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A global energy company that supplies low enriched uranium for commercial nuclear power plants.
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Vet67to82 (98.05) Submitted: 3/22/08 12:52 AM : Start Price: $20.16 USU Score: -54.92
I find USEC (USU) undervalued and oversold but I have other reasons to purchase USU as well. I strongly believe in the US/Russia nuclear reduction program ... converting weapons grade uranium to fuel for reactors and energy. The Russians "trust" USEC to convert the weapons grade uranium. The Russians "trust" USEC that the weapons grade uranium isn't going to get lost, misplaced, stolen. etc. or wind up in USA weapons pointed at Russia. USEC is the only United States company processing uranium into fuel. Neither Russia, nor the US government would have the confidence that Russian "weapons grade" uranium processed in another country by another company couldn't be lost, misplaced, stolen .... possibly winding up in the hands of terrorists.The Russians fear Russian uranium winding up in a weapon used against Russia. Look at how Russia's attitude has changed towards Iran. Of course, that's just the fear factor. USEC still has positive earnings and cash flow. USEC is funding the American Centrifuge Project (ACP) from cash flow. When the ACP is complete, it will use 95% less energy to produce a Separative Work Unit (SSU) than current technology used by USEC and more importantly, the technology used by USEC's competitors. The analogy I draw here, is similar to that of Chrysler (C) and American Motors (AMO). Amerian Motors struggled to build its one billiion plus dollars new assembly plant In Bramalia, Ontario, Canada. The market didn't care AMO management was looking to the future. The market pounded AMO's stock. Then AMO wound up assembling Chrysler autos ... and Chrysler wound up buying AMO ... cheap. I did better than +400 %. I believe that's exactly what's happening here. I believe other companies would like to build what USEC is building, 'till they consider what the "what are ya doing for me right now?" market idiots would do to their stock. So. I believe they'll sit back while USEC gets "punished" for looking to the future ... then attempt to takeover USEC before the same market idiots realize the huge advantage USEC has to either outearn or to put its competitors out of business.
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alexvb (45.40) Submitted: 3/22/08 2:42 PM
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I really agree with your analogy to American Motors and Chrysler. If I were GE, I would purchase as much of USEC as possible while the stock is so low instead of doing their laser enrichment process project. I would not be surprised if GE does try to buy USEC out if the stock price stays this low.About Russia and nuclear proliferation. From what I understand, Russia down mixes their high enriched uranium (HEU) to low enrichment uranium (LEU) before sending it to USEC. LEU is only marginally more useful for making weapons than unenriched uranium. Russia made the deal with the USEC when USEC was part of the US government. It now wants out of the deal so that it can sell LEU directly to American markets.
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Vet67to82 (98.05) Submitted: 3/23/08 11:48 PM
Thanka for your reply. You do have several good points. As far as buyouts, I hadn't considered GE but that'a a great thought. I was primarilary thinking of other enrichment companies ... of course, Warren Buffett likes energy companies. I'm thinking Berkshire Hathaway ... more than enuf cash to buyout USEC before it completes the ACP and finish the ACP. For any nuclear power company the beauty of owning USEC is cash for the enriched uranium moves from the left pocket to the right pocket. That could put a whole host of power companies in the mix if they consider upping the LEU for their competitors ... a nice old bidding war would be real great for stock holders.
alexvb (45.40) Submitted: 4/01/08 2:22 PM
I don't think that the government would allow a power company to buy USEC. And I think they certainly would not allow them to increase the price that they charge to other companies. Nuclear power companies are already heavy on capital costs and may not want to increase them by owning USEC.
LEXLUTH0R (95.12) Submitted: 4/18/08 5:46 PM
That is some good comparative thinking (AMO). I completely agree with you on this one. I do not see a downside at this price. Americans are not going to outsource their enrichment to a foriegn company so, the govt has to give them the loan to finish the facility. If I were them, I may also exagerate the estimated cost of contruction to extract as much cheap capital from the goverment that I could!
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