It’s a bad time to be in the uranium enrichment business

Aerial view of USEC's now-shuttered Paducah, KY uranium enrichment plant.

Aerial view of USEC’s now-shuttered Paducah, KY uranium enrichment plant.

It’s a bad time to be in the uranium enrichment business. As noted yesterday, the only U.S. enrichment company, USEC, filed for bankruptcy yesterday. The Washington Post has some details on how USEC plans to restructure itself and try to get out of debt, but the reality is that without a massive taxpayer loan–USEC has applied for $2 Billion from DOE–the company is likely to fold entirely. DOE and the White House’s Office of Management and Budget so far have refused to provide such a loan because USEC is in such a precarious economic position. And USEC’s plan to replace its entire board of directors but none of the senior management who collectively ran the company into the ground isn’t likely to spark a lot of confidence at DOE or OMB that the company can or will be turned around. Still, the company has a lot of friends on Capitol Hill who have managed to regularly sneak taxpayer money over the past few years into keeping USEC afloat. That clearly hasn’t worked so well, however, and from here it looks like USEC’s days are numbered–with only very small numbers left…

Meanwhile, the uranium enrichment business isn’t so good even for companies with a positive balance sheet. Urenco, part of which is up for sale itself, bet big on a “nuclear renaissance” when it built, and since expanded, its uranium enrichment plant in New Mexico. But the renaissance didn’t materialize and demand for enriched uranium isn’t growing–indeed, in the U.S. demand has been shrinking for the past year. And Urenco’s profits for 2013 fell by 13 percent.

Urenco CEO Helmut Engelbrecht, facing the prospect of continued sliding demand, is now pushing for construction not only of large new reactors, but also small, modular reactors (SMRs) on a global scale. Engelbrecht claims such reactors would be “every bit as safe as a windmill,” but since no SMR has ever actually been fully designed much less actually put into operation, such an assertion seems rather premature.

Engelbrecht apparently sees wind power, rather than natural gas, as nuclear’s main competitor at this point, saying that “The challenge for the industry is to come up with something simple and reliable that can beat wind power on cost – a plug in and play unit.”

He’s right on that point today, but with commercial operation of any SMRs–much less enough of them to boost demand for enriched uranium–at least a decade away, nuclear power at that point will also be competing directly with solar and other renewable technologies, as well as continued lower demand than forecast a few years ago due to the effectiveness of energy efficiency programs. And the trend of rising costs for nuclear power and falling costs for solar power isn’t going to help either Urenco or USEC.

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