Nuclear Winter: Uncle Sam Punts USEC (USU)

It seems that all the talk about getting off of coal-power and reducing dependence on foreign energy is still just rhetoric.  USEC Inc. (NYSE: USU) announced this morning that the long-standing loan process it has been waiting on a decision for is not going to go in its favor.  The Department of Energy told USEC that it would not proceed with USEC’s application for a loan guarantee to complete construction of the American Centrifuge Plant in Piketon, Ohio.  This is a major blow to the company.  It is also a blow to the future of nuclear energy in the U.S.

USEC is now forced to demobilize the American Centrifuge project.  The company said that this is now increasing our dependence on foreign sources of energy.  It even went as far as to say that President Obama promised to support the loan guarantee for the American Centrifuge Plant while he campaigned in Ohio.

The core existing business is said to remain strong as its Paducah plant is running at its highest efficiency ever and it finished the second quarter with $78 million of cash on hand.

The company’s quote says it all: “We are shocked and disappointed by DOE’s decision…. Our application has been pending for a year, and we have addressed any concerns the Department raised…. It is unclear how DOE expects to find innovative technologies that assume zero risk, but the American Centrifuge clearly meets the energy security and climate change goals of the Obama administration.”

Further, USEC said it has invested $1.5 billion in the American Centrifuge project, including what it says are hundreds of millions of dollars to assist in rebuilding portions of America’s nuclear industrial manufacturing base. Furthermore, USEC noted that the project had already created over 5,000 new jobs and it was expected that it would create over 8,000 in total jobs as manufacturers added new employees across the United States.

While the company says it remains focused on shareholder value, it also said in the release that it has engaged outside advisors to evaluate its strategic alternatives.  USEC shares are getting turned into chopped liver this morning.  Shares closed at $6.19 yesterday, but they are down 44% at $3.49 right after the open.  The 52-week range is $2.58 to $7.24.

JON C. OGG
JULY 28, 2009