The U.S. Department of Energy expects to release this year some $35 million in funding for Centrus Energy Corp. to begin building a new uranium enrichment cascade required to produce 600 kilograms of high-assay low-enriched uranium fuel by June 1, 2020, according to a letter contract filed Aug. 12 with the U.S. Securities and Exchange Commission.
The temporary contract, which the company hopes to finalize by Oct. 31, provides a new level of detail about the agency’s bet on Centrus to craft a 16-machine enrichment cascade that could one day produce uranium for U.S. defense programs using the Bethesda, Md., company’s AC100-M centrifuges.
The deal is a no-fee, cost-sharing pact. On an Aug. 12 conference call with investors, Centrus President and CEO Daniel Poneman, a former deputy secretary of energy in the Barack Obama administration, said that arrangement is “well worth the investment.”
Most of the work in the first year or so of the deal involves procuring the subassemblies for the 16 AC100-M machines and delivering them by Dec. 15, 2020, to DOE’s Portsmouth Site near Piketon, Ohio.
Centrus will build the new machines in Portsmouth’s Gas Centrifuge Enrichment Plant, which once housed the company’s canceled American Centrifuge Project: another AC100-heritage project that included some non-U.S. components that rendered the machines ineligible to enrich defense uranium.
Once finalized, DOE expects its the contract with Centrus subsidiary American Centrifuge Operating Co. to be worth about $115 million over three years, including two years of firm funding. A separate one-year option would cover final assembly of the cascade at Portsmouth, along with production of high-assay low-enriched uranium.
Meanwhile Centrus Chief Financial Officer Marian Davis was to depart the company the week of Aug. 12 after a roughly eight-year run. Centrus announced Davis’ voluntary resignation in a June filing with the SEC and confirmed her then-impending departure on its latest earnings call.
Poneman told investors that Centrus is still set to return to profitability in 2020. In the 2019 second quarter, the company posted a net loss of more than $17.5 million, or $1.84 a share, on revenue of just over $10.5 million. Amid a drop in revenue, Centrus narrowed its losses from the same quarter of 2018, when the top line was about $39.5 million and losses were around $28 million, or $3.08 a share, according to the company’s latest quarterly earnings report.
Sluggish orders in the uranium resale business led the revenue decline, according to Centrus’ earnings release. Uranium orders are typically slower in the first half of the year, Poneman said on the investor call, with most of the year’s revenue materializing in the second half.
Centrus is optimistic about its revenue prospects for the remainder of the year and raised its guidance dramatically, to a range of $205 million to $230 million from the range of $125 million to $160 million forecast just one quarter ago.
Well before it posted the terms of its contract to build a new uranium enrichment facility at the Portsmouth Site, Centrus Energy had already ticked off the first milestone on the $115 million pact with the Department of Energy’s Office of Science.
Milestone 1 in the undefinitized contract calls for the company to withdraw its request that the U.S. Nuclear Regulatory Commission (NRC) cancel the fuel provider’s license to enrich uranium at the site of the now-decommissioned American Centrifuge Project.
The NRC confirmed Aug. 7 that it had received the request filed on June 26: well in advance of the July 1 deadline required by the company’s new contract with DOE. The commission said it then closed Centrus’ request for withdrawal.
