USEC Responds to 'HEU Deal' Article

A few clarifications are in order regarding your article, "Clinton Protects Russian 'HEU Deal' Assets," (ACT, July/August 2000).

As noted in the article, the United States Enrichment Corporation (USEC) acts as executive agent to commercially implement the Megatons to Megawatts program (the Russian "HEU Deal") at no cost to the taxpayer.

Since privatization in July 1998, a series of global market changes have resulted in lower prices, lower demand, and increased price competition for enrichment. Like any business facing these challenges, USEC must cut costs to remain competitive. Despite government constraints and politics, we have taken steps to downsize our workforce and announced that we will consolidate operations at our Paducah, Kentucky, plant and cease enrichment at our Portsmouth plant by June 2001. We have also taken other cost-cutting measures, such as renegotiating electric power contracts (electricity accounts for more than half our cost of production).

Contrary to the assertion in your article, neither these deteriorated market conditions nor the plant closure decision means that USEC is taking action to "avert impending bankruptcy." We have strong fundamentals, robust cash flow, and over $6 billion in customer backlog. Like any other well-run business, we are reducing costs in order to remain competitive.

The Megatons to Megawatts HEU purchase program is a seven-year success story, albeit with occasional issues and problems along the way. To date, the Russians have converted the equivalent of nearly 4,000 nuclear warheads into fuel purchased by USEC to fuel commercial electric power plants.

Yes, there has been a financial impact on the nuclear fuel cycle due to this program. USEC is purchasing 5.5 million SWU (enrichment units) a year from Russia. The additional enrichment needed to meet our total customer demand is most economically produced by the timely consolidation of operations at our Paducah plant. That, coupled with a pending market-based pricing agreement with Russia for the post-2001 period, will benefit national security, our employees, and our shareholders.

The special interests proposing that USEC should be renationalized are in deep denial of the basic business conditions our industry is facing. They propose to keep two plants open at high employment levels, each operating at only 25 percent of capacity, to produce more of a product that is in declining demand at a higher price than the market will pay for it. That concept flunks even the most elementary business math test—unless, of course, the scheme depends on taxpayer dollars. And that is what is being proposed by those who advocate nationalization.

Charles B. Yulish

Vice President, Corporate Communications, USEC

August 3, 2000