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BETHESDA, Md., Dec 21, 2011 (BUSINESS WIRE) --The supply agreement signed in March between JSC "Techsnabexport" (TENEX) and United States Enrichment Corporation, a wholly owned subsidiary of USEC Inc. (NYSE:USU), took effect today. The supply agreement is a multi-year contract for the supply of low enriched uranium (LEU) beginning in 2013 that will build on USEC's long-term relationship with TENEX.
"We are excited to continue our fruitful relationship with TENEX, which has been built on the foundation of the successful Megatons to Megawatts(TM) program," said Phil Sewell, USEC senior vice president of American Centrifuge and Russian HEU. "This supply agreement will be a key component to helping us continue to meet our customers' needs. We appreciate the work and support of the U.S. government to complete the administrative arrangements under the U.S. - Russia nuclear cooperation agreement that now allows this commercial contract to move ahead."
Under the terms of its agreement with TENEX, the supply of LEU to USEC will begin in 2013 and ramp up until it reaches a level in 2015 that is approximately one-half the level currently supplied by TENEX to USEC under the Megatons to Megawatts program with the mutual option to increase the quantities up to the same level as that program. The Megatons to Megawatts program is scheduled to expire at the end of 2013. Unlike the Megatons to Megawatts program, the quantities supplied under the new contract will come from Russia's commercial enrichment activities rather than from downblending of excess Russian weapons material.
Deliveries under the agreement are expected to continue through 2022. USEC will purchase the separative work units (SWU) contained in the LEU and deliver natural uranium to TENEX for the LEU's uranium component. The pricing terms for SWU under the agreement are proprietary but are based on a mix of market-related price points and other factors.
Effectiveness of the agreement occurred following an exchange of notices between TENEX and USEC that the administrative arrangements under the U.S.-Russia nuclear cooperation agreement have been completed. These administrative arrangements, among other things, provide the framework for the return to Russia of natural uranium delivered by USEC to TENEX under the supply agreements.
The supply agreement assures USEC continued access to an important part of its existing supply mix. USEC continues to work towards the deployment of the American Centrifuge Plant in Piketon, Ohio. As it does, the Company is also continuing to review structuring options and strategic alternatives in evaluating the best path forward to realize long-term shareholder value. In that context, USEC and TENEX have agreed to conduct a feasibility study to explore the possible deployment of an enrichment plant in the United States employing Russian centrifuge technology. Any decision to proceed with such a project would depend on the results of the feasibility study and would be subject to further agreement between the parties and their respective governments.
The Megatons to Megawatts program is a unique, commercially financed government-industry partnership in which bomb-grade uranium from dismantled Russian nuclear warheads is being recycled into LEU used to produce fuel for American nuclear power plants. USEC, as executive agent for the U.S. government, and TENEX, acting for the Russian government, implement this 20-year, $8 billion program at no cost to taxpayers. This program is on track to complete the downblending of the equivalent of 20,000 nuclear warheads into commercial nuclear fuel by the program's conclusion at the end of 2013.
USEC Inc., a global energy company, is a leading supplier of enriched uranium fuel and nuclear industry related services for commercial nuclear power plants.
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