Usec Case

Executive Summary:

At the conclusion of our financial analysis, we recommend that the United States Enrichment Corporation continue with the development of their current system with the Paducah plant over the American Centrifuge Project (ACP). The net present value for Paducah is $578.54 million (Exhibit 2) and was our deciding factor to maintain the partnership USEC currently has with them. This NPV surpassed the $497.08 million (Exhibit 3) estimated for the ACP. The IRR for Paducah was unable to be calculated due to all positive cash flows and no data regarding any initial outlays of cash. Our supported financial calculations and conclusion are stated in the following report.

Analysis:

In 1992, the United States Government passed the Energy Policy Act, EPACT92, to address energy efficiency, energy conservation and energy management. In order to increase clean energy use and progress environmental productive energy practices, the EPACT92 set goals and created orders by amending utility laws for this initiative. In response to this reform, the United States Enrichment Corporation (USEC) was developed to manage privatization of uranium enrichment for civilian use. USEC went public in 1998 and continues to be a global energy leader as a supplier of enriched uranium fuel. The following case report outlines the capital expenditure project that USEC initiated in order to see the advantages of other technology available to improve their operations. The venture, American Centrifuge Project (ACP), had the potential to provide new technology to USEC that would allow them to bypass their competitors while decreasing enrichment cots. As of now, USEC is operating by gas-diffusion technology to enrich uranium. In order to execute the ACP, a final balance of $1.6 billion would be needed to cover all the operating, investing and financing activities, including the 100 million dollars that has already been invested with the Department...