The Chapter 11 bankruptcy filing and financial restructuring plan that USEC Inc. announced last week will not affect daily operations in Oak Ridge or the American Centrifuge Project, a company spokesman said Monday.
The bankruptcy filing and financial plan are a restructuring of the balance sheet of the parent company, USEC Inc., spokesman Paul Jacobson said. He said the company is trying to strengthen its balance sheet and be a stronger sponsor of the American Centrifuge Project, a “next-generation” U.S. uranium enrichment technology. USEC Inc. is a global energy company that is a leading supplier of enriched uranium fuel for commercial nuclear power plants.
The company currently has 304 people working on the centrifuge program in Tennessee. In Oak Ridge, workers take part in centrifuge operations, testing, and manufacturing.
“This plan for restructuring our debt and equity will have no effect on our employees, who will continue to receive paychecks and benefits in the ordinary course,” Jacobson said. “As we have communicated to our employees previously, some employees will be impacted by several ongoing initiatives that are unrelated to the restructuring.”
As an example, Jacobson cited the continuing phased transition of operations at USEC’s plant in Paducah, Ky., during 2014, which will affect employees as the company shrinks.
“American Centrifuge employees could also be affected by the level of continued U.S. Department of Energy support for the American Centrifuge project in 2014,” Jacobson said. “The restructuring and Chapter 11 filing, however, will have no impact on Paducah (Kentucky) or Centrifuge (Ohio and Tennessee) employees.”
Jacobson said the bankruptcy filing and financial restructuring plan are not due to a liquidity issue or lack of cash. USEC ended 2013 with a cash balance of $314 million.
But there is a large corporate note of about $500 million due in October, Jacobson said. It was sold in 2007, and two major assumptions applied then: the American Centrifuge Project would be “up and running” and producing a profit by now, and nuclear power was making a comeback as a zero-carbon source, including in expanding global markets that needed more electricity.
But since then, Jacobson said, there have been delays in the deployment of the American Centrifuge Project, and more than 50 nuclear power reactors were shut down in Germany and Japan after the meltdown at the Fukushima nuclear plant following a devastating tsunami three years ago. There is now a global oversupply of nuclear fuel, and prices are at record lows, Jacobson said.
He said USEC’s Chapter 11 bankruptcy is a pre-arranged restructuring, and the majority of creditors have already approved it. The company’s preferred equity investors, Toshiba Corp. and The Babcock and Wilcox Co., support the restructuring plan, USEC said in a press release last week.
The voluntary petition and reorganization plan were filed in U.S. Bankruptcy Court for the District of Delaware. USEC expects to receive court approval for the plan and could emerge from the Chapter 11 bankruptcy in 90 to 120 days, the press release said.
“None of USEC’s subsidiaries, including its primary operating subsidiary, the United States Enrichment Corp., have filed for bankruptcy protection,” the press release said.
The current USEC board of directors will oversee the restructuring process until the effective date of the plan, when a new board would take its place. B&W and Toshiba each retain the right to representation on the board of directors, the press release said.
USEC has headquarters in Bethseda, Md. Its American Centrifuge Manufacturing LLC and American Centrifuge research and development are based in Oak Ridge. The American Centrifuge Plant is in Piketon, Ohio, and the Paducah Gaseous Diffusion Plant, United States Enrichment Corp., and USEC Government Services are based in Paducah. (See this map for more information.)
The support agreements entered into by Toshiba and Babcock and Wilcox as part of the restructuring plan, as well as other materials related to the filing, can be found in an 8-K that was filed last week with the Securities and Exchange Commission. It’s available in the Investors section of the company’s website at www.usec.com. In addition, documents related to the Chapter 11 filing are available at www.loganandco.com.
Read a February 2014 update on the American Centrifuge Program here: American Centrifuge Program Update February 2014.
Read the USEC press release on the company’s financial restructuring plan here.