U.S. NUCLEAR RISKS

N - 10 May 2024 - US nuclear fuel company Centrus Energy is concerned over potential risks to its supply resulting from new legislation banning the import of Russian uranium. Centrus supplies of nuclear fuel components and services for the nuclear power industry. Centrus is also developing the next generation of centrifuge technologies with the aim of restoring US domestic uranium enrichment capability. However, primarily it acts as a broker of enriched uranium, sourcing foreign SWU (separative work units) and supplying SWU and uranium to US and international customers.

In April the Senate passed the Prohibiting Russian Uranium Imports Act (HR 1042), which bans uranium imports from Russia and becomes effective 90 days after enactment. The legislation, which was previously passed by the House of Representatives, has been send to the President for signature into law. “The legislation includes a provision that allows for the granting of waivers through 2027, including if the waiver serves the national interest,” Centrus notes. “When the legislation is enacted, we will apply for waivers from the Secretary of Energy and other applicable government agencies to request permission to continue supplying LEU to our customers. It is uncertain whether any waiver would be granted and, if granted, whether any waiver would be granted in a timely manner. The Company anticipates having adequate liquidity to support its business operations for at least the next 12 months.”

According to its 2023 annual report to the US Securities & Exchange Commission, Russia’s Tenex is Centrus’s largest supplier of SWU, followed by French company Orano. Centrus has commitments with Tenex for the supply of Russian enrichment services (in the form of SWU) to 2028.

US concern over Russian enriched uranium has a long history. In an effort to prevent an influx of cheap Russian enrichment services into the US after the collapse of the Soviet Union, the US nuclear energy industry instigated an anti-dumping petition in 1991. This resulted in the adoption in 1992 of the Russian Suspension Agreement (RSA) between the US Department of Commerce and Russia’s Ministry of Atomic Energy (now Rosatom). The RSA introduced formal quotas on the import of Russian enriched uranium. It was amended in 2008 and 2020.

Despite having access to alternative sources of enriched uranium, Centrus noted in its 2023 report that, without securing a waiver, an enriched uranium ban would preclude the company from importing Russian low enriched uranium (LEU) and that its alternative supply would not be sufficient to replace the Russian LEU currently permitted under the RSA.

The United States Enrichment Corporation (USEC) ceased production in 2001. Following bankruptcy in 2014, USEC re-emerged as Centrus Energy Corp and under a 2019 contract DOE’s Office of Nuclear Energy, Centrus licensed and built a new cascade of 16 AC100M centrifuges at Piketon to demonstrate production of high-assay, low-enriched uranium (HALEU), at that time only available from Russia.

Centrus’s first quarter 2024 results showed a net loss of $6.1m for the three months ended 31March. Centrus generated total revenue of $43.7m compared with $66.9m for the same three months in 2023, a decrease of $23.2m. Revenue from the LEU segment was $23.6m down from $58.8m in 2023. SWU revenue decreased by $35.2m as a result of a decrease in the volume of SWU sold and a decrease in the average price of SWU sold. Gross profit for the Company was $4.3m down from $23m in 2023.

Revenue from the Technical Solutions segment increased to $20.1m compared with $8.1m for the three months ended 31 March 2023, an increase of $12m. Revenue generated by the HALEU Operation Contract increased $12m due to the transition from Phase 1 to Phase 2 in late 2023. In November 2023, Centrus announced its first delivery of 20 kilograms of HALEU uranium hexafluoride (UF6), completing Phase 1 of the HALEU Operation Contract under budget and ahead of schedule. Centrus has now achieved cumulative deliveries to the DOE of approximately 135 kilograms of HALEU UF6.

Centrus also announced that it has signed approximately $900m in contingent LEU sales commitments, subject to entering into definitive agreements, in support of potential construction of LEU production capacity at Centrus' American Centrifuge Plant in Piketon, Ohio. These commitments, reflecting deliveries of LEU to customers from 2028 to 2040, are contingent upon Centrus securing substantial public and private funding and financing to build the new capacity. Centrus competes against large, government-owned entities and is the sole publicly traded enrichment company in the industry. Congress recently included $2.72bn for new, domestic nuclear fuel production as part of a government funding bill signed into law in March.

Centrus President & CEO, Amir Vexler, said "Centrus had a strong start to the year, making additional HALEU deliveries to the Department of Energy and submitting bids on two Requests for Proposals from the Department aimed at expanding its HALEU production capacity. In addition, the Company signed approximately $900m in contingent LEU sales commitments to support the potential construction of LEU production capacity alongside our HALEU production."

He added: "Recent funding legislation enacted with wide, bipartisan support includes a $2.7bn federal investment in domestic enrichment. With the support of a strong, public-private partnership, we look forward to scaling up production to meet the full range of commercial and national security requirements for enriched uranium, including HALEU for advanced reactors and LEU for the existing reactor fleet. While our first quarter results reflect the expected quarter-to-quarter fluctuations in our revenues and margins – largely resulting from the timing of customer deliveries – we are encouraged by the progress we are making to reclaim American leadership in uranium enrichment."

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