The significant part of the discussion from our standpoint is:
"This was also a big year for our technical solution segments. We completed Phase 1 of the HALEU contract, finishing construction of a cascade of advanced centrifuges, bringing it into operation and delivering the first 20 kilograms of High-Assay Low-Enriched Uranium or HALEU, to the Department of Energy. We did it ahead of schedule and under budget, demonstrating not only the effectiveness of our technology, but also our excellence in project management. While the output of the initial cascade is modest, the government urgently needs every bit of HALEU we can produce as fast as we can produce it. Indeed, the Department of Energy has made a multi-billion-dollar commitment to support deployment of HALEU-fuelled reactors, while the Department of Defence is developing HALEU-fueled microreactors that could support our troops around the world. Right now, the Pyrton Cascade is the only source of freshly enriched HALEU in the western world. We are proud to be in position to support these vital missions and deliver real value to taxpayers. Phase 2 calls for us to operate the cascade for a year and deliver the Department of Energy 900 kilograms of HALEU. Our contract also includes an optional third phase in which the Department can purchase up to nine years of additional production from the cascade. Phase 3 is the Department's sole discretion and the subject to the availability of congressional appropriations. Under the contract, the Department is responsible for providing the HALEU storage cylinders to collect the output of the cascade. They have provided a few cylinders for us to get started with production and they have ordered more, but the Department has experienced supply chain delays. The centrifuges will continue to operate, but the quantity of HALEU we are able to withdraw from the cascade in Phase 2 is limited by the number of cylinders the Department can provide and will be less than 900 kilograms. We don't anticipate a material financial impact on Centrus since we are meeting our obligations and the Department is compensating us on a cost plus and sent a fee basis in Phase 2. We expect that the delays in receiving the storage cylinders will get resolved sometime later this year and we don't anticipate this will be an ongoing issue after Phase 2. We have restored America's ability to enrich uranium. Now we need to do it at scale. What our Pyrton team has accomplished is remarkable. The first new US owned uranium enrichment plant to begin production in nearly seven years. Enrichment capacity per machine is the highest for any centrifuge ever built anywhere in the world. Each component is manufactured to the most exacting standards enabling a 40-foot-tall centrifuge to remain perfectly balanced while spinning a load of uranium at incredibly and incredible speeds fast and powerful enough to separate two isotopes that have only a 1% weight difference between them. It is an incredible technical achievement. I'm impressed not only by the cascade and the workers who built it but also by the enormous potential of the facility. It has a footprint roughly the size of the Pentagon. Hundreds of thousands of square feet of floor space room to accommodate more than 10,000 centrifuges. Heavy steel plate in the floor neatly laid out row upon row each one marking the position where a centrifuge can be installed. The potential for large-scale production of LEU for existing reactors as well as HALEU for advanced reactors is right there and waiting. Like any important worthwhile endeavor it will not be easy. Deploying enrichment capacity for LEU or HALEU at scale is a capital intensive exercise which is one reason why the rest of the world's enrichment plants are owned by governments. Here in the United States we will do so differently. It will require robust federal funding coupled with private investment, a public-private partnership that reflects not only the commercial value of the facility but also its value to national security, energy security and other vital national interests. The good news is that momentum is building for such a solution. The war in Ukraine has focused the world's attention on energy security and supply chains for fuel including nuclear fuel. Russia has 44% of the world's uranium enrichment capacity and there isn't enough non-Russian enrichment to fuel the world's reactors. Russia and China together have almost 60% of the world's enrichment. Although the U.S. House of Representatives passed legislation late last year to prohibit the importation of Russian nuclear fuel, there is a growing understanding in the industry and among policymakers that transitioning away from dependence on Russia will take years and requires investment in new domestic capacity. The transition away from reliance on Russian material must be carried out in an orchestrated manner to maintain market stability. The market urgently needs a new American producer to expand the diversity and security of supply and we are the best position company to fill that role. As a first step, Department of Energy released an RFP last month to begin purchasing HALEU, establishing a demand signal to bring new capacity online. We are well positioned to compete for that work as the only U.S. owned U.S. technology and richer in the marketplace, especially since we could offer the fastest pathway to large-scale HALEU production. In addition, members of both parties in the House and Senate are advancing legislation to make a multi-billion dollar investment in uranium enrichment. It sometimes may seem like the parties can't agree on much, but they agree on this. Late last year, both House's passed and the President signed legislation as part of the National Defense Authorization Act, creating a new program aimed at expanding U.S. production of both LEU and HALEU. To provide funding for that effort, the administration proposed $2.2 billion as part of a supplemental funding request. Fiscal year 2024 Energy and the Water Bill adopted in the House included a $2.4 billion, while the Senate version includes $800 million. And just this week, the Senate included $2.72 billion for domestic enrichment on a national security supplement. Like I said, it has to be public-private partnership. We are in the private sector and ready to step up and do our part. Centrus looks forward to leading the way. With that, I'm going to turn things over to Kevin so he can walk you through some more of the numbers"
SLX Price at posting:
$5.14 Sentiment: Buy Disclosure: Held
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