megaton to megawatts replacement

Importantly (to ensure a supply gap) the new agreement is for a reduced quantity and NOT from weapons grade HEU.


March 23, 2011

USEC Signs Multi-Year Contract with Russia's TENEX for Low Enriched Uranium Supply

-Contract Builds Upon an Existing Supply Arrangement with TENEX-

-Ensures Diverse Mix of Supply Sources While USEC Continues to Deploy Its American Centrifuge Project-

BETHESDA, Md. - USEC Inc. (NYSE: USU) has signed a multi-year contract with Russia's Techsnabexport (TENEX) for the 10-year supply of low enriched uranium (LEU) beginning in 2013 that will build on USEC's long-term relationship with TENEX. USEC and TENEX began working together in 1993 under the Megatons to Megawatts program. The new contract will provide USEC with continued access to Russian enriched uranium, which currently constitutes about one-half of USEC's supply source.

USEC and TENEX signed the contract today in Washington, D.C. 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.

"After safety, one of USEC's top priorities is to meet our customers' long-term needs for enriched uranium, and our decision to enter into this contract with TENEX is further evidence of our commitment and ability to meet those needs," said John K. Welch, president and CEO of USEC.

"We believe this new contract will further strengthen our important relationship with TENEX. Over the past two decades this relationship has supported our efforts to provide long-term reliable supplies of enriched uranium to our customers while maintaining a strong domestic production capacity based on U.S. technology," Welch said.

"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.

The new contract assures USEC continued access to an important part of its existing supply mix, which complements USEC's ongoing efforts to deploy the American Centrifuge Plant in Piketon, Ohio, using advanced U.S. centrifuge technology. With this contract in place, USEC will continue to be one of the world's leading suppliers of enriched uranium, while transitioning to new domestic production from the American Centrifuge Plant.

This new contract does not affect USEC's domestic production of enriched uranium or its highest priority objective to deploy the American Centrifuge technology. USEC's plant in Paducah, Ky., remains USEC's key supply source today. USEC continues to make progress in obtaining a $2 billion loan guarantee from the U.S. Department of Energy and additional financing to support the deployment of the American Centrifuge Plant. However, by supplementing its domestic capacity with continued access to Russian LEU, USEC can assure customers that its supply mix will remain sufficiently robust to meet their needs throughout the transition to the American Centrifuge Plant.

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.

USEC Inc., a global energy company, is a leading supplier of enriched uranium fuel for commercial nuclear power plants.

The Megatons to Megawatts Program is a unique, commercially financed government-industry partnership in which bomb-grade uranium from dismantled Russian nuclear warheads is being recycled into LEU used to produce fuel for American nuclear power plants. USEC, as executive agent for the U.S. government, and TENEX, acting for the Russian government, implement this 20-year, $8 billion program at no cost to taxpayers. This program is on track to complete the downblending of the equivalent of 20,000 nuclear warheads into commercial nuclear fuel by the program's conclusion at the end of 2013.