CENTRUS ENERGY CORP

Previous wording

Centrus operates two business segments: (a) LEU, which supplies various components of nuclear fuel to commercial customers from our global network of suppliers, and (b) Technical Solutions, which provides advanced engineering, design, and manufacturing services to government and private sector customers and is deploying uranium enrichment and other capabilities necessary for production of advanced nuclear fuel to power existing and next-generation reactors around the world.

Current wording

Centrus operates two business segments: (a) LEU, which supplies various components of nuclear fuel to commercial customers from our global network of suppliers, and (b) Technical Solutions, which provides advanced engineering, design, manufacturing, and services to government and private sector customers and is deploying uranium enrichment through HALEU production and other capabilities necessary for production of advanced nuclear fuel to power existing and next-generation reactors around the world.

Previous wording

Published spot price indicators for SWU reached historic highs in April 2009 at $163 per SWU. In the years following the 2011 Fukushima accident in Japan, spot prices declined more than 75%, bottoming out in August 2018 at $34 per SWU. This was followed by a period of price increases, which reached $155 per SWU by December 31, 2023. As of June 30, 2024, spot prices were $176 per SWU. This represents an increase of 14% since the beginning of the year and 418% over the 2018 historic low. This surge in the SWU spot price beginning in 2022 has been driven primarily by uncertainty created as a result of the war in Ukraine, coupled with growing interest in nuclear power as a source of reliable carbon-free energy.

Current wording

Published spot price indicators for SWU reached previous historic highs in April 2009 at $163 per SWU. In the years following the 2011 Fukushima accident in Japan, spot prices declined more than 75%, bottoming out in August 2018 at $34 per SWU. This was followed by a period of price increases, which reached $155 per SWU by December 31, 2023. As of September 30, 2024, spot prices were $180 per SWU, which surpasses the previous historic high. This represents an increase of 16% since the beginning of the year and 429% over the 2018 historic low. This surge in the SWU spot price beginning in 2022 has been driven primarily by uncertainty created as a result of the war in Ukraine, coupled with growing interest in nuclear power as a source of reliable carbon-free energy.

Previous wording

Under the 2019 HALEU Demonstration Contract, Centrus was engaged by the DOE to construct a cascade of 16 AC100M centrifuges in Piketon, Ohio to demonstrate HALEU production. The DOE has funded the contract up to $173.0 million with a period of performance that ended November 30, 2022. Closeout activities on the HALEU Demonstration Contract are ongoing. The DOE elected to change the scope of the HALEU Demonstration Contract and moved the operational portion of the contract to a new, competitively-awarded contract that would provide for operations beyond the term of the existing HALEU Demonstration Contract.

Current wording

Under the HALEU Demonstration Contract, Centrus was engaged by the DOE to construct a cascade of 16 AC100M centrifuges in Piketon, Ohio to demonstrate HALEU production. The DOE has funded the contract up to $173.0 million with a period of performance that ended November 30, 2022. Closeout activities on the HALEU Demonstration Contract are ongoing. The DOE elected to change the scope of the HALEU Demonstration Contract and moved the operational portion of the contract to a new, competitively-awarded contract that would provide for operations beyond the term of the existing HALEU Demonstration Contract.

Previous wording

Under the HALEU Operation Contract, DOE is contractually obligated to provide the 5B Cylinders necessary to collect the output of the cascade, but ongoing supply chain challenges have created difficulties for the DOE in timely securing enough 5B Cylinders for the entire production year. To support the DOE in mitigating the risk of further delays in delivery of 5B Cylinders, the Company received technical direction and a contract modification from the DOE to procure compliant 5B Cylinders and components. The contractual obligation to furnish compliant 5B Cylinders under the HALEU Operation Contract continues to rest with the DOE. During periods where quantities of 5B Cylinders are insufficient, the Company will not be able to produce HALEU but will be able to continue operations of the cascade and perform preventive maintenance and regulatory compliance-type activities. Centrus anticipates that the delays in obtaining sufficient 5B Cylinders will be temporary but no longer expects to achieve delivery of the 900 kilograms of HALEU UF 6 anticipated for Phase 2 of the contract, which extends to November 2024. Although inadequate for meeting the full delivery quantity target, the DOE has been successful in locating a small number of 5B Cylinders. Using the 5B Cylinders currently made available by the DOE, Centrus has now achieved cumulative deliveries to the DOE of approximately 179 kilograms of HALEU UF 6. We anticipate additional 5B Cylinders will be available during the third quarter, which will allow the Company to continue producing HALEU. The target fee for Phase 2 of the contract was estimated to be $7.5 million based on the estimated costs for the contract and is subject to a contract minimum fee of $6.9 million. In accordance with the HALEU Operation Contract, the Company has submitted several change requests for work being performed on infrastructure, facility repairs, and 5B Cylinders. The additional work is being performed under the DOE’s technical direction or contract modifications.

Current wording

Under the HALEU Operation Contract, DOE is contractually obligated to provide the 5B Cylinders necessary to collect the output of the cascade, but ongoing supply chain challenges have created difficulties for the DOE in timely securing enough 5B Cylinders for the entire production year. To support the DOE in mitigating the risk of further delays in delivery of 5B Cylinders, the Company received technical direction and a contract modification from the DOE to procure compliant 5B Cylinders and components. The contractual obligation to furnish compliant 5B Cylinders under the HALEU Operation Contract continues to rest with the DOE. During periods where quantities of 5B Cylinders are insufficient, the Company will not be able to produce HALEU but will be able to continue operations of the cascade and perform preventive maintenance and regulatory compliance-type activities. Centrus anticipates that the delays in obtaining sufficient 5B Cylinders will be temporary but no longer expects to achieve delivery of the 900 kilograms of HALEU UF 6 anticipated for Phase 2 of the contract, which extends to November 2024. Although inadequate for meeting the full delivery quantity target, the DOE has been successful in locating a small number of 5B Cylinders. Using the 5B Cylinders currently made available by the DOE, Centrus has now achieved cumulative deliveries to the DOE of approximately 332 kilograms of HALEU UF 6. We anticipate additional 5B Cylinders will be available during the fourth quarter, which will allow the Company to continue producing HALEU. The target fee for Phase 2 of the contract was estimated to be $7.5 million based on the estimated costs for the contract and is subject to a contract minimum fee of $6.9 million. In accordance with the HALEU Operation Contract, the Company has submitted several change requests for work being performed on infrastructure, facility repairs, and 5B Cylinders. The additional work is being performed under the DOE’s technical direction.

Previous wording

The DOE continues to pursue the availability of HALEU for the ARDP and for the advanced reactor market in general. The DOE issued RFPs for deconversion of HALEU into different forms needed to fabricate fuels used by various advanced reactor developers and the production of HALEU on November 28, 2023 and January 9, 2024, respectively. On June 27, 2024, the DOE issued an RFP focusing on the domestic production of LEU to ensure the availability of enriched uranium in a quantity that would be sufficient to address a supply disruption and gaps in domestic production and enrichment. The Company has submitted proposals in response to each of the November 28, 2023 and January 9, 2024 RFPs, and expects to submit a proposal in response to the June 27, 2024 RFP with the goal of expanding production capability at the Piketon facility, subject to availability of funding and/or off-take commitments. We understand that the DOE plans to award multiple indefinite delivery-indefinite quantity contracts to one or more successful bidders, after which one or more awardees would compete for individual task orders. The total to be awarded under the RFPs is $3.4 billion with a minimum of $2.0 million for each award, subject to further appropriations. Although we believe that we are well positioned, there is no assurance that we will be awarded a contract under any of the RFPs and, if awarded, the nature, timing and amount of the task orders that may be issued under an award is uncertain.

Current wording

The DOE continues to pursue the availability of HALEU for the ARDP and for the advanced reactor market in general. The DOE issued RFPs for deconversion of HALEU into different forms needed to fabricate fuels used by various advanced reactor developers and the production of HALEU on November 28, 2023 and January 9, 2024, respectively. On June 27, 2024, the DOE issued an RFP focusing on the domestic production of LEU to ensure the availability of domestically enriched uranium in a quantity that would be sufficient to address a supply disruption and gaps in domestic production and enrichment. The Company submitted proposals in response to each of these RFPs, with the goal of expanding production capability at the Piketon facility, subject to availability of funding and/or off-take commitments. The DOE plans to award multiple indefinite delivery-indefinite quantity contracts to the successful bidders, after which the awardees will compete for individual task orders. The total to be awarded under the RFPs is $3.4 billion with a minimum of $2.0 million for each award, subject to further appropriations.

Previous wording

The war in Ukraine (along with the recently enacted Import Ban Act, which had been contemplated by the Congress for more than a year) has contributed to a significant increase in market prices for enrichment and prompted calls for public and private investment in new, domestic uranium enrichment capacity not only for HALEU production, but also for LEU production to support the existing fleet of reactors. As a result, coupled with competing for an award under the January 9, 2024 RFP, Centrus is exploring the opportunity to deploy LEU enrichment alongside HALEU enrichment to meet a range of commercial and U.S. government requirements, which would bring cost synergies while increasing revenue opportunities. Our ability to deploy LEU and/or HALEU enrichment, and the timing, sequencing, and scale of those capabilities, is subject to the availability of funding (through outstanding DOE RFPs and other sources) and off-take commitments.

Current wording

The war in Ukraine, along with the recently enacted Import Ban Act, which had been contemplated by Congress for more than a year, has contributed to a significant increase in market prices for enrichment and prompted calls for public and private investment in new, domestic uranium enrichment capacity not only for HALEU production, but also for LEU production to support the existing fleet of reactors. As a result, coupled with the Company’s award for HALEU production and competing for an award under the June 27, 2024 RFP for LEU production, Centrus is exploring the opportunity to deploy LEU enrichment alongside HALEU enrichment to meet a range of commercial and U.S. government requirements, which would bring cost synergies while increasing revenue opportunities. Our ability to deploy LEU and/or HALEU enrichment, and the timing, sequencing, and scale of those capabilities, is subject to the availability of funding (through DOE awards, outstanding DOE RFP and other sources) and off-take commitments.

Previous wording

The Energy Act of 2020, which was signed into law in December 2020, requires the DOE to establish a program to support the availability of HALEU for civilian domestic research, development, demonstration, and commercial use. The Energy Act also reauthorized DOE nuclear energy research, development, demonstration, and commercial application activities, including advanced fuel, research and development for advanced reactors, used fuel technologies, and integration of nuclear energy systems for both existing plants and advanced nuclear concepts. It also authorized the funding of an ARDP which was launched by the DOE in May 2020. There are a number of advanced reactors under development that would use HALEU. Nine of the ten advanced reactor designs selected by the DOE for its ARDP will require HALEU. Various agencies of the U.S. government, including the U.S. Department of Defense, the Defense Advanced Research Projects Agency, and the DOE are building small modular reactors and microreactors, which demonstrates the focus on both the development of microreactors and HALEU. We believe our investments in advanced enrichment technology and our progress in demonstrating HALEU production will position the Company to meet the needs of government and commercial customers in the future as they deploy advanced reactors and next generation fuels and also offers potential cost synergies for a return to LEU production. Further, the Company is taking steps to pursue, including through the exploration of strategic partnerships, technologies that are complementary to HALEU production and critical to the HALEU ecosystem, including deconversion and fuel fabrication.

Current wording

The Energy Act of 2020 (“The Energy Act”) required the DOE to establish a program to support the availability of HALEU for civilian domestic research, development, demonstration, and commercial use. The Energy Act also reauthorized DOE nuclear energy research, development, demonstration, and commercial application activities, including advanced fuel, research and development for advanced reactors, used fuel technologies, and integration of nuclear energy systems for both existing plants and advanced nuclear concepts. It also authorized the funding of an ARDP which was launched by the DOE in May 2020. There are a number of advanced reactors under development that would use HALEU. Nine of the ten advanced reactor designs initially selected by the DOE for its ARDP will require HALEU. Various agencies of the U.S. government, including the U.S. Department of Defense, the Defense Advanced Research Projects Agency, and the DOE are building small modular reactors and microreactors, which demonstrates the focus on both the development of microreactors and HALEU. We believe our investments in advanced enrichment technology and our progress in demonstrating HALEU production will position the Company to meet the needs of government and commercial customers in the future as they deploy advanced reactors and next generation fuels and also offers potential cost synergies for a return to LEU production. Further, the Company is taking steps to pursue, including through the exploration of strategic partnerships, technologies that are complementary to HALEU production and critical to the HALEU ecosystem, including deconversion and fuel fabrication.

Previous wording

While the monthly price indicators have increased for several years, the uranium enrichment segment of the nuclear fuel market remains oversupplied and faces uncertainty about future demand for nuclear power generation. However, without Russian supply, the global market would be undersupplied for uranium enrichment. Recent data from the International Trade Commission shows a significant increase of the importation of enriched uranium into the U.S. from China in 2023 and 2024. If this trend continues, it will likely have significant changes in the competitive landscape that will affect pricing trends and customer spending patterns and create uncertainty and likely have a negative impact on our business. To address these changes, we have taken steps to adjust our cost structure; we may seek further adjustments to our cost structure and operations and evaluate opportunities to grow our business organically or through acquisitions and other strategic transactions.

Current wording

While the monthly price indicators have increased for several years, the uranium enrichment segment of the nuclear fuel market remains oversupplied and faces uncertainty about future demand for nuclear power generation. However, without Russian supply, the global market would be undersupplied for uranium enrichment. Recent data from the International Trade Commission shows a significant increase in the importation of enriched uranium into the U.S. from China in 2023 and 2024. If this trend continues, it will likely have significant changes in the competitive landscape that will affect pricing trends and customer spending patterns and create uncertainty and likely have a negative impact on our business. To address these changes, we have taken steps to adjust our cost structure; we may seek further adjustments to our cost structure and operations and evaluate opportunities to grow our business organically or through acquisitions and other strategic transactions.

Previous wording

According to the WNA, as of June 2024, there were 60 reactors under construction worldwide, approximately one-half of which are in China. The United States, with over 90 operating reactors, remains the world’s largest market for nuclear fuel. The nuclear industry in the United States, Japan, and Europe faces headwinds as well as opportunities. In the United States, the industry has been under pressure from the expansion of subsidized renewable energy as well as relatively low-cost natural gas resources in recent years, although natural gas prices in the U.S. electricity sector tripled between 2020 and 2022 according to data from the U.S. Energy Information Administration (“EIA”). Nine U.S. reactors have prematurely shut down in the past ten years, and others could shut down in the next few years. At the same time, construction was completed and commercial operations began in the second quarter of 2024 on one large reactor and one formerly shutdown reactor has plans to restart. The DOE recently released a report outlining a pathway to deployment of approximately 200 gigawatts of additional capacity by 2050, which would triple the nuclear energy capacity in the United States.

Current wording

According to the WNA, as of September 2024, there were 67 reactors under construction worldwide, approximately one-half of which are in China. The United States, with over 90 operating reactors, remains the world’s largest market for nuclear fuel. The nuclear industry in the United States, Japan, and Europe faces headwinds as well as opportunities. In the United States, the industry has been under pressure from the expansion of subsidized renewable energy as well as relatively low-cost natural gas resources in recent years, although natural gas prices in the U.S. electricity sector tripled between 2020 and 2022 according to data from the U.S. Energy Information Administration (“EIA”). Nine U.S. reactors have prematurely shut down in the past ten years, and others could shut down in the next few years. At the same time, construction was completed and commercial operations began in the second quarter of 2024 on one large reactor and one formerly shutdown reactor has plans to restart. The DOE recently released a report outlining a pathway to deployment of approximately 200 gigawatts of additional capacity by 2050, which would triple the nuclear energy capacity in the United States.

Previous wording

The IEA projects that global nuclear energy generation will grow substantially in the next three decades. In the IEA’s 2023 World Energy Outlook, nuclear generation is forecasted to grow by 25% by 2030 and 45% by 2040 under the “Stated Policies” scenario. In the “Net Zero Emissions by 2050” scenario, nuclear generation would grow by 47% by 2030 and more than double by 2040.

Current wording

The IEA projects that global nuclear energy generation will grow substantially in the next three decades. In the IEA’s 2024 World Energy Outlook, nuclear generation is forecasted to grow by 18% by 2030 and 47% by 2040 under the “Stated Policies” scenario. In the “Net Zero Emissions by 2050” scenario, nuclear generation would grow by 41% by 2030 and more than double by 2040.

Previous wording

The war in Ukraine has escalated tensions between Russia and the international community. As a result, the United States and other countries have imposed, including through the U.S.’s enactment of the Import Ban Act discussed below, and may continue imposing, additional sanctions and export controls against certain Russian products, services, organizations, and/or individuals. Such additional restrictions could affect our ability to purchase, take delivery of, transport, or re-sell Russian uranium enrichment, engage in transactions with TENEX, or implement the TENEX Supply Contract, which would have a negative material impact on our business. Further, sanctions by the United States, Russia or other countries may impact our ability and cost to transport, export, import, take delivery, or make payments related to the LEU we purchase and may require us to increase purchases from non-Russian sources to the extent available. For example, due to restrictions imposed by Canada on the ability of Canadian persons and entities to provide ocean transportation services to Russia, a permit is required for our shipper, a Canadian company, to transport the LEU that we procure under the TENEX Supply Contract to the United States. A Canadian permit issued to our shipper was extended to March 2027, but for so long as the sanctions remain in place, the shipper will require further extensions beyond the current validity of the permit for continued shipments of LEU imports. In addition, on June 24, 2024, members of the EU agreed to issue a 14th sanctions package, primarily targeting the export of Russian liquid natural gas and other services. The sanctions package includes restrictions on the transportation of empty containers to Russia. Since we supply empty cylinders under the TENEX Supply Contract that are filled and returned to us, this new sanctions package may impact the transportation of LEU from Russia to the extent such export activity has a nexus to a EU member state (e.g., through a ship’s flag, nationalities of crew members, etc.). This new sanctions package does not impact our near term deliveries. We are working with our shipper to determine the extent of the impact of the new sanctions on the transportation of LEU from Russia which may ultimately require our shipper to obtain special authorizations for the shipment of empty containers to Russia if a nexus with a EU member state exists.

Current wording

The war in Ukraine has escalated tensions between Russia and the international community. As a result, the United States and other countries have imposed, including through the U.S.’s enactment of the Import Ban Act discussed below, and may continue imposing, additional sanctions and export controls against certain Russian products, services, organizations, and/or individuals. Such additional restrictions could affect our ability to purchase, take delivery of, transport, or re-sell Russian uranium enrichment, engage in transactions with TENEX, or implement the TENEX Supply Contract, which would have a negative material impact on our business. Further, sanctions by the United States, Russia or other countries may impact our ability and cost to transport, export, import, take delivery, or make payments related to the LEU we purchase and may require us to increase purchases from non-Russian sources to the extent available. For example, due to restrictions imposed by Canada on the ability of Canadian persons and entities to provide ocean transportation services to Russia, a permit is required for our shipper, a Canadian company, to transport the LEU that we procure under the TENEX Supply Contract to the United States. A Canadian permit issued to our shipper was extended to March 2027, but for so long as the sanctions remain in place, the shipper will require further extensions beyond the current validity of the permit for continued shipments of LEU imports. In addition, on June 24, 2024, members of the EU agreed to issue a 14th sanctions package, primarily targeting the export of Russian liquid natural gas and other services. The sanctions package includes restrictions on the transportation of empty containers to Russia. Since we supply empty cylinders under the TENEX Supply Contract that are filled and returned to us, this new sanctions package may impact the transportation of LEU from Russia to the extent such export activity has a nexus to an EU member state (e.g., through a ship’s flag, nationalities of crew members, etc.). This new sanctions package does not impact our near term deliveries. We are working with our shipper to determine the extent of the impact of the new sanctions on the transportation of LEU from Russia which may ultimately require our shipper to obtain special authorizations for the shipment of empty containers to Russia if a nexus with an EU member state exists. The U.S. and Canadian governments have indicated that the EU agrees that this round of sanctions should not capture these containers and are working with the EU to clarify.

Previous wording

In response to the war in Ukraine, there were proposals to ban imports of uranium products that could cut off or reduce our ability to import LEU in one or more years under the TENEX Supply Contract. In fact, on May 13, 2024, the Import Ban Act was enacted. This new law bans imports of LEU from Russia into the U.S. beginning ninety (90) days after the date of enactment, subject to issuance of waivers by the DOE. In accordance with the instructions published by the DOE on May 24, 2024, the Company filed its first waiver request application on May 27, 2024, to permit the importation of LEU already committed for delivery to its U.S. customers in 2024 through 2027. On July 18, 2024, the DOE issued the Company a waiver allowing it to import LEU from Russia for deliveries already committed by the Company to its U.S. customers in years 2024 and 2025. For the years 2026 and 2027, the DOE deferred its decision to an unspecified date closer in time to the deliveries. On June 7, 2024, the Company filed a second waiver request application to allow for importation of LEU from Russia for processing and reexport to the Company's foreign customers and is awaiting DOE's determination. The Company plans to file a third waiver request application to allow for importation of LEU from Russia in 2026 and 2027 for use in the U.S. that have yet to be committed to our customers. The U.S. ban on imports of Russian LEU, without the grant of additional timely waivers, would have a negative material impact on our business. Through 2027, well over one-half of the LEU that we expect to deliver to customers was sourced under the TENEX Supply Contract. While we have other sources of supply, they are not sufficient to replace the TENEX supply. It is uncertain whether any waiver would be granted in response to our pending or any potential future applications and, if granted, whether any waiver would be granted in a timely manner.

Current wording

In response to the war in Ukraine, there were proposals to ban imports of uranium products that could cut off or reduce our ability to import LEU in one or more years under the TENEX Supply Contract. In fact, on May 13, 2024, the Import Ban Act was enacted. This new law bans imports of LEU from Russia into the U.S. beginning August 11, 2024, subject to issuance of waivers by the DOE. In accordance with the instructions published by the DOE on May 24, 2024, the Company filed its first waiver request application on May 27, 2024, to permit the importation of LEU already committed for delivery to its U.S. customers in 2024 through 2027. On July 18, 2024, the DOE issued the Company a waiver allowing it to import LEU from Russia for deliveries already committed by the Company to its U.S. customers in years 2024 and 2025. For the years 2026 and 2027, the DOE deferred its decision to an unspecified date closer in time to the deliveries. On June 7, 2024, the Company filed a second waiver request application to allow for importation of LEU from Russia for processing and reexport to the Company's foreign customers and is awaiting DOE's determination. The Company plans to file a third waiver request application to allow for importation of LEU from Russia in 2026 and 2027 for use in the U.S. that have yet to be committed to our customers. The U.S. ban on imports of Russian LEU, without the grant of additional timely waivers, would have a negative material impact on our business. Through 2027, well over one-half of the LEU that we expect to deliver to customers was sourced under the TENEX Supply Contract. While we have other sources of supply, they are not sufficient to replace the TENEX supply. It is uncertain whether any waiver would be granted in response to our pending or any potential future applications and, if granted, whether any waiver would be granted in a timely manner.

Previous wording

Our revenues, operating results, and cash flows can fluctuate significantly from quarter to quarter and year to year. Our LEU segment backlog consists primarily of long-term, fixed commitment contracts, and we have visibility on a significant portion of our revenue for 2024-2027.

Current wording

Our revenue, operating results, and cash flows can fluctuate significantly from quarter to quarter and year to year. Our LEU segment backlog consists primarily of long-term, fixed commitment contracts and contingent sales commitments, and we have visibility on a significant portion of our revenue for 2024-2027.

Previous wording

The Company’s backlog is $2.7 billion and $2.0 billion as of June 30, 2024 and December 31, 2023, respectively, and extends to 2040. Backlog is recognized as revenue in future periods as work is performed or deliveries of SWU and uranium are made.

Current wording

The Company’s backlog is $3.8 billion and $2.0 billion as of September 30, 2024 and December 31, 2023, respectively, and extends to 2040. Backlog is recognized as revenue in future periods as work is performed or deliveries of SWU and uranium are made.

Previous wording

Our backlog in the LEU segment extends to 2040. As of June 30, 2024 and December 31, 2023, our backlog is approximately $1.7 billion and $1.0 billion, respectively. The backlog is the estimated aggregate dollar amount of revenue for future SWU and uranium deliveries primarily under medium and long-term contracts with fixed commitments, and includes approximately $0.3 billion of deferred revenue and advances from customers as of June 30, 2024, whereby customers have made advance payments to be applied against future deliveries. No orders in our backlog are considered at risk related to customer operations. However, these medium and long-term contracts are subject to significant risks and uncertainties, including existing import laws and restrictions such as the RSA, which limits imports of Russian uranium products into the United States and applies to our sales using material procured under the TENEX Supply Contract, as well as the potential for additional sanctions and other restrictions affecting the Company or its suppliers, in response to the evolving situation regarding the war in Ukraine.

Current wording

Our backlog in the LEU segment extends to 2040. As of September 30, 2024 and December 31, 2023, our backlog is approximately $2.8 billion and $1.0 billion, respectively. The backlog is the estimated aggregate dollar amount of revenue for future SWU and uranium deliveries primarily under medium and long-term contracts with fixed commitments and approximately $2.0 billion in contingent LEU sales commitments, subject to entering into definitive agreements, in support of potential construction of LEU production capacity at the Piketon, Ohio facility. The contingent sales commitments depend on our ability to secure substantial public and private investment necessary to build new enrichment capacity. The LEU segment backlog also includes approximately $0.2 billion of deferred revenue and advances from customers as of September 30, 2024, whereby customers have made advance payments to be applied against future deliveries. No orders in our backlog are considered at risk related to customer operations. However, these medium and long-term contracts are subject to significant risks and uncertainties, including existing import laws and restrictions such as the RSA, which limits imports of Russian uranium products into the United States and applies to our sales using material procured under the TENEX Supply Contract, as well as the potential for additional sanctions and other restrictions affecting the Company or its suppliers, in response to the evolving situation regarding the war in Ukraine.

Previous wording

Our backlog in the Technical Solutions segment extends to 2033. As of both June 30, 2024 and December 31, 2023, our backlog is approximately $1.0 billion. Our backlog includes both funded amounts (services for which funding has been both authorized and appropriated by the customer), unfunded amounts (services for which funding has not been appropriated), and unexercised options. If any of our contracts were to be terminated, our remaining backlog would be reduced by the expected value of the cancelled contracts.

Current wording

Our backlog in the Technical Solutions segment extends to 2033. As of September 30, 2024 and December 31, 2023, our backlog is approximately $0.9 billion and $1.0 billion, respectively. Our backlog includes both funded amounts (services for which funding has been both authorized and appropriated by the customer), unfunded amounts (services for which funding has not been appropriated), and unexercised options in our contracts. If any of our contracts were to be terminated or options not being exercised, our remaining backlog would be reduced by the expected value of the cancelled contracts or forgone options.

Previous wording

Revenue from our LEU segment accounted for approximately 90% and 83% of our total revenue for the three and six months ended June 30, 2024, respectively. The majority of our customers are domestic and international utilities that operate nuclear power plants, with international sales constituting approximately 41% of revenue from our LEU segment since 2022. Our agreements with electric utilities are primarily medium and long-term fixed-commitment contracts under which our customers are obligated to purchase a specified quantity of the SWU component of LEU from us. Contracts where we sell both the SWU and natural uranium hexafluoride components of LEU to utilities or where we sell natural uranium hexafluoride to utilities and other nuclear fuel related companies are generally shorter-term, fixed-commitment contracts. Individual customer orders for the SWU component of LEU fulfilled in the six months ended June 30, 2024 averaged approximately $7.7 million per order. As a result, a relatively small shift in the timing of customer orders for LEU may cause significant variability in our operating results period over period.

Current wording

Revenue from our LEU segment accounted for approximately 60% and 79% of our total revenue for the three and nine months ended September 30, 2024, respectively. The majority of our customers are domestic and international utilities that operate nuclear power plants, with international sales constituting approximately 44% of revenue from our LEU segment since 2022. Our agreements with electric utilities are primarily medium and long-term fixed-commitment contracts under which our customers are obligated to purchase a specified quantity of the SWU component of LEU from us. Contracts where we sell both the SWU and natural uranium hexafluoride components of LEU to utilities or where we sell natural uranium hexafluoride to utilities and other nuclear fuel related companies are generally shorter-term, fixed-commitment contracts. Individual customer orders for the SWU component of LEU fulfilled in the nine months ended September 30, 2024 averaged approximately $9.0 million per order. As a result, a relatively small shift in the timing of customer orders for LEU may cause significant variability in our operating results period over period.

Previous wording

Revenue from the LEU segment was $169.6 million and $87.6 million for the three months ended June 30, 2024 and 2023, respectively, an increase of $82.0 million (or 94%). SWU revenue increased by $91.6 million as a result of a 147% increase in the volume of SWU sold and an 18% increase in the average price of SWU sold. Uranium revenue decreased by $9.6 million as a result of a 40% decrease in the volume of uranium sold, partially offset by a 26% increase in the average price of uranium sold.

Current wording

Revenue from the LEU segment was $34.8 million and $40.5 million for the three months ended September 30, 2024 and 2023, respectively, a decrease of $5.7 million (or 14%). SWU revenue decreased by $5.7 million as a result of a 71% decrease in the volume of SWU sold, partially offset by a 194% increase in the average price of SWU sold.

Previous wording

Revenue from the Technical Solutions segment was $19.4 million and $10.8 million for the three months ended June 30, 2024 and 2023, respectively, an increase of $8.6 million (or 80%). Revenue generated by the HALEU Operation Contract increased by $8.4 million due to the transition from Phase 1 to Phase 2 in late 2023. The remaining increase was attributable to other contracts.

Current wording

Revenue from the Technical Solutions segment was $22.9 million and $10.8 million for the three months ended September 30, 2024 and 2023, respectively, an increase of $12.1 million (or 112%). Revenue generated by the HALEU Operation Contract increased by $12.7 million due to the transition from Phase 1 to Phase 2 in late 2023. The remaining change was attributable to other contracts.

Previous wording

Cost of sales for the LEU segment was $159.7 million and $95.7 million for the six months ended June 30, 2024 and 2023, respectively, an increase of $64.0 million (or 67%). SWU costs increased as a result of a 63% increase in the average unit cost of SWU sold and a 34% increase in the volume of SWU sold. Uranium costs decreased as a result of a 40% decrease in the volume of uranium sold, partially offset by a 30% increase in the average unit cost of uranium sold. Cost of sales for the six months ended June 30, 2024 and 2023, included $1.8 million and $2.9 million, respectively, for the revaluation of inventory loans.

Current wording

Cost of sales for the LEU segment was $29.6 million and $30.4 million for the three months ended September 30, 2024 and 2023, respectively, a decrease of $0.8 million (or 3%). SWU costs decreased as a result of a 71% decrease in the volume of SWU sold, partially offset by a 229% increase in the average unit cost of SWU sold. Cost of sales for the three months ended September 30, 2024 and 2023, included $1.9 million and $0.6 million, respectively, for the revaluation of inventory loans.

Previous wording

Cost of sales for the Technical Solutions segment was $15.9 million and $9.6 million for the three months ended June 30, 2024 and 2023, respectively, an increase of $6.3 million (or 66%). Costs incurred for the HALEU Operation Contract increased by $6.3 million due to the transition from Phase 1 to Phase 2 in late 2023. For details on HALEU Operation Contract accounting, refer to Technical Solutions Segment above.

Current wording

Cost of sales for the Technical Solutions segment was $19.2 million and $9.6 million for the three months ended September 30, 2024 and 2023, respectively, an increase of $9.6 million (or 100%). Costs incurred for the HALEU Operation Contract increased by $8.8 million due to the transition from Phase 1 to Phase 2 in late 2023. The remaining increase was attributable to other contracts. For details on HALEU Operation Contract accounting, refer to Technical Solutions Segment above.

Previous wording

Gross profit for the LEU segment was $33.0 million and $26.8 million for the three months ended June 30, 2024 and 2023, respectively, an increase of $6.2 million (or 23%). The increase for the three months ended June 30, 2024 was due primarily to the specific contract and pricing mix of SWU contracts and the timing of their deliveries quarter over quarter. This was reflected by an increase in the volume of SWU sold, partially offset by a decrease in the average profit margin per SWU.

Current wording

Gross profit for the LEU segment was $5.2 million and $10.1 million for the three months ended September 30, 2024 and 2023, respectively, a decrease of $4.9 million (or 49%). The decrease for the three months ended September 30, 2024 was due primarily to the specific contract and pricing mix of SWU contracts and the timing of their deliveries quarter over quarter. This was reflected by a decrease in the volume of SWU sold, partially offset by an increase in the average profit margin per SWU.

Previous wording

Gross profit for the Technical Solutions segment was $3.5 million and $1.2 million for the three months ended June 30, 2024 and 2023, respectively, an increase of $2.3 million (or 192%). The increase was primarily attributable to the transition from Phase 1 to Phase 2 of the HALEU Operation Contract in late 2023.

Current wording

Gross profit for the Technical Solutions segment was $3.7 million and $1.2 million for the three months ended September 30, 2024 and 2023, respectively, an increase of $2.5 million (or 208%). The increase was primarily attributable to the transition from Phase 1 to Phase 2 of the HALEU Operation Contract in late 2023.

Previous wording

Revenue from the LEU segment was $193.2 million and $146.4 million for the six months ended June 30, 2024 and 2023, respectively, an increase of $46.8 million (or 32%). SWU revenue increased by $56.4 million as a result of a 34% increase in the volume of SWU sold and a 15% increase in the average price of SWU sold. Uranium revenue decreased by $9.6 million as a result of a 40% decrease in the volume of uranium sold, partially offset by a 26% increase in the average price of uranium sold.

Current wording

Revenue from the LEU segment was $228.0 million and $186.9 million for the nine months ended September 30, 2024 and 2023, respectively, an increase of $41.1 million (or 22%). SWU revenue increased by $50.7 million as a result of a 33% increase in the average price of SWU sold and a 2% increase in the volume of SWU sold. Uranium revenue decreased by $9.6 million as a result of a 40% decrease in the volume of uranium sold, partially offset by a 26% increase in the average price of uranium sold.

Previous wording

Revenue from the Technical Solutions segment was $39.5 million and $18.9 million for the six months ended June 30, 2024 and 2023, respectively, an increase of $20.6 million (or 109%). Revenue generated by the HALEU Operation Contract increased by $20.4 million due to the transition from Phase 1 to Phase 2 in late 2023. The remaining increase was attributable to other contracts.

Current wording

Revenue from the Technical Solutions segment was $62.4 million and $29.7 million for the nine months ended September 30, 2024 and 2023, respectively, an increase of $32.7 million (or 110%). Revenue generated by the HALEU Operation Contract increased by $33.1 million due to the transition from Phase 1 to Phase 2 in late 2023. The remaining change was attributable to other contracts.

Previous wording

Cost of sales for the LEU segment was $136.6 million and $60.8 million for the three months ended June 30, 2024 and 2023, respectively, an increase of $75.8 million (or 125%). SWU costs increased as a result of a 70% increase in the average unit cost of SWU sold and a 147% increase in the volume of SWU sold. Uranium costs decreased as a result of a 40% decrease in the volume of uranium sold, partially offset by a 27% increase in the average unit cost of uranium sold. Cost of sales for the three months ended June 30, 2024 and 2023, respectively, included $1.5 million and $0.8 million for the revaluation of inventory loans.

Current wording

Cost of sales for the LEU segment was $189.3 million and $126.1 million for the nine months ended September 30, 2024 and 2023, respectively, an increase of $63.2 million (or 50%). SWU costs increased as a result of a 75% increase in the average unit cost of SWU sold and a 2% increase in the volume of SWU sold. Uranium costs decreased as a result of a 40% decrease in the volume of uranium sold, partially offset by a 31% increase in the average unit cost of uranium sold. Cost of sales for the nine months ended September 30, 2024 and 2023, included $3.7 million and $3.5 million, respectively, for the revaluation of inventory loans.

Previous wording

Cost of sales for the Technical Solutions segment was $32.2 million and $18.6 million for the six months ended June 30, 2024 and 2023, respectively, an increase of $13.6 million (or 73%). Costs incurred for the HALEU Operation Contract increased by $13.0 million due to the transition from Phase 1 to Phase 2 in late 2023. For details on HALEU Operation Contract accounting, refer to Technical Solutions Segment above. The remaining increase was attributable to costs incurred under other contracts.

Current wording

Cost of sales for the Technical Solutions segment was $51.4 million and $28.2 million for the nine months ended September 30, 2024 and 2023, respectively, an increase of $23.2 million (or 82%). Costs incurred for the HALEU Operation Contract increased by $21.8 million due to the transition from Phase 1 to Phase 2 in late 2023. For details on HALEU Operation Contract accounting, refer to Technical Solutions Segment above. The remaining increase was attributable to costs incurred under other contracts.

Previous wording

Gross profit for the LEU segment was $33.5 million and $50.7 million for the six months ended June 30, 2024 and 2023, respectively, a decrease of $17.2 million (or 34%). The decrease for the six months ended June 30, 2024 was due primarily to the decrease in margin on SWU sales due to the specific contract and pricing mix of SWU contracts and the timing of their deliveries period over period. This was reflected by a decrease in the average profit margin per SWU, partially offset by an increase in the volume of SWU sold.

Current wording

Gross profit for the LEU segment was $38.7 million and $60.8 million for the nine months ended September 30, 2024 and 2023, respectively, a decrease of $22.1 million (or 36%). The decrease for the nine months ended September 30, 2024 was due primarily to the decrease in margin on SWU sales due to the specific contract and pricing mix of SWU contracts and the timing of their deliveries period over period. This was reflected by a decrease in the average profit margin per SWU, partially offset by an increase in the volume of SWU sold.

Previous wording

Gross profit for the Technical Solutions segment was $7.3 million and $0.3 million for the six months ended June 30, 2024 and 2023, respectively, an increase of $7.0 million (or 2,333%). The increase was primarily attributable to the transition from Phase 1 to Phase 2 of the HALEU Operation Contract in late 2023.

Current wording

Gross profit for the Technical Solutions segment was $11.0 million and $1.5 million for the nine months ended September 30, 2024 and 2023, respectively, an increase of $9.5 million (or 633%). The increase was primarily attributable to the transition from Phase 1 to Phase 2 of the HALEU Operation Contract in late 2023.

Previous wording

Amortization of intangible assets was $3.7 million and $1.7 million for the three months ended June 30, 2024 and 2023, respectively, an increase of $2.0 million (or 118%). Amortization expense for the intangible asset related to the September 2014 sales backlog is a function of SWU sales volume under that backlog, and amortization expense for the intangible asset related to customer relationships is amortized on a straight-line basis.

Current wording

Amortization of intangible assets was $2.4 million and $1.4 million for the three months ended September 30, 2024 and 2023, respectively, an increase of $1.0 million (or 71%). Amortization expense for the intangible asset related to the September 2014 sales backlog is a function of SWU sales volume under that backlog, and amortization expense for the intangible asset related to customer relationships is amortized on a straight-line basis.

Previous wording

Nonoperating components of net periodic benefit loss (income) netted to income of $16.2 million and a loss of $0.7 million for the six months ended June 30, 2024 and 2023, respectively, a change of $16.9 million (or 2,414%). The change is primarily due to the $16.6 million remeasurement gain driven by the partial annuitization of two pension plans in May 2024. The remaining change is primarily related to the expected return on plan assets, partially offset by interest cost as the discounted present value of benefit obligations nears payment, as described in Note 8, Pension and Postretirement Health and Life Benefits of the Consolidated Financial Statements.

Current wording

Nonoperating components of net periodic benefit loss (income) netted to a loss of $0.8 million and income of $0.6 million for the three months ended September 30, 2024 and 2023, respectively, a change of $1.4 million (or 233%). Nonoperating components of net periodic benefit income consist primarily of the expected return on plan assets and the remeasurement related to lump sum payouts, partially offset by interest cost as the discounted present value of benefit obligations nears payment, as described in Note 8, Pension and Postretirement Health and Life Benefits of the Consolidated Financial Statements.

Previous wording

Income tax expense was $8.9 million and $3.3 million for the three months ended June 30, 2024 and 2023, respectively, an increase of $5.6 million (or 170%). Income tax expense for both periods resulted from applying the annual effective tax rate to the quarterly income from continuing operations adjusted for discrete items. For more information about the valuation allowance, see Note 14, Income Taxes, in our Consolidated Financial Statements on our Annual Report on Form 10-K for the year ended December 31, 2023.

Current wording

Income tax benefit was $0.9 million and $7.6 million for the three months ended September 30, 2024 and 2023, respectively, a decrease of $6.7 million (or 88%). Income tax benefit for both periods resulted from applying the annual effective tax rate to the quarterly income from continuing operations adjusted for discrete items. In addition, a decrease to the federal tax valuation allowance of $7.7 million was recorded during the three months ended September 30, 2023. For more information about the valuation allowance, see Note 14, Income Taxes, in our Consolidated Financial Statements on our Annual Report on Form 10-K for the year ended December 31, 2023.

Previous wording

Advanced technology costs were $9.8 million and $7.5 million for the six months ended June 30, 2024 and 2023, respectively, an increase of $2.3 million (or 31%). Advanced technology costs consist of American Centrifuge work and related expenses that are outside of our customer contracts in the Technical Solutions segment, including bid and proposal activities and work to improve our centrifuge technology.

Current wording

Advanced technology costs were $13.9 million and $10.8 million for the nine months ended September 30, 2024 and 2023, respectively, an increase of $3.1 million (or 29%). Advanced technology costs consist of American Centrifuge work and related expenses that are outside of our customer contracts in the Technical Solutions segment, including bid and proposal activities and work to improve our centrifuge manufacturing capability.

Previous wording

Selling, general and administrative costs were $15.7 million and $18.1 million for the six months ended June 30, 2024 and 2023, respectively, a decrease of $2.4 million (or 13%). This decrease was due primarily to a decrease in employee-related expenses, including equity related compensation.

Current wording

Selling, general and administrative costs were $25.7 million and $27.5 million for the nine months ended September 30, 2024 and 2023, respectively, a decrease of $1.8 million (or 7%). This decrease was due primarily to a decrease in employee-related expenses, including equity related compensation.

Previous wording

Amortization of intangible assets was $4.8 million and $2.8 million in the six months ended June 30, 2024 and 2023, respectively, an increase of $2.0 million (or 71%). Amortization expense for the intangible asset related to the September 2014 backlog is a function of SWU sales volume under that backlog, and amortization expense for the intangible asset related to customer relationships is amortized on a straight-line basis.

Current wording

Amortization of intangible assets was $7.2 million and $4.2 million in the nine months ended September 30, 2024 and 2023, respectively, an increase of $3.0 million (or 71%). Amortization expense for the intangible asset related to the September 2014 backlog is a function of SWU sales volume under that backlog, and amortization expense for the intangible asset related to customer relationships is amortized on a straight-line basis.

Previous wording

Nonoperating components of net periodic benefit loss (income) netted to income of $16.3 million and a loss of $0.4 million for the three months ended June 30, 2024 and 2023, respectively, a change of $16.7 million (or 4,175%). The change is primarily due to the $16.6 million remeasurement gain driven by the partial annuitization of two pension plans in May 2024. The remaining change is primarily related to the expected return on plan assets, partially offset by interest cost as the discounted present value of benefit obligations nears payment, as described in Note 8, Pension and Postretirement Health and Life Benefits of the Consolidated Financial Statements.

Current wording

Nonoperating components of net periodic benefit loss (income) netted to income of $15.4 million and a loss of $0.1 million for the nine months ended September 30, 2024 and 2023, respectively, a change of $15.5 million (or 15,500%). The change is primarily due to the $16.8 million remeasurement gain driven by the partial annuitization of two pension plans in May 2024. The remaining change is primarily related to the expected return on plan assets, partially offset by interest cost as the discounted present value of benefit obligations nears payment, as described in Note 8, Pension and Postretirement Health and Life Benefits of the Consolidated Financial Statements.

Previous wording

Income tax expense was $6.6 million and $5.7 million in the six months ended June 30, 2024 and 2023, respectively, a decrease of $0.9 million (or 16%). Income tax expense for both periods resulted from applying the annual effective tax rate to the quarterly income from continuing operations adjusted for discrete items. For more information about the valuation allowance, see Note 14, Income Taxes, in our Consolidated Financial Statements on Form 10-K for the year ended December 31, 2023.

Current wording

Income tax expense was $5.7 million and income tax benefit was $1.9 million in the nine months ended September 30, 2024 and 2023, respectively, a change of $7.6 million (or 400%). Income tax expense (benefit) for both periods resulted from applying the annual effective tax rate to the quarterly income from continuing operations adjusted for discrete items. In addition, a decrease to the federal tax valuation allowance of $7.7 million was recorded during the nine months ended September 30, 2023. For more information about the valuation allowance, see Note 14, Income Taxes, in our Consolidated Financial Statements on Form 10-K for the year ended December 31, 2023.

Previous wording

Net income was $24.5 million and $19.9 million in the six months ended June 30, 2024 and 2023, respectively, an increase of $4.6 million (or 23%). The increase was primarily attributable to an increase of $16.9 million in nonoperating components of net periodic benefit income, an increase of $7.0 million in gross profit from the Technical Solutions segment, and a decrease of $2.4 million in selling, general, and administrative expense, partially offset by a decrease of $17.2 million in gross profit in the LEU segment, an increase of $2.3 million in advanced technology costs, and an increase of $2.0 million in the amortization of intangible assets.

Current wording

Net income was $19.5 million and $28.1 million in the nine months ended September 30, 2024 and 2023, respectively, a decrease of $8.6 million (or 31%). The decrease was primarily attributable to a decrease of $22.1 million in gross profit in the LEU segment and an increase in income tax expense of $7.6 million, partially offset by an increase of $15.5 million in nonoperating components of net periodic benefit income and an increase of $9.5 million in gross profit from the Technical Solutions segment.

Previous wording

As of June 30, 2024, the Company had a consolidated cash and cash equivalents balance of $227.0 million. In addition, there was $29.8 million of restricted cash related to three inventory loans, which required a cash deposit into an escrow fund. See Note 3, Cash, Cash Equivalents, and Restricted Cash of the Consolidated Financial Statements. The Company anticipates having adequate liquidity to support our business operations for at least the next 12 months from the date of this Quarterly Report on Form 10-Q. Our view of liquidity is dependent on, among other things, conditions affecting our operations, including market, international trade restrictions, sanctions and other conditions, the impact of the May 2024 enactment of the Import Ban Act and our ability to obtain additional waivers thereunder, the level of expenditures and government funding for our services contracts, and the timing of customer payments. Liquidity requirements for our existing operations are affected primarily by the timing and amount of customer sales and our inventory purchases.

Current wording

As of September 30, 2024, the Company had a consolidated cash and cash equivalents balance of $194.3 million. In addition, there was $29.8 million of restricted cash related to three inventory loans, which required a cash deposit into an escrow fund. See Note 3, Cash, Cash Equivalents, and Restricted Cash of the Consolidated Financial Statements. The Company anticipates having adequate liquidity to support our business operations for at least the next 12 months from the date of this Quarterly Report on Form 10-Q. Our view of liquidity is dependent on, among other things, conditions affecting our operations, including market, international trade restrictions, sanctions and other conditions, the impact of the May 2024 enactment of the Import Ban Act and our ability to obtain additional waivers thereunder, the level of expenditures and government funding for our services contracts, and the timing of customer payments. Liquidity requirements for our existing operations are affected primarily by the timing and amount of customer sales and our inventory purchases.

Previous wording

Capital expenditures of approximately $4.9 million are anticipated over the next 12 months.

Current wording

Capital expenditures of approximately $22.5 million are anticipated over the next 12 months.