Advanced Technology Costs and Other Income

9 Months Ended

Sep. 30, 2013

Advanced Technology Costs and Other Income

ADVANCED TECHNOLOGY COSTS AND OTHER INCOME

USEC is conducting a RD&D program for the American Centrifuge technology with cost share funding from DOE. The objectives of the RD&D program are to demonstrate the American Centrifuge technology through the construction and operation of a commercial demonstration cascade of 120 centrifuge machines and sustain the domestic U.S. centrifuge technical and industrial base for national security purposes and potential commercialization of the American Centrifuge technology. This includes activities to reduce the technical risks and improve the future prospects of deployment of the American Centrifuge technology. The June 2012 cooperative agreement with DOE, as most recently amended on October 25, 2013 ("the October 2013 Amendment"), defines the scope, funding and technical goals for the RD&D program. The cooperative agreement provides for 80% DOE and 20% USEC cost sharing for work performed during the period June 1, 2012 through December 31, 2013. The cooperative agreement is being incrementally funded, and $241.3 million of DOE funding has been provided as follows:


•	$87.7 million of funding was provided by DOE accepting title to quantities of depleted uranium that enabled USEC to release encumbered funds that were providing financial assurance for the disposition of this depleted uranium;


•	$45.7 million of funding was provided pursuant to the six-month continuing appropriations resolution passed by Congress and signed by the President on September 28, 2012;


•	$44.4 million of funding was provided in March 2013 by DOE transferring the SWU component of LEU that DOE previously acquired from USEC in exchange for the transfer of quantities of USEC’s depleted uranium to DOE;


•	$49.9 million of funding was provided pursuant to the FY2013 continuing appropriations resolution, through amendments to the cooperative agreement on June 13, 2013 and July 24, 2013; and


•	$13.6 million of funding was provided pursuant to the FY2014 continuing appropriations resolution, through an amendment to the cooperative agreement on October 25, 2013.

As of September 30, 2013, USEC has made cumulative qualifying American Centrifuge expenditures of $270.2 million. DOE’s pro-rata share is 80% or $216.2 million. Of the $216.2 million, $191.4 million has been received by USEC and DOE’s remaining funding share of $24.8 million is included in current accounts receivable as of September 30, 2013.

In the nine months ended September 30, 2013 and 2012, USEC made qualifying American Centrifuge expenditures of $155.1 million and $55.7 million, respectively. DOE’s pro-rata share of 80%, or $124.1 million and $44.6 million, is recognized as other income in the nine months ended September 30, 2013 and 2012, respectively.

The $13.6 million of additional government funding provided by the October 2013 Amendment is for the RD&D program funding period November 2, 2013 to December 31, 2013. Although this funding is not sufficient to fund the RD&D program through December 31, 2013, the October 2013 Amendment states that there is an expectation that DOE would provide additional funding for the RD&D program for the funding period ending December 31, 2013. The remaining funding would be made through a subsequent modification to the cooperative agreement, with the amount of such funding to be determined. USEC expects cumulative spending for the RD&D program for the period June 1, 2012 through December 31, 2013 to be approximately $320 million. This amount is less than the originally estimated cost of the program of up to $350 million as a result of cost savings achieved by the Company and spending reductions made by the Company to complete the program technical milestones within the reduced government funds anticipated to be available for the program.

The government fiscal year 2014 continuing appropriations resolution passed by Congress and signed by the President on October 16, 2013 provided for continued funding for the U.S. government from October 1, 2013 through January 15, 2014. This resolution continued funding for the RD&D program at the government fiscal year 2013 annual rate of $110 million, less any automatic spending cuts applied to U.S. government spending. USEC believes that this level of funding, if provided, will be sufficient to fund the RD&D program through December 31, 2013 and achieve the remaining technical milestones within the reduced spending plan described above.

There is no assurance that additional funding will be made available. DOE’s remaining cost share is conditioned upon USEC continuing to meet all milestones and deliverables on schedule, USEC continuing to demonstrate to DOE’s satisfaction its ability to meet future milestones, and the availability of such government funding.

Additional details regarding funding for the American Centrifuge project and commitments and contingencies related to the American Centrifuge Plant under the 2002 DOE-USEC Agreement and the June 2012 cooperative agreement are provided in Note 15.

- Definition

The entire disclosure for research, development, and computer software activities, including contracts and arrangements to be performed for others and with federal government. Includes costs incurred (1) in a planned search or critical investigation aimed at discovery of new knowledge with the hope that such knowledge will be useful in developing a new product or service, a new process or technique, or in bringing about a significant improvement to an existing product or process; or (2) to translate research findings or other knowledge into a plan or design for a new product or process or for a significant improvement to an existing product or process whether intended for sale or the entity's use, during the reporting period charged to research and development projects, including the costs of developing computer software up to the point in time of achieving technological feasibility and in-process research and development acquired in a business combination consummated during the period.

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