Uranium enrichment company Centrus Energy, which is closing down its work on the American Centrifuge Plant (ACP) in Piketon, Ohio, said Tuesday it still does not have a contract for the portion of that program that was supposed to continue through September at the Oak Ridge National Laboratory in Tennessee.
Centrus thought it would have that work locked up under a subcontract with Oak Ridge prime UT-Battelle back in September, but the deal never materialized. Yet according to the company’s latest yearly earnings report, Centrus has not given up hope.
“We anticipate that DOE, through UT-Battelle, will extend our development work in Oak Ridge with a contract through September 30, 2016,” Centrus wrote in its latest 10-K filing with the U.S. Securities and Exchange Commission. ACP’s expansive research and development program was concentrated at Piketon, but some work took place at Oak Ridge. Even as it moved to close down Piketon last year, Centrus thought it would get a new UT-Battelle subcontract to continue the Oak Ridge work.
Daniel Poneman, the former deputy energy secretary who is now Centrus’ president and chief executive officer, offered his personal dose of optimism in a Tuesday quarterly earnings call, saying “Oak Ridge has said they will continue to fund our ongoing work in Tennessee this year.”
But Centrus said the same thing last year in a September press release that proved premature. That same month, DOE pulled the plug on the Piketon portion of the program, triggering waves of layoffs in Ohio.
A Centrus spokesperson on Friday confirmed 60 ACP workers left the plant on March 4 in the first wave of layoffs, leaving 150 Centrus badges on site at Piketon. That compares with 255 as of Dec. 31, according to the company’s latest 10-K.
“We have not announced the schedule for future layoffs at this time,” the spokesperson said. “We expect that the decontamination and demolition effort will continue through the end of 2016.”
American Centrifuge costs outside the scope of Centrus’ subcontract with UT-Battelle totaled a combined $35.5 million for 2014 and 2015, the company said in its latest earnings filing. This largely included the cost of preparing the Piketon facility for shutdown, though it also encompassed project testing and development work at Oak Ridge, which, absent a contract with UT-Battelle, Centrus self-funded.
As recently as September, Centrus thought it would have a one-year, fixed-price deal for the Oak Ridge work. In a press release issued that month, the company said the contract would be worth about $35 million a year — less than half of what Centrus made annually under the predecessor ACP subcontract when Piketon operations were in full swing. There were 120 Centrus employees at Oak Ridge as of Dec. 31, the 10-K says.
Centrus is now reinventing itself as “the world’s most diversified supplier of nuclear fuel and nuclear fuel services,” Poneman said on the company’s latest conference call. It will have to do that without the enrichment capacity it once counted on from the advanced centrifuge farm in Piketon, on which the company had bet big.
According to the latest Centrus 10-K, about $800 million worth of orders could disappear as customers trigger contract clauses that allow them to cancel all or part of their orders if ACP is not ready to enrich uranium as planned.
“Some of these customers have indicated they expect to exercise their contract termination rights,” Centrus wrote in the filing. If that happens, the company would either have to walk away from the business, or — preferably, from the management’s point of view — negotiate a new contract.
Future revenue at risk from ACP’s closure represents about 35 percent of Centrus’ total backlog, which stood at $2.3 billion as of Dec. 31. That includes long-term orders, some of which are not due to be filled until well into the late 2020s or beyond, the company wrote in its 10-K.
While Centrus has said it plans to maintain its Nuclear Regulatory Commission license for ACP, the company sees no prospects, at least in the short term, for restarting the facility, Poneman said on the conference call. The market for low-enriched uranium fuel does not support a commercial-scale enrichment plant such as ACP, he added, “and won’t for several years to come.”
The news was not all bad, however, as Centrus reminded listeners on the conference call Tuesday that it had clinched $165 million in uranium fuel orders over the last nine months for unidentified customers. Deliveries under these contracts stretch out through 2022, Centrus said. Some of these orders were not finalized before the company closed out its 2015 fiscal year, and so are not part of the latest earnings results.
Also in 2015, Centrus renegotiated a crucial contract to purchase low-enriched uranium from Russia’s state-owned uranium enrichment company, TENEX. The new deal keeps the pipeline open through 2026, Centrus said in its earnings report. Centrus used to refine such fuel at the now-closed Paducah Gaseous Diffusion Facility, when the company was still owned by the U.S. government and known as the United States Enrichment Corporation (USEC).
Overall, Centrus lost $187.4 million in 2015, compared with earnings of $297.8 million in 2014; the prior year includes results from the now-defunct predecessor company, USEC. Centrus emerged from a Chapter 11 bankruptcy reorganization in 2014.
The company’s 2015 loss included a “non-cash charge of $137.2 million for the impairment of excess reorganization value” it booked following the exit from bankruptcy. In other words, the company significantly lowered the estimated of the value of its intangible assets — like the brand-value barometer known in accounting-speak as goodwill — since the bankruptcy.
Overall revenue in 2015 was $418.2 million, compared with $514.1 million in 2014 that included nine months of USEC results. Results for 2014 included $425 million in one-time gains related to the organization, which explains the company’s profit last year, Chief Financial Officer Stephen Greene said on the call.
