March 17, 2014

ZION PROJECT THE ROOT OF UNCERTAINTY FOR MANY IN ENERGYSOLUTIONS SALE

By ExchangeMonitor

Uncertainty over the financial viability of the Zion license stewardship project soured several serious offers from entities that expressed serious interest in buying EnergySolutions over the last two years, according to the proxy statement the company filed with the Securities and Exchange Commission Feb. 8. The proxy statement details EnergySolutions’ pursuit since February 2011 for a buyer for the either the entire company or the UK and European segment, the government segment, or the Zion license stewardship project. EnergySolutions entertained serious offers for as much as $9 per share for the entire company, but of the two dozen entities expressing serious interest at least three deals were offered and then rescinded with the entities specifically citing Zion as a chief concern. At least five other entities involved in discussion for purchase or possible partnering with Zion also declined.

Even Energy Capital Partners, which is now months away from finalizing purchase of EnergySolutions, expressed serious concern at one point with the financial outlook of the Zion plant, including "operating costs, potential overruns and the amount of money in the nuclear decommissioning trusts associated with the Zion project," according to the proxy. After more than a year of fielding offers, in May 2012 EnergySolutions held a board meeting and in discussions noted that "many of the bidders expressed concerns about the potential liabilities and risks associated with the Zion project, and following diligence on Zion had withdrawn from the process." A month later, then-CEO Val Christensen was ousted and replaced by board member David Lockwood and the company announced it was reducing fiscal year 2012 guidance from a range of $150 million to $160 million down to a range of $130 million to $140 million, and expressed their understanding of and expectation for future profit margins at the Zion project.

After six more months of unsuccessful negotiations, EnergySolutions’ board agreed to allow ECP an exclusivity agreement. ECP had determined that valuing EnergySolutions at between $3.50 and $4.00 per share, "assuming that the Zion project would break even," was an agreeable offer. The proxy statement, released Feb. 8 after the 30-day "go shop" period for EnergySolutions to seek alternative offers expired Feb. 7, is intended to convince the company’s shareholders to vote for the acquisition offer. A special meeting will be held in Palo Alto, Calif. on April 5 at 9:00 a.m. PT to determine whether a majority of shareholders approve of the deal.

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