Washington (Platts)--1Nov2012/1149 am EDT/1549 GMT

After fighting to continue operations at its Paducah, Kentucky, uranium enrichment plant earlier this year, USEC said Thursday it would likely cease enrichment operations there in May 2013 and rely on sales of Russian-sourced fuel and current inventories to meet its contracts until the company's troubled Advanced Centrifuge plant comes online in several years.

"We had hoped to continue enriching at Paducah as we build out the American Centrifuge plant, however, delays in the deployment of ACP, and current market conditions have meant that we expect there to be a transition period of several years until the ACP is in commercial operations," said USEC president John Welch.

"During this period we would no longer be enriching uranium at Paducah, but instead would make sales from our existing inventory and future purchases through our supply agreement with Russia," he said during a call with investors Thursday.

Article continues below...

Request a free trial of: Electric Utility Week
	Electric Utility Week is a must read for top executives and policymakers in the utility business. It is even more vital today, as utilities find their way in the fastest-changing world ever. This newsletter focuses on the big, fundamental news that matters to every utility--investor-owned, municipal and cooperative.

USEC in May inked a deal with the US Department of Energy, Energy Northwest and the Tennessee Valley Authority to keep its Paducah plant open, and its 1,000 workers employed, for one year. Under the deal, DOE transferred title to over 9,000 st of depleted uranium to Energy Northwest, which contracted USEC to enrich it to low enriched uranium for use in Energy Northwest and TVA reactors.

Welch said that while USEC would continue to look for ways to keep the plant open, the Paducah enrichment facility is inefficient compared with its competitors, and along with slacker demand from shuttered nuclear plants in Japan and Germany, the plant cannot therefore compete.

When the current deal ends next year, USEC said it would be able to meet its contracts with supplies on hand and through a contract to buy low-enriched uranium from Russia through 2022.

"We are in the process of developing protocols and delivery mechanisms for this transitional supply arrangement with Tenex. The amount we will purchase from Russia will ramp up in volumes over a couple years," said Philip Sewell, the senior vice president for ACP and Russian highly enriched uranium.

Sewell added that USEC would have an option to buy additional supplies from Russia if demand increases. If the options are used, USEC will be buying about 5.5 million separative work units (SWU) from Russia, he said, about the same level as today under a program that expires in 2013.

While USEC said the use of Russian-sourced fuel and current inventories would allow it to bridge between the shutdown of Paducah and the opening of the American Centrifuge plant in Piketon, Ohio, that project's future is far from assured. Currently, the company is reliant on DOE for research and development funding to help prove the project.

USEC has applied for a $2 billion loan guarantee from DOE, but the agency has said the advanced centrifuge technology has not yet been proven. DOE has given USEC several hundred million dollars in funding to help do that, and the company said it hopes to have a new loan guarantee application ready for the department in 2013.

Both the Paducah and Piketon plant have attracted political controversy, as US lawmakers from Kentucky pressed to keep the Paducah plant open, and US House of Representatives Speaker John Boehner pushed DOE to approve a loan guarantee for the American Centrifuge plant.

But the company has struggled financially, with commitments of $280 million this year from DOE for the ACP allowing the project to stay afloat, and critics in Congress have charged the project is a boondoggle.

--Derek Sands, derek_sands@platts.com

--Edited by Keiron Greenhalgh, keiron_greenhalgh@platts.com

Tweet