Bowing to pressure from the Clinton administration and Congress, the uranium-processing firm USEC Inc. yesterday dropped its threat to resign as the federal government's executive agent in a nuclear nonproliferation deal with Russia.
The Bethesda-based company, which was sold by the government to investors in July 1998, had raised the possibility that it would resign as the agent in the Russian deal if it failed in its efforts to win as much as $200 million in federal financial aid.
USEC had said that it needed the federal financial support because the deal with the Russians--under which Russians convert highly enriched uranium from dismantled nuclear warheads into low-enriched uranium used as fuel in power plants--was costing the company money. USEC buys the processing from the Russians at a price it says is higher than its own cost of processing.
But the administration countered by saying that it was negotiating with other companies to take over the executive agency, which could have created a competitor to USEC in the market to sell fuel-quality uranium to utilities.
Yesterday USEC's board blinked, voting to continue as executive agent until the deal with the Russians expires at the end of 2001. The company estimated that doing so will result in approximately $10 million in lost earnings next year, but USEC President William H. Timbers Jr. said that "the company would incur greater economic costs in the long run from not being the manager of this program."
Investors sent the company's shares tumbling 7.6 percent, or 62 1/2 cents, to close at a new low of $7.62 1/2.
The company also may have incurred costs in ill will created by its lobbying campaign. Members of Congress and the administration have said they were unconvinced that federal aid of the magnitude that USEC was seeking was warranted, noting that the company is spending $100 million a year in dividends to shareholders and another $100 million to buy back its stock.
Energy Secretary Bill Richardson said yesterday that he doesn't rule out helping USEC. But he said that the amount the company had been seeking and its unwillingness to give assurances about employment and the continued operation of its uranium-processing plants in Paducah, Ky., and Portsmouth, Ohio, were "unacceptable."
"We will work with USEC. We will try to straighten out some of our differences," Richardson said, but he also said that he is keeping alive the idea of introducing additional agents into the Russian deal. "This is not a threat," but a step to make sure national security considerations are protected, he said.
House Commerce Committee Chairman Rep. Thomas J. Bliley Jr. (R-Va.) said yesterday that "today's announcement does not mean this problem has disappeared." Bliley has been sharply critical of the administration for what he has said is a failure to provide adequate oversight for USEC after it was privatized. "The Clinton administration dodged the bullet today," he said.
In a written statement yesterday, USEC's Timbers said that to meet the needs of shareholders "the relationship between our cost structure, including the purchase price of enriched uranium from Russia and the market price of our products must come into better alignment." Rep. Ted Strickland (D-Ohio) said he was concerned that USEC's next step might be to lay off workers.
USEC pays Russia $88 per unit of processed uranium now and will pay $91 in 2001, which the company says is higher than its own cost of processing and above the market price, which is in the low $80s, according to company spokesman Charles Yulish.