Thank you, Mikel. I really deeply appreciate your kind words and getting to know you has been a privilege and a real learning experience for me. So, thank you for that.
I’m just going to say a few words now, and I’ll have a little bit more to say later. And I first want to talk about our board. While we’ve only been working together for two months, I’ve already come to appreciate collectively the wise council of our Chairman and the entire board. They have challenged me, and they’ve challenged all of us to find new and better ways of doing business.
I’m also very grateful to our Centrus colleagues who worked to get me up to speed in a short period of time, here in Bethesda, out in Oak Ridge and out in Piketon, Ohio. And to our shareholders who are here today and those who are listening online, I’d like to welcome you and thank you all most sincerely for your continued support of Centrus.
Now, before I share my initial impressions based on my first couple of months with the company and the thoughts about the road ahead, I’d like to turn the meeting over to our Chief Financial Officer, John Barpoulis, for a review of the first quarter’s financial results.
Thank you, John.
It has been a privilege for me to be given the responsibility by the board of leading Centrus, a company with a vital mission to fulfill. In my first weeks on the job, I’ve had the opportunity to visit our operating facilities in Piketon, Ohio and Oak Ridge, Tennessee. I was immediately impressed not only by the deep technical knowledge of our people there, but by their creativity and their spirit of innovation. They’re passionate about their mission, committed to this company, and determined to succeed.
I was also struck in both places by the meticulous attention to safety and to security and by the open communications that I witnessed between the shop floor and the management team. That’s not only intrinsically important; it’s a litmus of a healthy workplace culture. It’s our job in management to create the conditions to help them achieve the mission to which they have already dedicated so much: assuring the future of our nation’s uranium enrichment capability.
Forty years ago this summer, I came to Washington as an intern to work for a childhood hero and my home state senator, John Glenn. The lessons he taught me about patriotism and public service have inspired me to this day. And believe it or not, one of my very first projects working for Senator Glenn was to write an analysis of the interaction between electricity prices, natural uranium prices, tails assays and separative work units. I was 19 years old. That was the first SWU I ever met.
I was sitting there, typing away on my IBM Selectric. It’s been a journey ever since, much of which has continued to relate to the issues that remain pivotal to the success of this company. Whether working in the public sector or the private sector, my core beliefs have been consistent, that nuclear energy offers a nearly inexhaustible source of carbon-free energy that can benefit people around the world, that the unique nature of nuclear energy requires the most assiduous efforts to ensure safety and to minimize the risk of nuclear terrorism or proliferation and that the United States must therefore remain a world leader in commercial nuclear power.
Indeed, I believe that the United States has both the opportunity and the responsibility, given our unique history in developing the potential of atomic fission, to work with other nations around the world to require adherence to strict standards of safety, security, and effective safeguards and controls. Our expertise and capabilities are crucial to our national and global security. Centrus is an indispensable part of that historic effort.
That’s why after retiring from government service last fall, when introduced, quite unexpectedly I might add, to an opportunity to lead the effort to preserve America’s domestic enrichment capability with homegrown U.S. technology, my memory instantly flashed back to the Russell Senate Office Building 204 in my early efforts to find out what NPT actually stood for in the days before Google, if some of you remember. It took me the rest of the afternoon at the Congressional Research Service to discover that it stands for Nuclear Nonproliferation Treaty. And there’s been no turning back.
The first summer and the second summer here were spent working on the Nuclear Fuel Assurance ActAfter having dedicated so much of my life to these issues, rather than turning my back on a mission to which I had dedicated so much time and effort over four decades, and in the spirit that first sparked my passion for nuclear security and frankly with the inspiration of Senator Glenn, I decided to try to get beyond writing op-eds, speaking at conferences and actually trying to do something about it. And that’s why I’m here.
Centrus, as the successor to USEC, the U.S. Enrichment Corporation, has unique technical capabilities and a longstanding track record of satisfying U.S. and overseas requirements for safe enriched uranium fuel. In my judgment, we have both the opportunity and the obligation to play a leading role in the international industry in the years ahead.
Last September 30th, the company emerged from Chapter 11 reorganization with a healthier balance sheet and a fresh start. To be clear, success is far from assured and some critical factors lie outside our power to control. Most notably, our success will be tied to the future of nuclear power.
Four years after the tragedy of Fukushima — and our hearts continue to go out to the families who suffered from that awful calamity — the industry is still working through the repercussions. Germany and Japan have turned sharply away from nuclear energy. Investment decisions and the deployment of additional reactors slowed in many other countries as governments appropriately studied the lessons of Fukushima and applied them to their own programs.
Here in the United States, several developments warrant attention. After a 30-year hiatus in the deployment of new commercial reactors, five units are now under construction in regulated markets. On the other hand, an era of abundant natural gas, reduced electricity demand, and additional challenges faced by nuclear reactors in merchant markets have limited the expansion of nuclear power and threatens the survival of some existing reactors that are still operating well today.
The net effect of all this has been to depress demand for nuclear fuel far below what was projected just a few years ago. Most enrichment facilities are continuing to operate, further aggravating the oversupply in the market and driving down prices. SWU prices have fallen to levels that are 50% lower than they were in 2011. Expansion of new enrichment capacity has been put on hold and there are many sellers of low enriched uranium including some utilities who made advanced purchases of fuel that they no longer need.
The market has changed and so must Centrus. We have to be open to new approaches, to new customers, new suppliers, and new ways of thinking. Ultimately, the market for nuclear fuel is expected to recover, and we intend to position Centrus to take advantage of that recovery. After all, most of the countries that paused their nuclear programs have in due course continued on a path to further deployment. Nuclear power remains at the very heart of our low-carbon portfolio in the years ahead.
So now, we see over 60 new reactors being built around the world with a focus shifting increasingly of markets in Asia and the Middle East. In Japan where I recently visited, and we just had an excellent visit from Prime Minister Abe, there’s a determined effort on the part of Prime Minister Abe and his government to bring many of their idled reactors back online with the first reactors hopefully starting back up this summer and more to follow in the next few years.
Taken together, most projections showed total world demand rising from about 50 million SWU today to 70 million SWU by 2025. So, there’s room in the market for Centrus to succeed and to grow our business over time.
Now, the company has changed a great deal since the last shareholder meeting in 2013. It has a new identity, a new capital structure, a new board, a healthier balance sheet, and will be bringing new leadership to key positions. Despite the challenges this company has faced over the past couple of years — restructuring, austerity, reorganization — the company has achieved major objectives.
In December ’13 — and I had the privilege of participating in these ceremonies — we completed the 20-year Megatons to Megawatts program, the most successful nonproliferation measure in history, converting 500 metric tons of highly enriched uranium from warhead material targeting American cities into peaceful commercial reactor fuels that provided 10% of this nation’s electricity for a generation.
In April 2014, we successfully completed the research, development, and demonstration cooperative agreement constructing a full cascade of advanced centrifuge machines achieving all of its technical milestones on time and within budget. The next month, we commenced the current American Centrifuge Technology Demonstration and Operations agreement with the Oak Ridge National Laboratory for continued cascade operations and continuation of core American centrifuge research and technology activities. There, we have successfully completed over 330 years of machine run time.
And in October of that year, we also completed the safe shutdown, delease and return to the Department of Energy of the Paducah plant in a professional manner that protected the company’s interest while ensuring that we fully met our responsibilities for the return of the site to the Department of Energy.
Of course, the shutdown of the Paducah Plant and the end of Megatons to Megawatts, combined with the market impact of the Fukushima disaster, took a toll on our company. We lost 70% of our workforce. We care deeply about the workers and families affected in Ohio, Kentucky, Tennessee, and Maryland and we want to return the company to a level of growth that will require us once again to recruit and to place good talent and good jobs in our facility.
But to do that, our business model needs to change. We need to take advantage of our smaller size by being more agile and entrepreneurial, more alert to new opportunities, and better able to seize opportunities to buy and sell material when we see a good deal.
Most importantly to our long-term viability, we successfully completed our financial restructuring that strengthened our balance and provided the business with the opportunity to begin rebuilding. While we still face many challenges, the company that I joined in March is in much better shape than two years ago and it has maintained its demonstrated track record of fulfilling its contractual commitments on budget, on spec, and on time.
And so, we stand today a new Centrus ready to meet our customer’s needs in a market that presents uncertainty but also opportunity. I’ve spent my first two months meeting with customers, suppliers, and others in our industry to hear directly their concerns, to better understand their needs and to determine how Centrus can best meet those needs while succeeding as a profitable commercial entity.
So far, these discussions have led to the following preliminary conclusions. First, consumers of nuclear fuel continue to value diversity of sources of enriched uranium product both to assure security of supply and to promote market competition. Second, consequently, nuclear plant owners and operators want Centrus to survive and to flourish.
Third, for the same reason, the Centrus value proposition for our customers remains tied to our continuing to remain a reliable supplier of commercial nuclear fuel. While customers understand that now is a challenging time to contemplate adding new capacity in light of the current market conditions, their long-term support for Centrus depends on our moving toward deployment of new commercial enrichment capacity.
So, this defines our challenge at Centrus. How will we succeed? I’m not finished with my listening tour, but I can tell you some things about how an approach is forming in our mind to be further developed and refined in consultations with our customers, our shareholders, partners, and other stakeholders.
First, we must grow our enriched-uranium business, giving it fresh focus, strong leadership, and a reinvigorated “customer first” philosophy, providing our customers with the products and services they need when they need it.
Second, to the extent that Centrus, post restructuring, needs to supplement its existing capabilities in order to be more responsive to more dimensions of the customer requirement, then we will pursue such capabilities through partnerships and internal resources as appropriate. We’ll also explore additional business opportunities that leverage our nuclear and manufacturing capabilities even as the enrichment market remains depressed.
Third, we will continue to work toward adding new enrichment capacity, mindful of our duty to conduct the appropriate due diligence at every step of the process.
Fourth, Centrus will continue to play a crucial role in support of America’s national security and global nuclear security missions.
And fifth, that said, Centrus will size its business and its plans to the commercial marketplace with a long-term focus on deployment of new production.
In following this course, we will remember that the success that this company achieved in converting 500 metric tons of highly enriched uranium from weapon stocks to commercial reactor fuel — by the way, that’s the equivalent of dismantling three nuclear weapons a day, every day, for 20 years straight — really based on what I have long considered to be a stroke of genius.
What is that? To harness a national security imperative to the power of the commercial marketplace — it did not depend on annual approvals, it did not depend on legislative actions and appropriations. And while relations between Russia and the United States have endured many ups and downs over that 20-year period, the HEU Deal continued to deliver product on time and within spec year after year after year. That premise remains valid.
We still face a national security imperative to remain in the enrichment business. It therefore becomes the mission of Centrus to establish itself as a successful commercial enterprise standing on its own two feet so that the company can continue to serve the vital missions that are inherent to the unique role and responsibility of the United States. The stronger our commercial business, the better able we are to support the nation’s business.
We believe that by listening to our customers, by working with our partners, investors, shareholders, and other stakeholders and pursuing the highest levels of performance and execution and ethics and integrity, we can and we will succeed.
This doctrine would be in the best interest of Centrus shareholders, the nuclear industry, the governments that are interested in nuclear energy, and the causes of climate change as well as nuclear safety, security, and nonproliferation.
Thank you again for your support and interest in Centrus. We’re working hard every day to deliver on our commitments to you. I’m excited about our future prospects and look forward to meeting with many of you in the months ahead to discuss where we are headed. Thank you very much.
Now, before handing the mic back to Mikel to wrap up, I do want to add one additional point. This has been a challenging period for all of us and again, I really appreciate the hard work that has gone into bringing this company to where it is. The restructuring and all the related activity that have run their course have been difficult and a challenging experience.
From the perspective of somebody who’s joining the company, and looking back over this experience, I understand the importance of shareholder communications. That’s why I welcome today’s opportunity to meet you, and we are committed going forward as a management team to treat this as an opportunity, but also as a responsibility. In that spirit, we’re going to work to provide our shareholders improved communications and a better insight as to where the company is going, our challenges, our goals, and how we are doing against those goals.
I look forward to a new era of shareholder communication. And now, I will hand the mic back over to Mikel Williams to continue the proceedings. Thanks.