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A global energy company that supplies low enriched uranium for commercial nuclear power plants.
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alexvb (59.46) Submitted: 3/10/08 9:37 PM : Start Price: $4.95 USU Score: 7.36
USEC is grossly undervalued at $4.87 / share. It is trading below total current assets minus total liabilities ($5.94 / share) and at less than half of its tangible book value ($11.90 / share).This would make sense for a company that is loosing money or involved in major litigation. But, it earned $.18 / share in Q4. This beat analysts predictions of $.13 / share.The big news is that USEC increased the cost estimates of there "American Centrifuge" plant (a plant that will cut the cost of enriching uranium by an order of magnitude) increased from $2.3 billion to $3.5 billion as they continue to negotiate with suppliers. Of this, $615 million was spent in 2007. They expect to spend $650 - $700 million on it in 2008. Despite this, they expect earnings to be $24 - $45 million in 2008. At the end of 2008 they expect to start operating some of there AC100 (name of the new centrifuges in the plant).The DOE has budgeted to guarantee $2 billion in loans for nuclear fuel cycle projects in 2008. USEC is the only enricher in the US. So, they will be able to raise a significant portion of the capital for 2008 using extremely low interest rate loans.My biggest worry is that GE is planning to compete with a laser enrichment process (GLE). However, it is in very early stages and projects to start operating in the five year time frame. Laser enrichment has about the same cost to enrich uranium as gas centrifuge. However, GE claims that it has smaller capital costs. GE also makes many of the reactors and provides many of the services to the nuclear industry. GE has acquired the IP from Silex Systems Ltd. of Australia.However, GE does not have a site to build the plant. USEC has already started construction at a DOE site with all of the nuclear fuel handling infrastructure in place. GE does not have the design complete. USEC has a working system that is not operating in a cascade. GE does not know what the costs will be for the GLE plant will be. USEC is negotiating contracts to produce the machines now.
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alexvb (59.46) Submitted: 4/01/08 2:34 PM
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I recently re-read USEC's annual report and noticed that it stated that they had to wait 33 months to get government approval for the "American Centrifuge" plant. This is interesting for two reasons:1) USEC's detractors should not have blamed USEC's management for allowing the project to slip behind schedule. True, management did not estimate the time to get approval correctly. But, it was out of their control.2) This provides a large barrier to entry. GE and AREVA will have to wait at least that long to start building. I would guess that they would have to wait longer. Neither have the contacts inside the DOE. AREVA is a foreign company. GE has never run an enrichment plant.
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jonconnery (46.08) Submitted: 4/04/08 8:20 AM
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All of the above stated by Alexvb simply points out that this is a creature of the U.S . Government , a government sanctioned and financed monopoly, barring any easy entry to the field by competitors , domestic or foreign.. What is not to like about it ??? LOL
alexvb (59.46) Submitted: 4/20/08 1:24 PM
Anyone interested in investing in USEC with real money should study the nuclear fuel production economy. It is much more complex than other fuel markets. A good start is to read these two Wikipedia articles: http://en.wikipedia.org/wiki/Uranium_markethttp://en.wikipedia.org/wiki/Enriched_uraniumUSEC's primary role in the economy as the enricher. It is also the executive agent of the Megatons to Megawatts program. At this point, they use gaseous diffusion to enrich uranium. However, they are building a gas centrifuge plant.I'd also like to comment on this news: http://www.businesswire.com/portal/site/google/?ndmViewId=news_view&newsId=20080417005630&newsLang=enThe press release contains a number of positive pieces of news. The biggest piece is that they have released most of the centrifuge plans to their suppliers and continue to not see an increase in the plant cost estimate. The implication of this is that there is a very low chance that the cost of the plant will significantly increase because suppliers get the plans so that they can begin production. For a supplier to begin production they must provide good cost estimates.The release states that they are likely to get a DOE load guarantee some time this year. The date is uncertain as any decision by a government agency (consider Sirius and XM merger). If government takes too long, they may need to issue some stock or take on an unsecured loan. My hope is that they do not issue stock since I believe it to be undervalued. Because this is the beginning of the plant production and USEC is still very profitable, expect the financing to be a small portion of the estimated $3.5 billion cost for the whole plant.They mentioned that they are negotiating long term contracts with their customers for the output of their new plant. In the future I would like to hear about any contracts that they do sign.
LEGMAKER (< 20) Submitted: 5/12/08 11:18 PM
I believe this stock is undervalued and you are right. They should have a monopoly as soon as they secure their new technology with the new centrifuge plant. There are already five new nuclear plants planned in the United States by 2012 and I believe the number will at least double if not triple by then. Its a technology we need and long term this stock is very cheap.
synergize (98.32) Submitted: 5/13/08 10:18 AM
Stock is on a downtrend for a year. It bottom down on 3/19/2008 at 3.18. On 4/3/2008 it went up to close at 5.40. Since then it consolidate at or near $5. I think there is a potential bullish reversal. Stochastics seems to confirm that. So I research farther for news just to validate that there is no negative reports anytime soon.Related reports/links:USEC Inc.: Earnings in line with expectationshttp://www.chillicothegazette.com/apps/pbcs.dll/article?
synergize (98.32) Submitted: 5/14/08 11:38 PM
Stock is on a downtrend for a year. It bottom down on 3/19/2008 at 3.18. On 4/3/2008 it went up to close at 5.40. Since then it consolidate at or near $5. I think there is a potential bullish reversal. Stochastics seems to confirm that. So I research farther for news just to validate that there is no negative reports anytime soon.Please remember that this post reflects my personal opinions. You should use your own judgement and seek appropriate advice for any investments ideas.Related reports/links:USEC Inc.: Earnings in line with expectationshttp://www.chillicothegazette.com/apps/pbcs.dll/article?
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