Please ensure Javascript is enabled for purposes of website accessibility

USEC Recoils After Loan Falls Through

By Toby Shute – Updated Apr 6, 2017 at 1:27AM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

I hope you didn't roll the dice on this dicey loan, Fool.

In late March, I called out USEC (NYSE:USU) for running some "fluff" PR proclaiming that customers like Exelon (NYSE:EXC) were just itching to take planned uranium fuel production off the enricher's hands. Standing in the way of this rosy future, however, was an uncertain $2 billion loan application with the Department of Energy.

Well, uncertainty has given way to certainty. Unfortunately for USEC investors, the certainty is that USEC will not be receiving the DOE loan. The government said the company had yet to clear "technical and financial hurdles" in rejecting the application Tuesday.

USEC, in turn, announced it will take steps to demobilize its American Centrifuge Plant and explore strategic alternatives. I presume that means a sale to someone like McDermott (NYSE:MDR) subsidiary B&W, or Shaw Group's (NYSE:SGR) buddy Westinghouse Electric. One analyst suggested General Electric (NYSE:GE) as another potential bidder, but I would think GE is rather preoccupied with its global laser enrichment venture.

Interestingly, the only other competitor vying for this DOE money is another Shaw Group collaborator -- France's Areva. At first, you might think the Obama administration would catch some serious heat for picking a company part-owned by the French government over a homegrown enrichment shop. But jobs are jobs, and Areva is investing significant resources in the American nuclear revival. Just look at the recent groundbreaking of Areva's and Northrop Grumman's (NYSE:NOC) heavy components facility in Newport News, Va., which promises to bring 500 jobs for skilled workers to that state.

Anyway, back to USEC. I told you guys this was a highly speculative investment. The Motley Fool CAPS community, which has been overwhelmingly bullish on the stock, just got this one utterly wrong. I believe that those who jumped in and bought shares on the plunge, or gave the stock a fresh thumbs-up in CAPS, are wrong as well. Given its outdated assets, this company has no future without the American Centrifuge Plant, and hence without outside capital. I just don't see any potential acquirer rushing in to pay more than $1 billion for this company (don't forget the debt load), with USEC boxed in to this degree.

Start investing today -- just $7 per trade with Scottrade. Or find the broker that's right for you.

Fool contributor Toby Shute doesn't have a position in any company mentioned. Check out his CAPS profile or follow his articles using Twitter or RSS. The Motley Fool has a disclosure policy.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Centrus Energy Corp. Stock Quote
Centrus Energy Corp.
LEU
$36.65 (-7.38%) $-2.92
General Electric Company Stock Quote
General Electric Company
GE
$64.55 (-1.24%) $0.81
Exelon Corporation Stock Quote
Exelon Corporation
EXC
$41.67 (-0.02%) $0.01
McDermott International, Inc. Stock Quote
McDermott International, Inc.
MDR
Northrop Grumman Corporation Stock Quote
Northrop Grumman Corporation
NOC
$478.82 (-3.55%) $-17.64

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
329%
 
S&P 500 Returns
106%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 09/24/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.