 million SWU capacity of the American Centrifuge Plant is the expected output from the approximately 11,500 AC100 machines that will fit in the existing buildings at Piketon. We are working to be in a position to assemble approximately 400 machines per month from 2010 through 2012. USEC will evaluate the nuclear fuel market and progress by U.S. utilities towards building new reactors early in the next decade to determine the economic return on building additional American Centrifuge capacity.
USEC will continue to conduct research and development on the American Centrifuge machines even as the initial 3.8 million SWU plant is built. Enhanced analytical tools and computer aided design and manufacturing methods open the door to less costly, more productive machines as USEC seeks to enhance its capability in centrifuge technology and develop a next-generation machine. This will ensure that the United States has a reliable, domestically owned and controlled source of uranium fuel and can continue its leadership in enrichment technology for nuclear power.
USEC Inc., a global energy company, is a leading supplier of enriched uranium fuel for commercial nuclear power plants.
Forward Looking Statements
This document 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: the success of the demonstration and deployment of our American Centrifuge technology including our ability to meet our performance targets, target cost estimate and schedule for the American Centrifuge Plant and our ability to secure required external financial support; changes in existing restrictions on imports of Russian enriched uranium, including the imposition of duties on imports of enriched uranium under the Russian Contract; pricing trends in the uranium and enrichment markets and their impact on our profitability; changes to, or termination of, our contracts with the U.S. government and changes in U.S. government priorities and the availability of government funding; 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, including our Annual Report on Form 10-K and subsequent quarterly Form 10-Qs. Revenue and operating results can fluctuate significantly from quarter to quarter, and in some cases, year to year. We do not undertake to update our forward-looking statements except as required by law.
CONTACT: USEC Inc.
Investors:
Steven Wingfield, 301-564-3354
or
Media:
Elizabeth Stuckle, 301-564-3399
SOURCE: USEC Inc.