100 million shares of USEC stock sold

27 August 1998

In a huge public offering, 100 million shares of US Enrichment Corp stock were sold in late July for an initial price of $14.25 a share, raising more than $1.4 billion for the newly privatised company.

The IPO came at an opportune time prior to the worst of the US stock market’s summer slide. Within two weeks, the market value of USEC shares had fallen to $13.

USEC, which provides enrichment services for about 40% of the world market, was formerly owned by the US government. The IPO was the last stage in a gradual move to privatisation. On 4 August, USEC shares were rated BBB+ by Standard & Poor’s. S&P said the rating, which is considered investment grade, reflected USEC’s strong position in the competitive uranium enrichment market and an expectation that management will pursue a conservative financial policy. S&P added that USEC’s earnings, which had been on the decline because of the US agreement to purchase Russian uranium at above-market prices and because it had to renegotiate many customer contracts, should stabilise in the future. “Financial performance is expected to stabilise over the near term,” the securities rating firm said.

USEC’s debt-leverage is “moderate,” S&P added. The company should generate enough cash internally over the next few years to fund at least a significant portion of the $2.2 billion investment needed between now and 2005 to test USEC’s promising laser enrichment technology, S&P said.

Continued confusion over HEU deal with Russia There is continuing uncertainty about the six-year-old plan for the US to buy uranium from Russia following privatisation of USEC. USEC now wants to sell 70 million pounds of its own stocks of uranium, which would reduce the market value of uranium and so the amount of money the Russian’s would receive. The chairman of the US Senate Budget Committee, Pete Domenici, has received a letter from Russia’s Atomic Energy Minister, Yevgeny Adamov, accusing the US of violating the agreed provisions and describing the situation as “dramatically deteriorating.” In 1992, the US signed a $12 billion agreement with Russia to buy 500 t of its excess uranium between 1995 and 2005 to prevent it from falling into the wrong hands. By the start of 1998, the US had purchased 36 t.

Aleksei Grigoriev, deputy director of Tekhsnabeksport and the official in charge of the programme, has accused the US of failing to fulfil its agreement to buy diluted uranium from dismantled Russian nuclear weapons, according to the agreement. He says the US has been paying for only enriched uranium, and not the “natural” component, as stipulated. Meanwhile, the Communist majority in the Russian parliament, the Duma, plans to introduce a law which would prohibit export of fissile materials from Russia. This followed a review of the uranium deal conducted by Duma’s Security Committee in late April.

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