United States Enrichment Corp., bailed out once, seeks more federal money for new project

The troubled United States Enrichment Corp., on the brink of closing a Kentucky enrichment plant, has been bailed out in a complex Energy Department accord designed to keep that facility open one more year.

But USEC, a Bethesda-based firm that provides fuel for nuclear power reactors, is seeking more federal money to carry out research and development for the American Centrifuge Project, a more efficient enrichment plant in Ohio that the company calls vital to its future.

USEC’s supporters in Congress have inserted language in versions of three different spending bills that would provide as much as $150 million — an example of how a small piece of complicated legislation can acquire powerful political allies and foes.

Without new government aid, USEC says it will have to halt work at the Ohio site by month’s end, and that has created a rare moment of bipartisanship in Washington. Democratic and GOP members of the Ohio delegation, including House Speaker John A. Boehner, and Energy Secretary Steven Chu support the authorization or transfer of research money for USEC’s new facility.

But USEC’s efforts to secure federal aid have also sparked bipartisan criticism. A former government corporation privatized in the 1990s, USEC has struggled financially while blending down highly enriched uranium from decommissioned Russian nuclear warheads. The Russia deal runs out next year, and competing companies can enrich uranium more cheaply.

Taking aim at a proposal in the Senate version of the highway bill, Reps. Edward J. Markey (D-Mass.) and Stevan E. Pearce (R-N.M.) urged House conferees to reject the $150 million “earmark” and to “stop the expenditure of taxpayer dollars on USEC’s failed” new Ohio plant.

“No one would consider providing Solyndra more federally backed loans, so why should USEC be any different?” Pearce says on his Web site, comparing USEC to the now-bankrupt solar panel manufacturer that received federal loan guarantees.The European consortium, Urenco, operates an enrichment plant in Pearce’s district in New Mexico.

In the energy and water appropriations bill for fiscal 2013, the Senate version includes authorization for transferring $150 million to USEC while the House version provides a new appropriation of $100 million. The House version of the defense spending authorization bill gives the energy secretary the ability to spend up to $150 million on USEC’s centrifuge technology.

Despite the push by the Energy Department and USEC’s allies in Congress, investors and credit analysts are not impressed. The stock, already down from its 2007 peak of about $24 a share, has plunged an additional 31 percent this year, to 74 cents a share, and will be dropped from the New York Stock Exchange if it does not rebound.The entire market capitalization of the company, which was once government-owned, is just $96 million, a fraction of the amount it is seeking in government assistance.

In March, JPMorgan Chase led a group of seven lenders who provided a new $235 million, one-year credit facility tied to government aid. On Tuesday, Standard & Poor’s put USEC’s CCC plus credit rating on “negative” alert because of uncertainty about government funding. “We consider the company’s liquidity position to be weak,” S&P said in a note to investors.

USEC’s supporters say a U.S.-owned company must be preserved to supply small amounts of uranium to make the tritium needed to maintain U.S. nuclear weapons. Under the deal that will keep a Paducah, Ky., plant open a year, USEC will provide enough uranium to do that for about 15 years, the Energy Department said.

The department also noted that USEC leases Paducah and once it stops, the department will face the cost of cleaning up the 3,425-acre site, which opened in 1952 to fuel nuclear reactors and weapons.

The department has orchestrated a chain of transactions involving government agencies and firms. One dimension: A consortium of 28 municipal power utilities in Washington state will acquire enough enriched uranium not only to meet its needs but also the demands of the Tennessee Valley Authority for 10 to 15 years.

The Energy Department said it would provide 9,075 metric tons of uranium “tails,” material left behind during the making of nuclear weapons in past years.

Energy Northwest, the Washington state consortium, will pay USEC to enrich the uranium tails. Energy Northwest will use part of the enriched uranium to power its Columbia Generating Station, whose sole customer is the Bonneville Power Administration, which is wholly owned by the Energy Department.

Energy Northwest would sell the other portion of enriched uranium to the TVA. TVA would set aside a tiny amount needed to replace deteriorating tritium in U.S. weapons stockpiles. TVA also extended an agreement to provide power to Paducah, which devours as much electricity as Nashville.

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Steven Mufson covers energy and other financial news.
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