Centrus Energy Corp. is a trusted supplier of low-enriched uranium (“LEU”)
for commercial nuclear power plants. References to “Centrus”, the
"Company", or “we” include Centrus Energy Corp. and its
wholly owned subsidiaries as well as the predecessor to Centrus unless the context
otherwise indicates. LEU is a critical component in the production of nuclear
fuel for reactors that produce electricity and we supply LEU to both domestic
and international utilities for use in a growing fleet of nuclear reactors worldwide.
Centrus is a leader in the development of advanced uranium enrichment technology
and is performing research and demonstration work to support U.S. energy and
national security.
In 2014, USEC Inc. filed a voluntary petition for relief under Chapter 11 of
the United States Bankruptcy Code and on September 30, 2014, the Company emerged
from that bankruptcy as Centrus Energy Corp. In 2015, a new management team
was assembled to reposition the Company for long-term success with a focus on
strategic positioning, expanding sales and business development.
Today, Centrus is a very different company than USEC was three years ago:
Shift in strategic priorities: Due to oversupply in the enrichment market, Centrus
does not plan for near term deployment of a commercial scale uranium enrichment
facility. However, Centrus is continuing to advance its centrifuge technology,
preserving its operating license from the U.S. Nuclear Regulatory Commission
(“NRC”) and plans to deploy a commercial scale enrichment facility
over the long term as market conditions recover. We are pursuing strategic relationships
that would capitalize on Centrus unique assets, including our NRC license,
our operational expertise, and our significant technical capabilities.
Better positioned in the market: Without the large capital and overhead costs
of a production facility, Centrus is positioned to obtain supply at a low price
from a market that continues to be oversupplied, which will provide an advantage
in pursuing sales opportunities.
Technology leader: Centrus expects to retain its core expertise and world leading
technical, engineering and manufacturing capabilities in Oak Ridge, Tennessee
through our anticipated contract with the operator of ORNL.
Revised supply agreement: In late 2015, the new management team successfully
completed a renegotiation of the company’s supply contract with Russia;
better matching the agreement to market opportunities and extending the agreement
to at least 2026.
Diversified supply base: Centrus new leadership team is focused on expanding
and diversifying our supply base to provide additional value to our customers.
Over the course of 2015, Centrus entered into new agreements with primary producers
of uranium enrichment expanding both our sources of supply and increasing the
number of possible delivery locations for enriched uranium. In addition, Centrus
acquired additional enrichment supply from the excess inventories of utility
operators of nuclear power plants and from other secondary sources of enrichment
supply.
Solidifying our position for the long term: Centrus has long-term sales and
supply contracts in place that extend well into the next decade, which will
provide an extended stream of revenue for many years. This will give the Company
flexibility to continue growing as the global enrichment market recovers. In
the meantime, we continue to book new sales and take advantage of present market
conditions to obtain new low cost supply.
We believe that Centrus’ position as a leading provider of enriched uranium
and our long-standing global relationships will enable an increase in future
market share for the Company. We are well-positioned to capitalize on our heritage,
industry-wide relationships, and diversity of supply to provide reliable and
competitive enrichment sourcing. Centrus continues to be valued by our customers
as a source of diversity, stability, and competition in the enrichment market.
Moreover, our smaller size and lower fixed costs can be advantageous in the
current excess capacity market.
For a discussion of the potential risks and uncertainties facing our business,
see Item 1A, Risk Factors.
Uranium and Enrichment
Uranium is a naturally occurring element and is mined from deposits located
in Kazakhstan, Canada, Australia and several other countries. According to the
World Nuclear Association, there are adequate measured resources of uranium
to fuel nuclear power at current usage rates for about 90 years. In its natural
state, uranium is principally comprised of two isotopes: uranium-235 (“U235”)
and uranium-238 (“U238”). The concentration of U235 in natural uranium
is only 0.711% by weight. Most commercial nuclear power reactors require LEU
fuel with a U235 concentration greater than natural uranium and up to 5% by
weight. Uranium enrichment is the process by which the concentration of U235
is increased to that level.
LEU consists of two components: separative work units (“SWU”) and
uranium. SWU is a standard unit of measurement that represents the effort required
to transform a given amount of natural uranium into two components: enriched
uranium having a higher percentage of U235 and depleted uranium having a lower
percentage of U235. The SWU contained in LEU is calculated using an industry
standard formula based on the physics of enrichment. The amount of enrichment
deemed to be contained in LEU under this formula is commonly referred to as
its SWU component and the quantity of natural uranium used in the production
of LEU under this formula is referred to as its uranium or “feed”
component.
Historically, we produced or acquired LEU from two principal sources. We produced
LEU at the Paducah gaseous diffusion plant ("Paducah GDP") in Paducah,
Kentucky that we leased from DOE, and acquired LEU under a contract with Russia
under the 20-year Megatons to Megawatts program. Under the Megatons to Megawatts
program, we purchased the SWU component of LEU derived from dismantled nuclear
weapons from the former Soviet Union for use as fuel in commercial nuclear power
plants. We ceased enrichment at the Paducah GDP at the end of May 2013 and repackaged
and transferred our existing inventory to off-site licensed locations under
agreements with the operators of those facilities.
While in some cases customers purchase both the SWU and uranium components of
LEU from us, utility customers typically provide uranium to us as part of their
enrichment contracts, and in exchange we deliver LEU to these customers and
charge for the SWU component. As of December 31, 2015, we held uranium at licensed
locations to which title was held by customers and suppliers with a value of
$0.4 billion based on published price indicators. Title to uranium provided
by customers generally remains with the customer until delivery of LEU, at which
time title to LEU is transferred to the customer and we take title to the uranium.
The following outlines the steps for converting natural uranium into LEU fuel,
commonly known as the nuclear fuel cycle:
Mining and Milling. Natural, or unenriched, uranium is removed from the earth
in the form of ore and then crushed and concentrated.
Conversion. Uranium concentrates (“U3O8”) are combined with fluorine
gas to produce uranium hexafluoride (“UF6”), a solid at room temperature
and a gas when heated. UF6 is shipped to an enrichment plant.
Enrichment. UF6 is enriched in a process that increases the concentration of
the U235 isotope in the UF6 from its natural state of 0.711% up to 5%, which
is usable as a fuel for light water commercial nuclear power reactors.
Fuel Fabrication. LEU is then converted to uranium oxide and formed into small
ceramic pellets by fabricators. The pellets are loaded into metal tubes that
form fuel assemblies, which are shipped to nuclear power plants.
Nuclear Power Plant. The fuel assemblies are loaded into nuclear reactors to
create energy from a controlled chain reaction. Nuclear power plants generate
approximately 19% of U.S. electricity and 11% of the world’s electricity.
Used Fuel Storage. After the nuclear fuel has been in a reactor for several
years, its efficiency is reduced and the assembly is removed from the reactor’s
core. The used fuel is warm and radioactive and is kept in a deep pool of water
for several years. Many utilities have elected to then move the used fuel into
steel or concrete and steel casks for interim storage.