Greetings, and welcome to the Centrus Energy Q2 2022 earnings call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Dan Leistikow, Vice President, Corporate Communications for Centrus. Thank you, Dan. You may begin.
Good morning and thank you all for joining us. Today's call will cover the results for the Q2 of 2022, ended June 30. Today, we have Dan Poneman, President and Chief Executive Officer, and Kevin Harrill, Controller and Chief Accounting Officer. Our Chief Financial Officer, Philip Strawbridge, had a scheduling conflict that prevented him from being on today's call, but he'll be available for follow-up calls next week. Dan and Kevin will be taking questions following their prepared remarks. Before turning the call over to Dan Poneman, I'd like to welcome all of our callers, as well as those listening to our webcast. This conference call follows our earnings news release issued yesterday. We expect to file our report for the Q2 of 2022 on Form 10-Q later today.
All of our news releases and SEC filings, including our 10-K, 10-Qs, and 8-Ks, are available on our website. A replay of this call will also be available later this morning on the Centrus website. I would like to remind everyone that certain of the information we may discuss on this call today may be considered forward-looking information that involves risk and uncertainty, including assumptions about the future performance of Centrus. Our actual results may differ materially from those in our forward-looking statements. Additional information concerning factors that could cause actual results to materially differ from those in our forward-looking statements is contained in our filings with the SEC, including our annual report on Form 10-K and quarterly reports on Form 10-Q. Finally, the forward-looking information provided today is time sensitive and accurate only as of today, August 5, 2022, unless otherwise noted.
This call is the property of Centrus Energy. Any transcription, redistribution, retransmission, or rebroadcast of the call in any form without the expressed written consent of Centrus is strictly prohibited. Thank you for your participation, and I'll now turn the call over to Dan Poneman.
Thank you, Dan, and thank you to everyone on the call today. We are happy to report another strong and productive quarter for Centrus. The numbers speak for themselves, $99.1 million in revenue, $60.9 million in gross profit, and $37.4 million in net income. We always remind listeners on these calls that a normal feature of our business is that revenues and margins vary widely from quarter- to- quarter based on the timing of deliveries, and that is, the annual performance that matters most. I do think that it's fair to say that these numbers are another example of the continued resilience of our business, even in the face of challenges like the pandemic and the changes in the global nuclear fuel market brought about by Russia's invasion of Ukraine.
We are continuing to deliver the fuel our customers need and the results our investors expect. I am enormously proud of our team for the work they are doing to navigate a sometimes-difficult environment and to help our company grow for the long term. Along those lines, our sales team has been putting up strong numbers. In the first two quarters of the year, we made deliveries of SWU, separate work units, and uranium totaling about $103 million. We also secured new sales contracts and commitments worth about $135 million. As a result, the total value of our order book has increased over the course of the year and now stands around $1 billion. As I said, the numbers can speak for themselves, but numbers alone don't tell the whole story.
The Ukraine invasion brought energy security issues into sharp focus. While much of the discussion has been around natural gas, Russia is much more dominant when it comes to nuclear fuel, with 46% of the world's uranium enrichment capacity. It is an indispensable supplier of Low-Enriched Uranium for existing reactors worldwide and is currently the only source of High-Assay Low-Enriched Uranium, or HALEU, the advanced reactor fuel that will be required for most of the next-generation reactors now under development. This has contributed to a dramatic rise in market prices for uranium enrichment and a new sense of urgency from policymakers as well as industry participants to support investments in new domestic capacity for both LEU and HALEU. Centrus is uniquely positioned to lead this effort. We have the only deployment-ready U.S. technology that is capable of meeting national security as well as commercial requirements.
Our site is already licensed by the Nuclear Regulatory Commission for LEU production and is also the only site in the country that is licensed to produce HALEU. We have long-standing ties to utilities around the world and commercial relationships with many of the most innovative companies that are designing the advanced reactors of tomorrow. The HALEU enrichment plant we have been building in Ohio is expected to begin demonstrating HALEU production next year. Subject to the availability of funding and/or offtake commitments, we can scale that facility up to whatever level of production the market requires, including both HALEU and LEU for commercial as well as government and national security missions. We're pleased that the Department of Energy has issued a request for proposals that is expected to fund the next stage of the HALEU demonstration and potentially support years of operation and production beyond that.
This is a competitive solicitation, and we are working hard to demonstrate our capabilities and make a strong case when we submit our bid later this month. This is one part of a broader HALEU availability program that has been established at the Department of Energy to promote the build-out of domestic HALEU production infrastructure. Congress provided $45 million in fiscal year 2022. The administration has proposed $95 million for fiscal year 2023, which was increased to $100 million in the Energy and Water Appropriations bill that recently passed the House. While the Nuclear Energy Institute and others in the industry have embraced the proposal for annual funding of $300 million per year. The draft text of the Inflation Reduction Act, recently announced by Senator Schumer and Senator Manchin, includes $700 million for HALEU.
There have also been media reports that the administration is developing a proposal to make purchases of LEU and HALEU as a way to jumpstart domestic production. We cannot predict where the legislative process will land, but it is clear that the momentum behind restoring American leadership in uranium enrichment is real, and it is growing. For more on the numbers, let me now turn things over to Kevin Harrill. Kevin.
Thank you, Dan. Good morning, everyone. As Dan mentioned, and as we regularly discuss on these calls, there is considerable variability in our revenue and margins throughout the year. The Q1 of this year was relatively subdued, but in the Q2 we had several LEU deliveries. Our focus is not on what happens in any one quarter, but what happens over the course of a year and how that compares to prior years. Again, there are two factors at play here. Most of our revenue in the LEU business comes from multi-year sales contracts we have with major utilities. Under those contracts, customers typically have an annual purchase obligation, not a quarterly obligation. The customer chooses which quarter to take their delivery, and we book the revenue in that same quarter.
For example, in the first two quarters of the year, Centrus secured more than $135 million in new sales contracts and commitments. These sales include deliveries of SWU and uranium from 2022 through 2026, and those revenues will be recognized in whatever quarter and year they are delivered. Secondly, the prices in our sales contracts vary significantly based upon when they were signed. Published price indicators for enrichment peaked around $165 per SWU pre-Fukushima, declined to below $40 by late 2018, and then began a slow but steady rise to around $60 per SWU prior to the Ukraine invasion. Since then, published price indicators have risen to $87 per SWU in the spot market and above $130 in the long-term market.
We have contracts in our order book that were signed up and down that price curve. Our quarterly revenue will therefore vary depending on both delivery volume and whether those deliveries were on higher price contracts or lower price contracts. For the three months ended June 30, our total revenue was $99.1 million. In our LEU segment, the volume of SWU sold declines, but the average price of the deliveries increased compared to the same quarter in 2021. This resulted in an overall increase in revenue for the segment. At the same time, our unit cost of sales per SWU also declined, resulting in a gross profit for the segment of $59.4 million for the quarter, compared to a gross profit of $18.2 million for the segment in the same quarter in the prior year.
In our Centrus Technical Solutions segment, we generated $13.6 million in revenue against cost of sales of $12.1 million. This resulted in gross profit for the segment of $1.5 million. Segment revenues were $3.6 million lower than in the Q2 of 2021, but that was more than offset by a $6.2 million reduction in cost of sales for the segment. Combining the two segments, we earned a gross profit of $60.9 million for the quarter and net profit of $37.4 million. As you may recall, in our annual 10-K filing, we reported improvement of more than $100 million in the funding status of our legacy pension plan over the course of 2021.
This cut our long-term pension liability from $124.4 million at 2020 year-end to just $23.1 million by the end of 2021. That was primarily driven by the strong growth in our pension assets, combined with the impact of a $43.5 million settlement we secured last year with the U.S. government that helped reduce our long-term liabilities for pension and post-retirement health benefits. While equity markets are down substantially this year, the decline in pension assets has been partially offset by a decline in pension liability due to rising interest rates. Ultimately, the actuarial assumptions established at the beginning of the year show a continued improvement in our pension status, with just $16 million remaining of non-current pension liability.
We are in a strong financial position going forward with a cash balance of $136.9 million, which includes $21.3 million of restricted cash for financial assurance as of the end of the quarter, and a long-term order book valued at $1 billion as of June 30. With that, let me turn things back over to Dan.
Thank you, Kevin. Before we get to your questions, let me just take a step back to talk about the broader landscape and the changes in the world and our industry that we have witnessed in recent months. There is no doubt that the Ukraine invasion has upended expectations in the global nuclear fuel market and caused government as well as industry leaders to refocus on their vulnerable supply chains. Since the end of the year, spot prices for SWU have increased more than 50% and long-term prices have doubled. That means we have opportunities to make new sales at much higher prices than we could have just a few months ago. The realization that prices are rapidly increasing has also prompted a number of utilities to accelerate their contracting activity as they work to secure long-term fuel supplies before prices go up still further.
At the same time, the overall outlook for nuclear is stronger than it has been in years. More and more countries are embracing the need for nuclear energy as a pathway to reduce carbon emissions and to provide greater energy security, particularly as prices for natural gas are spiking. Natural gas prices in the United States have roughly doubled from a year ago. Wholesale natural gas prices for advanced deliveries in the Netherlands, which is often used as the benchmark for pricing in the European Union, surged to more than EUR 210 per MWh in late July. That's more than 10 x the average price between 2010 and 2020. Governments in Europe have either doubled down on their nuclear programs, reversed decisions to retire plants, or revive long-dormant plants to acquire new reactors.
Even the German government is reconsidering its earlier decision to shut down their remaining three nuclear power plants by the end of this year. Last month, the European Union agreed to include nuclear power in its EU Taxonomy, a pivotal decision that could promote wider deployment of nuclear energy throughout Europe as a vital tool in the fight against climate change. In California, Governor Newsom recently announced that the state will consider delaying the shutdown of the Diablo Canyon Nuclear Power Plant, which generates more carbon-free electricity than all of the utility-scale wind and solar the state has added in the last five years. Wyoming, a state that gets around 80% of its electricity from coal, now has plans to replace one of its retiring coal-fired plants with first-of-a-kind HALEU-fueled sodium-cooled fast reactor designed by TerraPower and backed by Bill Gates.
The International Energy Agency's net-zero scenario requires a doubling of the global nuclear fleet by 2050, from 450 GW installed today to 812 GW installed by mid-century. Achieving that growth will be challenging, but with effective leadership and strong public-private partnerships, it is doable. Indeed, given the scale and the urgency of the global challenge to prevent catastrophic climate change, failure is not an option. The momentum behind maintaining existing reactors and building new ones is gaining steam around the world, and Centrus is committed to providing an assured source of fuel to support those reactors for decades to come. With that, we'll now turn to your questions. Operator?
Thank you. We will now be conducting a question-and-answer session. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two if you would like to remove your question from the queue. We ask that you limit yourself to one question and one follow-up before re-queuing to join the question queue. One moment, please, while we poll for questions. Our first question comes from the line of Rob Brown with Lake Street Capital Markets. Please proceed with your question.
Good morning.
Good morning, Rob.
I just want to follow up on your comment about the new sales activity. How much is the SWU pricing driving that? And sort of what's the pipeline of activity that's still yet to convert? Or is it a lot pulled forward? How's sort of the rest of the activity out there?
Well, I think, Rob, you have to kind of look in the broad sweep of history. You know, when, as we experienced from 2011 to about August 2018, prices going down, just put yourself in the shoes of a fuel buyer. You know, why buy today if it will be cheaper tomorrow? Now that you see the curve having kinked, and now moving up, there is really two things. You know, number one, and they're related, obviously. Number one, there's an advantage buying sooner if it's going to be cheaper, right? Secondly, because of all of the uncertainty in the supply scenarios, there's just a pure, frankly, straight energy security aspect to this. People are trying to lock in long-term supplies.
You know, it's very important to operate reactors with a very clear line of sight to your supply chain. I think those are the factors that are in play. I don't know if that fully answers your question.
No, that's great. Very helpful. Thank you. Just following up on some of your comments about the legislative efforts to increase U.S. supply, I know there's a lot of things happening. How is your sort of view on when these pieces need to start to fall in place and how long it takes to get the supply online once decisions start to get made?
Well, it would take quite a fine prognosticator to predict the timing of actions of the U.S. Congress on the one hand. On the other hand, you know, I read news reports this morning, very promising ones about this Manchin-Schumer legislation possibly passing over the weekend. Indications I have seen, Rob, and, you know, I'm the last person to speak on behalf of the Congress, but I think Speaker Pelosi would bring folks back promptly to have this addressed. We've seen a lot of support, anticipatory support on the House side. Our hope is that very, very soon indeed, you would have a fully enacted bill that the president would sign in just a very short while from now. As I've mentioned in my remarks, that's really a game changer, right?
Because it's got $700 million in it for HALEU, and that's exactly the kind of market signal that we've been looking for. It's both a market signal, but also, it's a very significant investment, right? Beyond that, there's the normal appropriations process, which is always complex, but especially so in an election year. We've been very encouraged to see the administration, which more than doubled its request for the coming fiscal year compared to the last one. The House mark was even higher. The administration had requested $95 million, then the House put in $100 million. Industry writ large, including the Nuclear Energy Institute, have been actually asking for $300 million, all with the same, frankly, view in mind of its really time to get off the dime.
We're making significant, huge investments really in these advanced reactors that X-energy and TerraPower are building under the Advanced Reactor Demonstration Program. It's absolutely imperative that they got a fuel supply. I think it's quite logical, but it's also gratifying to see that people have sort of recognized that. I do expect you're going to see a continuing effort, Rob, in the Congress, and the appropriation cycle is what it is, whether we'll see another continuing resolution and whether we'll get past the November elections will take some TV commentator, not me, to help you out.
Thank you. Our next question comes from the line of Joseph Reagor with Roth Capital Partners. Please proceed with your question.
Hey, Dan and team.
Hey, Joe.
Thanks for taking the questions. Hey, so, on this $135 million of new contracts, I realize you can't give us a year by year on it, but any additional color as far as how that breaks down across the six years? Is it, you know, roughly even? Is it back half weighted? Is it front half weighted?
Yeah. Joe, I don't think we really go into that kind of thing, you know, in public disclosure space. I think we just kind of do the global numbers and then, you know, they will roll out in successive quarters as they roll out.
Okay. Second thing, on the HALEU contract that you're competing for, can you kind of give us a little background on what the space looks like as far as the other competition? You know, you guys are the only ones with a HALEU license right now, so, you know, like, is this really an open competition, or is it more a matter of the government has to say it is, and, you know, you guys are really the only, you know, party in town?
Well, Joe, it's hard enough to speak on my own behalf, and I sure am not going to speak on behalf of other companies. To the second part of your question, it's a real competition. I mean, the department's been out there. They had an industry day. It's real, and we're taking it very seriously indeed. You know, these RFIs, if you've had any exposure to them, are extraordinarily detailed and work intensive things. There, I think, would make you proud as an American to see the hard work that goes into even preparing the RFI itself. To be responsive to a very thoughtfully and thoroughly prepared RFI is a massive undertaking, and we're taking it very seriously. You know, we feel good about our capabilities.
We feel good about what we bring to the table, but we are taking nothing for granted, and, you know, we're focused on this like a laser beam.
Thank you. As a reminder, ladies and gentlemen, if you would like to ask a question, please press star one on your telephone keypad. There appear to be no further questions at this time. I'd like to turn the floor back over to management for closing comments.
Thank you, operator. This will conclude our investor call for the Q2 of 2022. As always, I want to extend a thank you to our listeners online and investors who called in. We look forward to speaking with you again next quarter.
This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation, and have a wonderful day.