The USA's USEC Inc. has signed a 10-year contract with Russia's Techsnabexport (TENEX) for the 10-year supply of low enriched uranium (LEU) beginning in 2013. The new contract will provide USEC with continued access to Russian enriched uranium, which currently constitutes about one-half of USEC's supply source.
Under the terms of the contract, the supply of LEU to USEC will begin in 2013 and ramp up until it reaches a level in 2015 that is approximately one-half the level currently supplied by TENEX to USEC under the Megatons to Megawatts program with the mutual option to increase the quantities up to the same level as that program. Unlike the Megatons to Megawatts program, the quantities supplied under the new contract will come from Russia's commercial enrichment activities rather than from downblending of excess Russian weapons material.
"USEC remains fully committed to deploying our American Centrifuge technology in our new plant in Ohio and extending the operations of our Paducah Gaseous Diffusion Plant in Kentucky. This contract complements those ongoing activities as we maintain our market position during this important transition period."
USEC will deliver the enriched uranium supplied under this contract to USEC's customers under its portfolio of contracts. Under the quantitative limitations on imports of Russian enriched uranium in the United States through 2020, USEC will deliver a portion of the enriched uranium to U.S. utilities with most of the enriched uranium to be delivered to USEC's customers outside of the United States in both existing and emerging markets.
Deliveries under the contract are expected to continue through 2022. USEC will purchase the separative work units (SWU) contained in the LEU and deliver natural uranium to TENEX for the LEU's uranium component. The pricing terms for SWU under the contract are proprietary but are based on a mix of market-related price points and other factors.
The effectiveness of the new contract between TENEX and USEC is subject to approval of the Russian State Corporation for Atomic Energy (ROSATOM) and completion of administrative arrangements between the U.S. and Russian governments under the agreement for cooperation in nuclear energy between the United States and the Russian Federation (the Russia 123 Agreement) which, among other things, provides the framework for the return to Russia of natural uranium delivered by USEC to TENEX. USEC anticipates that these implementing arrangements will be completed in 2011.
Following approval of the new supply contract by ROSATOM, USEC and TENEX expect to conduct a feasibility study to explore the possible deployment of an enrichment plant in the United States employing Russian centrifuge technology. As part of the feasibility study, ROSATOM, USEC and TENEX will review international agreements, government approvals, licensing, financing, market demand and commercial arrangements. Any decision to proceed with such a project would depend on the results of the feasibility study and would be subject to further agreement between the parties and their respective governments. In any event, such a project would not be deployed until after completion of the American Centrifuge project. This initiative is part of USEC's strategic approach in serving its customers in the uranium enrichment market.