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Policy: Environment & Energy

Energy Department gives troubled company $30 million two days after its bankruptcy announcement

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Watchdog,Waste and Fraud,Luke Rosiak,Energy and Environment,Spending,U.S. Enrichment Corporation

Department of Energy officials have given a troubled nuclear enrichment company more than $24 million only hours after it announced plans to declare bankruptcy.

United States Enrichment Corp. is also trying to attract private investment against another $750 million it expects to receive from DOE, money the government refuses to discuss.

The DOE and the White House have ignored repeated requests for information on the tax dollars, loan guarantees and other aid going to the USEC Inc., in a process reminiscent of Solyndra, the solar company that created a furor when critics said federal officials should have known the company might later go bankrupt when it gave it a $500 million loan guarantee.

The only information available to date from DOE regarding its continued tax-funded subsidies for USEC are news releases posted on the company's website.

The company announced Dec. 16 that it plans to file "a prearranged and voluntary Chapter 11 petition for relief in the United States Bankruptcy Court for the District of Delaware in the first quarter of 2014.”

Two days later, the company announced: “USEC Inc. was informed today by the United States Department of Energy that it is prepared to extend the American Centrifuge cooperative research, development and demonstration (RD&D) program for three months beyond January 15, 2014, subject to congressional appropriations. DOE and USEC will share costs of the program on an 80-percent/20-percent basis for a total funding level of approximately $10 million per month.”

Not mentioned in either statement, and apparently unnoticed by anyone except its intended audience of investors, was this notice in a Securities and Exchange Commission filing the same day as the bankruptcy announcement:

USEC is seeking new investor money by touting its viability because of “the implementation and deployment of a National Security Train Program utilizing American Centrifuge technology with an expected total program cost to be funded by the government of not less than $750 million.”

Like DOE, USEC officials refused to discuss the new funding promises by the government. The Examiner has been unable to find any references in official documents to a "National Security Train Program."

Remarkably in the same document it filed with the SEC, USEC conceded that there is no market for the product it wants to produce with heavily subsidized funding.

"The economics of the ACP are severely challenged by the current supply/demand imbalance in the market for low enriched uranium and at current market prices for low enriched uranium, USEC does not believe that its plans for ACP commercialization are economically viable without additional government support," it wrote.

"Such information illustrated that based on current market prices and cost estimates, the equity return profile for ACP is likely below that required to raise third-party equity capital."

As the Examiner reported in its "Enrichment at the Public Till" series in November, USEC, like Solyndra, is a politically connected company, and it has spent up to $5 million a year on lobbying, even as the company's entire worth has been as low as $18 million.

Prominent Republicans, including House Speaker John Boehner, pushed aggressively for DOE to give a loan guarantee to the company around the same time they were vigorously criticizing DOE for giving one to Solyndra.

DOE refused in 2012, citing numerous problems, and instead agreed to a research and development program that was to end in 2013.

Secretary of Energy Ernest Moniz was a paid member of USEC's strategic advisory council between 2002 and 2004.

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Luke Rosiak

Senior Watchdog Reporter/Data Editor
The Washington Examiner