USEC Provides Update on American Centrifuge Plant Progress

Business Wire,  April 17, 2008  

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BETHESDA, Md. -- USEC Inc. (NYSE:USU) reported today that it has finalized the initial design for its technologically advanced AC100 centrifuge machine, that its Lead Cascade testing program is demonstrating reliable and consistent operations, and that its ongoing budget review continues to indicate a $3.5 billion cost for the American Centrifuge Plant now under construction.

In addition, a manufacturing facility in Oak Ridge, Tenn., that was recently purchased by USEC continues to be rapidly refurbished with state-of-the-art equipment to support high-volume centrifuge manufacturing.

Since the beginning of 2008, the American Centrifuge machines involved in the Lead Cascade integrated testing program have operated for more than 30,000 machine hours, providing data on equipment reliability and identifying opportunities to further optimize the machine and cascade design. The ongoing Lead Cascade testing has demonstrated an output of low enriched uranium at a product assay used in commercial reactor fuel, which is consistent with results observed in 2007.

The Lead Cascade test program has also provided data that resulted in modifications and improvements to centrifuge components. USEC's American Centrifuge team in Oak Ridge has used the data generated by the integrated testing program, along with tests in Oak Ridge involving AC100 machines in individual tests stands, to evaluate these improvements. Recent tests of the AC100 have continued to demonstrate potential performance beyond the initial target performance.

The initial design for the AC100 machines was finalized on March 31, and 75 percent of the drawings have been released to USEC's strategic suppliers to begin manufacturing components. Additional component validation testing will be completed and the remaining drawings released to the strategic suppliers by June 30. The AC100 machine is designed to produce 350 SWU per year.

The strategic suppliers will now begin manufacturing parts for the 40 to 50 AC100 machines that will be installed in the next operating cascade in Piketon, Ohio, which is expected to be operational in the spring of 2009. In addition, improved AC100 components and design features will be incrementally introduced into the current cascade throughout 2008.

USEC's review of the comprehensive project budget and schedule is ongoing, and the Company expects the process to be completed later this quarter. In February, USEC said the project budget for building the American Centrifuge Plant (ACP) is expected to be about $3.5 billion, which includes spending to date but does not include costs for financing or financial assurance.

"Our American Centrifuge team continues to make solid progress on several fronts and our confidence in the technology grows. We are focused on preparing a more refined budget for building the American Centrifuge Plant," said John K. Welch, USEC president and chief executive officer.

"We have been working our way through a process of cost analysis, then meeting with our suppliers and going through their cost projections line by line. For example, with our EPC contractor Fluor, we have decided to self-perform or separately contract some of the balance of plant work because we believe the work can be done at a lower cost without substantially affecting the schedule," he said.

"Although we are still very much in the midst of working with our strategic suppliers to control costs, based on what we've seen to date, we continue to expect the cost of the plant to be about $3.5 billion," Welch said. "We believe the key to success is to construct the plant in the most cost-effective manner, to balance and mitigate risks, and to have flexibility in our schedule to account for the timing and availability of debt financing.

"We are also reviewing our financing plans for the plant in light of current credit market conditions and the anticipated timing of any loan guarantees from the U.S. Department of Energy," Welch said. "Our preferred path is to obtain a loan guarantee for the project from DOE. In late 2007, Congress authorized DOE loan guarantees for a variety of energy projects, including up to $2 billion for the front end of the nuclear fuel cycle. The DOE's implementation plan went to Congress last week and DOE expects to issue a solicitation for projects by midyear.

"The loan guarantee implementation plan details the criteria DOE will use to evaluate energy projects. Our project is in close alignment with the established criteria and we will work closely with DOE to provide the information it needs to evaluate our project in a timely manner," Welch said.

"Since the timing of when DOE will complete its review of projects or when a broad recovery of the credit markets will occur is uncertain at this point, we are also looking at alternative spending profiles for our project without substantially delaying the ultimate build-out of the American Centrifuge Plant. We are keeping a close eye on our capital spending to ensure that we live within our means until we are able to raise debt capital," Welch said. "Our successful efforts to improve the economics of the Paducah plant provide a meaningful financial backstop during the deployment period and give us greater flexibility to extend its operations as part of any alternative planning we may evaluate as the most prudent path for deploying our American Centrifuge Plant.