All right. Hey, everyone, Marc Bianchi here from the research team at TD Cowen. We're excited to be joined by Dan Poneman, who's CEO of Centrus, which Dan will explain, is involved in enrichment and the future of enrichment, if we'll call it that, with HALEU. But Dan, maybe before we get into all the questions I've got, could you just give us a quick introduction to Centrus and
Sure
... you know, without getting into too much detail, 'cause we'll get into it later, but just like the HALEU and LEU opportunities that you have.
Sure. I'll do this fast. For those of you who may not have heard of Centrus, you perhaps heard of our grandfather, which is the Manhattan Project. Centrus is literally the direct descendant of the Manhattan Project. For those of you who watched the movie Oppenheimer, you'll have seen in Oak Ridge, Tennessee, they were filling a bowl full of marbles. Well, that's what we do, right? We enrich uranium. The technology was invented in the Manhattan Project at Oak Ridge. We still have our manufacturing facility in Oak Ridge, Tennessee. After the war ended, the Manhattan Project became the Atomic Energy Commission. That became the Department of Energy, and then the United States in 1998, I'll write a book about it someday, became the only country in the world to privatize this technology, which can be used to make nuclear weapons.
It privatized under the name U.S. Enrichment Corporation. Long story, but after Fukushima crushed the market, the company went through Chapter 11. I came in to try to turn it around. We turned it around, we became profitable, and this will segue to Marc's second question. We got a cost-share contract from the U.S. Department of Energy to build the most advanced centrifuges in the world, and we have now completed that cascade, 16 machines. They're about to start operating next week, actually, in Piketon, Ohio. This will be the first new U.S. production from a U.S. technology enrichment plant to begin production since 1954. And what are we gonna make? We're gonna make a fancy new kind of fuel that's called High-Assay Low-Enriched Uranium. Here's a nickel primer on enrichment.
You can think of it like alcohol proof, but you can pull uranium out of the ground, and you... It's not, not the one you want. You want the 0.7% Uranium-235 isotope, which is famous because it splits more easily and can, under right circumstances, sustain a chain reaction and release heat. Now, if you crank up the proof of this whiskey, so to speak, from the 0.7% found in nature to 4% or 5%, that will be good enough to generate steam, and all 93 reactors now operating in the United States use what we call Low-Enriched Uranium.
The same technology that cranks it up in concentration to 4% or 5%, you keep going, you get all the way up to 90%, and now you're back at the Manhattan Project and a mushroom cloud and a bomb, or a reactor that's so strong and powerful in a compact form that you can fit a reactor onto a boat, like a submarine or a carrier. So what's the difference between low and high-enriched uranium? Well, legally, it's 20%. We don't have time to go into the whys and the wherefores, but, that's the legal limit between low and high. So if I'm Bill Gates, say, and I wanna get a fancy new reactor that's got all kinds of performance enhancements, but I don't wanna risk bombs getting built or all the regulations that go with that dangerous level of enrichment, I go just shy of 20%, 19.75%.
Centrus Energy Corp has the only Nuclear Regulatory Commission license to make that very special kind of fuel, which we call high-assay low-enriched uranium, and for people who have time limitations, we shorten that to HALEU. And so up until about 3:00 P.M. on February 24th, 2022, everybody in the world thought they were gonna get HALEU from the only commercial source, which happens to be Russia, and as of 25th, nobody wanted to get it from there. And so we are right front and center, super excited.
Next week, we're gonna start this thing producing enriched uranium in southern Ohio, because we shipped the parts from Oak Ridge, Tennessee, to the plant in Piketon, Ohio, that is the size of the Pentagon. And the good news is, not only will we be producing, but this thing is, like, infinitely scalable. I shouldn't say infinitely, it's, it's scalable to a huge degree. The building size there is about the same square footage as the Pentagon. We could put thousands of machines in, where we now just have 16. So Marc, that's a brief primer.
Good. Yeah, good one. So we've got about 15 minutes left. These are short sessions.[crosstalk] Sure. I wanna talk quickly about your LEU opportunity business and opportunity. So tell us quickly, what's a SWU? And explain kind of the supply-demand dynamic for low enriched,
Okay
... globally, and the impact of this Russia-
Yeah
... situation.
Yeah, I'll be succinct, since we don't have much time. A SWU is simply the amount of effort that is required to raise the enrichment from one percentage assay to another percentage assay. You can't hold a SWU in your hand, it's a measurement of work, in a sense. And so it's a weird unit of account, but that's how enrichment typically has been measured. Here's the problem: when basically, for a lot of reasons, the United States fell from the largest exporter to the largest importer of enrichment over many decades, actually, Russia moved in to take our place, and they did. Russia has 46% of the global supply capacity to enrich uranium. What does that mean?
That means of the global demand, which is 48 million SWU per year, without Russia being included, if you took Russia out of the equation, the supply falls—the supply to meet that 48 million SWU demand is 33 million. That shortfall of 15 million SWU is the same as 100% of U.S. consumption of enrichment per year, and add to that, Europe consumes 10 or 11 million SWU of enrichment per year.
So if people are, and they are, assiduously trying to get off of dependence on Russian imports of enriched uranium, there's a huge, I mean, ginormous market opportunity to fill that gap, and we are ambitious to play our role. We will not be the only ones in that space. Obviously, there are big incumbents already in place, but the world wants more suppliers, not just more supply. There's only four commercial suppliers, and they're all state-owned enterprises in Russia, China, and Europe, and we would like to add an American supplier to the mix.
What is your opportunity there? Could you restart the assets you have? Do you have to build new assets, and what's the timeline to hear more about that from you guys?
[audio distortion] In place. You can see some of the pictures on our New York Times story. It's a vast, vast building with... How long would it take? Well, to make LEU, we could, from a FID, get the first SWU off the line in about 36 months, and once we get a supply chain up and running, we could be adding cascades, which is how we build out in a modular fashion. First it'll take six months for the second cascade, but quickly we get down to two months per additional cascade. Each cascade has 120 machi-[audio distortion] Once we get going.
You might have... You broke up for me. I don't know if it's my- on my side, or it's on your side, but maybe what would be good if you could just review the timeline when we would know about your ability or decision to move forward with that. Like, what are the-
Okay.
What are the chips that need to fall?
For the LEU, I gotta distinguish between. The LEU opportunity is different from the HALEU opportunity.
Yeah.
So you asked about LEU, so I'll answer LEU. We need basically two things. Number one, every enrichment plant in the history of the world has been bought and paid for by governments. No... As I said before, no other country ever privatized uranium enrichment. So we will need to get onto the playing field with these fully bought and paid for facilities, fully amortized by foreign governments. We need a government contribution. The good news is, if you saw in the House, they passed the House Appropriations Committee, a $2.4 billion mark for enrichment over three years. The Senate has had legislation that had numbers up to $3.5 billion. It's not in there now, but they did pass 96 to three votes, the Nuclear Fuel Security Act, so there's strong support on both sides of the Hill, on both sides of the aisle.
So those are the kind of numbers that we need from the government, and the second thing we need is we need long-term offtake from credit-worthy offtakers. So, you would imagine all of the major U.S. utilities that have fleets of reactors would be people we would be talking to. And so as soon as we get those two things, because there is a known market of known size with very well heeled, big balance sheet, Moody's-rated offtakers in the form of big U.S. utilities, this is a very financeable deal once we get those two pieces in place, which is a commitment by the government to do their part, it's gotta be a public-private partnership, and then some level of support from the market in terms of utility offtake.
That $2.4 billion House mark and whatever, we'll see what happens with the Senate, is that specifically low enriched, or could that cross over between any kind of enrichment?
That would cover both LEU and HALEU, but our machines can do either and both. Right? Our license goes up to 20%, but obviously that includes 4% or 5%, so we can make either or both LEU and/or HALEU.
I think you reviewed this before, but it might have frozen. Just the timeline now, switching over to the HALEU program, just you've got the, the-
Yeah
... I guess, the pilot or demonstration-
I'm sorry if I was frozen. Yeah. Yeah, very quickly, from a final investment decision, 40-42 months later, we can add a cascade of 120 machines. That cascade would produce 6 metric tons of HALEU, based on 4.95% feedstock into the cascades. After that, the second cascade would follow six months later, and then quickly, we cycle to a two-month build per cascade because the supply chain would be up and running. It actually is a little shorter to start making LEU because we already have a lot of designs, design work done. So our first SWU would come off the line for an LEU cascade in 36 months instead of 42 months.
Got it. Got it. Okay, great, and you have the only NRC license for HALEU. How hard is it for somebody to get a license? What, what should we think about the competitive positioning here with that license?
I would say that [audio distortion] out of letter is Y, which stands and tell you exactly how long, but you know, it... You can think in terms of, say, at least, you know, two or three years. We have a significant head start. Of course, you have to start from somewhere, and you can read the trade announcements as well as I have, but a lot of the incumbents, unlike us, we're scrappy and small, we gotta be aggressive, and they've got very large and attractive EBITDAs on their existing business, and they're run by governments. I think we have a number of advantages in terms of being able to move quickly.
There is an RFP for HALEU that's kind of working its way through. Can you just kind of update us on where that stands and what the timeline would look like for some kind of an award to be announced?
Yeah. Well, I'm always very careful not to speak for people who I'm not, and I'm not the U.S. government, and they, as much as I'm in a hurry, you can't always dictate the pace of the government. They put out a draft RFP. They got a lot of comments. There were challenges about that RFP. They have said it's coming out soon, but they have not been very specific. They've broken it also into different pieces, handling the deconversion piece, which we haven't talked about, and enrichment. But, you know, I would say people are hoping that it comes out by the end of the year, but I can't... I would be reckless to actually predict with any confidence because it, it's really in the hands of the Department of Energy- ... and the administration.
And, has there been any quantification about how much they could be looking to procure and, what the range around that would be?
There has been. They have a... The draft RFP put out a number, they call them clauses, which are specific, like work tasks within the RFP, and different question is, there is a preference not depend on appropriation that have not yet been passed through the Congress and signed by the President. So, it's not clear, candidly speaking, that, how much of the $500 million, which is in the Inflation Reduction Act as part of the overall $700 million, that was dedicated to HALEU. $500 million was actually to purchase the stuff, but that one of the challenges is, since the Ukraine war has freaked out the market, the LEU feedstock, which I referred to a moment ago, has shot up in price.
So if the government designs the RFP in a certain way that they end up spending most of the money on feedstock, you won't get very much HALEU out of it. But again, Marc, we're gonna have to see how the final RFP comes out, because a lot of companies and trade organizations gave comments that were very focused on trying to make sure that the money in the Inflation Reduction Act actually went to producing HALEU, and not just buying a commodity that's already available commercially, such as LEU.
I know this is a tough question to answer, 'cause it involves a bit of a forecast, but is there any way you can help us think about kind of the minimum level of HALEU demand, for what we know is in motion right now on the advanced reactor side, and then, you know, what a reasonable scenario could be down the road in the 2030s?
Well, it is, it's hard to know because, of course, right now, there's a lot of talk, and there are MOUs, and there's a lot of excitement and a lot of sizzle, but in terms of take or pay contracts that have been announced, not so much, right? But the Department of Energy, which is as good a source as any, projects a demand reaching potentially 40 metric tons by 2030. And just to put that in a little bit of context, if we build four cascades, which is a kind of a good number for us to be looking at right now, that would...
If you take that plus the demonstration cascade, that would produce on the order of 25 metric tons per year that would be available, you know, in that timeframe I mentioned, Marc, a few minutes ago. So those are the kinds of numbers. The numbers on the upside are huge, but then all of us sort of depends on this becoming a blue ocean opportunity, that once we demonstrate, and we are dedicated to do this, that we can solve the so-called chicken and egg conundrum that has been dogging this part of the industry for two years at least, that this market will really take off. The DOE has called for 200 gigawatts of new nuclear by 2050 to meet net zero. That's gonna require an enormous amount of reactors to get built.
The cost only goes up if we delay. We think there's a huge opportunity out there. The short version for your listeners, if they don't know it, is the problem with HALEU has been so far, or with advanced reactors, and when I'm talking about advanced reactors, I mean, specifically the fast neutron-based ones that are so-called fourth generation, like TerraPower, X-energy, Oklo, ARC, et cetera, not the LEU-based GE NuScale types. No one wants to order 10 reactors without a fuel source, and nobody wants to invest a big chunk of capital in a fuel source without 10 reactor orders. This public-private partnership I've been talking about is absolutely critical to solving the chicken and egg conundrum.
Yeah. Well, maybe in the two minutes we have left, can you talk about the agreement with Oklo, and also the power needs for what you do? Because my understanding is enrichment is really power intensive. Just talk to us about that a little bit, and then where you see... Why, why team up with Oklo, and where is the opportunity there over time?
Oklo is a terrific company. It's very, very exciting. We've, I think, you know, we've announced publicly deals with both TerraPower, Bill Gates' company, and Oklo. The Oklo one has a number of interesting features. They need, I mentioned it before, deconversion. So the uranium, enriched uranium comes off the line, it's a gas, and you can't put a gas into a fuel pellet, so we've got to deconvert that gas into a solid form. They are interested in working with us on that. They're interested in us because we have exquisite manufacturing capacity at a nuclear quality level, which is a very rare thing to find, and we've been extremely successful. We're starting our cascade two months ahead of time. When have you heard that happen in nuclear space?
The other exciting thing is they're gonna be our neighbors, and a slight, a friendly amendment, you know, the old gaseous diffusion technology was enormously consumptive of electricity, which is why it became uneconomic. We are now deploying these advanced centrifuges, which are much more energy and electricity efficient. But one of the interesting features of the Oklo deal is that they will build two of their powerhouses, the Aurora powerhouse, in the area, and we could have offtake from their powerhouses driving our centrifuges, which make the fuel in turn for their reactors. It's a little bit like how Henry Ford created a market by giving his workers $5 a day to buy their own Model T's.
Well, that's probably a good place to leave it. Dan, thanks so much. A little bit of a speed round here-
Thank you, Marc, and thanks to everybody.
All right.
Yeah, we're excited about it. Thank you all for taking the time.
Thank you.