USEC, Inc. (USU)

newwealth.blogspot.com

“new, state-of-the-art centrifuge uranium enrichment plant in 2010, and at full production by late 2012. With 30 new nuclear plants in the works, a DOE secured loan imminent for $2B, and a virtual monopoly on the US LEU market”

“USU is the most viable candidate to receive a lions share of $2bln-$4bln worth of Department of Energy loans earmarked for companies that enrich uranium. They are presently the only licensed enrichers of uranium in the United States. They enrich 50% of the uranium used domestically, and 25% of the uranium used world wide. They are presently tapped out of cash having spent every penny developing and proving an enrichment technology that reduces the power consumption of their enrichment process by 95%”

The opportunity: They just got their loan denied by Uncle Sam for the rest of the plant. Go figure, this is exactly not the sort of firm they would support being an alternative energy and a textbook example of American innovation. Glad that we are ‘just trying to make sure the working people get a fair shake in this country’, right?

The Valuation: Had sales last year of 2 billion. It now has customer commitments valued at more than$3.4 billion for the new plant, after Exeleon came to the table with a wet pen for 1.2 billion promptly after the Govnmnt balked. If they get the plant up it doubles their business, either way they have the technology. Now if we start making sense and we are going to see 30 new plants (QUESTION: WILL IT HAPPEN?) this would turn this into an absolute screamer. I have to think that if they were cranking at 8 billion in sales that the margins would expand (say conservative 5% from current 2%) and then you have a company with income of 640 mil a year, at current valuation it would be a 90 dollar stock.

NUKE industry friend outlook to the question above: "Do I think we will see new plants, absolutely maybe not 30 but with the amount up for application and the number already scheduled to break ground next year there will definitely be new construction. As far as reprocessing goes this is technology we developed some time ago and have yet to use it commercially it is currently only used for DOE purposes. The first commercial reprocessing facility was supposed to open in IL a year ago but clearly that didn't happen. I believe there was also a reprocessing facility slated to be built somewhere in Texas that was also abandoned before it got going. The reason for this is simply politics there are organizations spending ridiculous amounts of money trying to stop this from happening which in turn drives production costs up. France has been using reprocessing for quite some time now without any problems. The major drawback to reprocessing is that one of the byproducts is weapons grade plutonium. I think eventually we use reprocessing but we will see new construction at least 5 years before we start reprocessing. "