The U.S. Department of Energy has finalized a deal for Centrus Energy Corp. to produce high-assay low-enriched uranium fuel for nuclear reactors by building a new all-domestic enrichment cascade — technology that could one day contribute to national defense.
The Bethesda, Md.-based company, the former U.S. Enrichment Corp., announced the news this week. The company started work on May 31 on the 16-machine cascade of AC100-M centrifuges at DOE’s Portsmouth Site near Piketon, Ohio, under an undefinitized contract with the agency’s Office of Nuclear Energy.
The deal, announced in January, is a no-fee, cost-sharing arrangement worth roughly $115 million, including two years of firm funding and one option year. The Energy Department was to release about $35 million in funding by December, according to a copy of the undefinitized contract that Centrus released over the summer.
Centrus is paying about $30 million out of pocket, the company said this week in an 8-K filing with the U.S. Securities and Exchange Commission. Management expects to book most of that as a loss in the 2019 fourth quarter. Dan Poneman, Centrus’ chief executive officer, said on a Friday conference call with investors the cost-share requirement was “significant” for the company.
Centrus also said in the contract 8-K that it will publish its full agreement with the Office of Nuclear Energy along with its full-year 2019 earnings statement, notionally due to be filed with the SEC early in 2020.
In all, Centrus is under contract to produce 600 kilograms of high-assay low-enriched uranium fuel by June 1, 2020. The fuel, which would include about 20% uranium-235, could help the Office of Nuclear Energy further develop so-called “advanced” nuclear reactor designs for commercial markets. The Centrus fuel could be burned in test reactors to determine its performance and suitability for commercial markets.
Most of the work in the first year or so of Centrus’ contract involves procuring subassemblies for the 16 centrifuges and delivering them by Dec. 15, 2020, to Portsmouth’s Gas Centrifuge Enrichment Plant: the building that once housed the company’s now-canceled American Centrifuge Project.
The American Centrifuge Project, canned during the Barack Obama administration, was an industrial demonstration of AC100-heritage technology that, unlike the cascade now under construction, included some non-U.S. components. These rendered the machines ineligible to enrich defense uranium.
The Energy Department’s semiautonomous National Nuclear Security Administration (NNSA) will in 2038 require a new source of low-enriched uranium in order to create tritium needed to maintain the explosive power of the U.S. nuclear arsenal. As part of an analysis of alternatives slated to wrap up in December, the weapons agency is considering using Centrus AC-100 series technology for this purpose.
Meanwhile, Centrus reported net income this week over just over $20 million, or $2.17 a share, for the 2019 third quarter, up from a loss of more than $9.5 million, or $1.06, in the year-ago quarter. Quarterly revenue rose to almost $7105 million in 2019 from around $34 million in 2018.
Centrus typically books most of its revenue in the second half of the year. The company said revenue from its flagship low-enriched uranium segment, the reactor fuel business, about quadrupled year-over-year to just under $60 million, “reflecting the variability in timing of utility customer orders.”
