Q1 2021 Centrus Energy Corp Earnings Call

May 12, 2021

[music].

Yes.

Okay.

[music].

Greetings and welcome to this interest Energy's first quarter 2021 earnings conference call. At this time, all participants are in a listen only mode.

Question on niche special follow the formal presentation.

He will should require operator assistance during the conference. Please press star zero on your telephone keypad. He built this conference is being recorded I would now like to turn the conference over to your host did unless Dicko Vice President corporate communications. Thank you you may begin.

Good morning, Thank you for joining us today's call will cover the results for the first quarter of 2021 ended March 31st share today are Dan Pondimin, President and Chief Executive Officer, Philip Strawbridge, Senior Vice President Chief Financial Officer, Chief Administrative officer, and Treasurer, John Dorrian controller and Chief.

Officer.

Before turning the call over to the economy 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 quarterly report on form 10-Q later today all of our news releases and SEC filings, including our 10-K 10, Qs and eight Ks are available on our website.

A replay of this call will also be available later this morning on the central <unk> 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 risks and uncertainty including assumptions about the future performance of Sentras. 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 that.

And 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 may.

12 from 2021 unless otherwise noticed.

This call is the property of central <unk> energy any transcription redistribution retransmission or rebroadcast of the call on any form without the expressed written consent of Sentras is strictly prohibited.

For your participation and I'll now turn the call over to Dan Palmer.

Thank you Dan and thank you to everyone on the call today.

I am pleased to report that after returning to profitability in 2020 centers energy had a strong and profitable first quarter of 2021.

We saw a total revenue of $55 $6 million and posted a net profit of $5 $1 million through the first three months of the year.

As always we could not have done this without the hard work and incredible talent of our employees I am so proud of all that we have accomplished together, particularly under the unique challenges presented by COVID-19.

We continue to work through the challenges presented by the pandemic and the ongoing realities of quantity, including extensive telework masking and social distancing.

We've been making our customer deliveries without interruption and benefit from the fact that most of our revenue comes from stable long term contracts.

We are also making tremendous progress towards completing our three year $115 million contract with the U S Department of energy to build and to deploy a cascade of our AC 100 machines.

These centrifuges will demonstrate production of a next generation nuclear fuel called high assay low enriched uranium or halo in early 2021, making it the first NRC license tailwind production facility in the United States a major milestone in the restoration of American nuclear leadership on the <unk>.

World stage and support on the next generation of advanced nuclear reactors.

While the pandemic has had some impact on our manufacturing supply chain. We are working through those challenges and expect the project to finish on time.

As you know Halo is an enriched uranium fuel with a higher enrichment level than the standard low enriched uranium that powers. Most commercial reactors today, because it has a higher concentration on physical isotope uranium 235, Hey, Lou allows for better fuel utilization smaller fueled pores reduce.

<unk> volumes of waste.

And a number of other advantages for reactor economics and performance.

We've talked a lot about the department of energy advanced reactor demonstration program or a R. D. P. Over the last few months nine of the 10 reactor designs selected under that program, including the two major demonstrations are expected to operate on Halo.

Hey, Lou is particularly well suited from micro reactors.

Does it allow us from fuel cores that are physically smaller, but which can last for many years or even decades at remote locations.

Some of these reactors may even be transportable. The U S Department of Defense. For example has a program called project Pele, which aims to build a prototype halo fueled mobile micro reactor within three years. The U S. Department of energy also is working to build a haven fuel micro reactor at Idaho National.

On a laboratory within two years called Marvel.

Goal is to help accelerate micro reactor development by giving designers a platform to test and to demonstrate their technologies.

On the capacity of micro reactors is as the name implies smaller than other reactors underdevelopment, even a modest deployment of micro reactors, whether from military or civilian use could result in a large demand for halo.

The Halo production capacity, we are building as part of the demonstration program will be modest, but we have a modular deployment model subject to the availability of funding or off take agreements. We are ready to expand the capacity of the facility to meet any level of Haywood demand.

As we noted in our annual shareholder letter the International Atomic Energy Agency released an estimate at the end of last year that global nuclear power generation could increase by 8% to 39% over the next decade and could more than double by 2050.

Rising demand tends to mean rising prices for fuel, which is exactly what we have been seeing over the last three years since reaching their lowest point in August of 2018 spot prices for enrichment measured in dollars per separative work units or swoop have increased by over 55%.

More utilities have come back into the market to secure their fuel supply for future years also as we noted in our annual 10-K filing we had particularly strong sales activity from November through the end of January with more than $100 million net new sales commitments as of the end of the first quarter the value.

<unk> of our long term order book Rose to about $989 million, a $29 million increase from the end of 2020 now for more details on our quarterly financial results I will turn the call over to Philip.

Thank you Dan and good morning to everyone as Dan mentioned from the first quarter of 'twenty. One we had total revenue of $55 6 million and achieved a net profit of $5 1 million.

Revenue from the <unk> segment increased seven 4 million compared to the same quarter in 2020.

Cost of sales from the <unk> segment increased $12 1 million in the three months ended March 31, 2021 compared to the corresponding period in 2020, primarily due to increased volume.

Excluding legacy costs and previously deferred sales the average unit cost of sales for smoothed decreased 14% in the quarter compared to last year.

As we've mentioned before we tend to see variability from quarter to quarter, but convert customers in the <unk> segment generally have multiyear contracts with purchase obligations that are annual not quarterly.

The customer sides, what month to take their annual purchase commitments in the quarter when we.

Reported in that quarter that we reported the revenue.

Some quarters look worse, because we have fewer deliveries, while others look better because we have more deliveries.

Another source of variation is the fact that some contracts were signed when prices were higher than they are today and others were signed when prices were lower so a quarter can look better or worst depending upon the price points on a particular contract that we're delivering in that quarter.

Our technical solutions solutions segment received increased revenue increased $3 2 million in the first quarter of 2021 as compared to the same period in 2020.

Collecting increased work performed on the Halo and ex energy contracts.

Cost of sales from this segment increased $6 4 million in the three months ended March 31, 2021 compared to the corresponding period in 2020.

The increase in contract work performed.

Now I'd like to talk a little bit about our SG&A costs in the first quarter of 2021.

Our SG&A.

Creased by 300000 compared to the same period in 2020 that was in spite of a $1 2 million increase in incentive compensation expense.

Merrily related to the Remeasurement of obligations under our long term incentive plans, which are based on the price of our stock.

We were able to more than offset that increased by cutting back on other areas, including a $1 $1 million reduction in consulting costs. We will continue to look at opportunities to reduce our SG&A costs as we have over the last several years.

As far as cash we ended the quarter with a strong consolidated cash balance of $163 3 million.

I'm sure. Some of you may have noted that even with the net profit we showed a net loss applicable to common shareholders of $2 2 million or <unk> 17 per basic and diluted per common share under GAAP.

That was the result of an exchange of common and preferred shares.

Without giving effect to that exchange on a non-GAAP basis. The adjusted net income per share was <unk> 34.

Basic and <unk> 33 on a diluted.

Now I'm going to turn the call back over to Dan.

Thank you Philip.

As usual, let me offer a final thought about the importance of the nuclear industry moving forward.

The demonstration program that we're all working so hard to complete.

To demonstrate production of this new Haywood fuel.

It has been a challenge, but an exciting one for the company and early next year in 2022.

We are very much looking forward to seeing for the first time on several years, the United States of America actually producing not only enriched uranium, but this new form that is potentially the enabler of the entire fleet of advanced generation reactors that is now under development.

So 2022 was a red letter date for this company.

But beyond that there have been several promising developments for industry in the last several months.

Writ large for example.

The binding administrations American jobs planned specifically mentioned advanced nuclear reactors and fuel as part of efforts to jumpstart clean energy manufacturing through federal procurement.

Efforts are also underway to sustain the existing fleet of commercial reactors, which contribute one fifth of our nation's power, but over half of our carbon free power.

Unfortunately energy markets don't recognize the full value either of the resilience of this always on power source or.

Or it's tremendous contribution to our climate goals. So serious consideration is now being given to proposals that provide for tax credits for the nuclear industry similar to those that have supported the expansion of renewable energy sources like wind and solar from many years.

We don't know yet what might come on these discussions but it is encouraging to hear of rising support from the largest carbon free energy source currently available.

The updated country commitments to reduce global emissions will require nuclear energy to meet the growing need for reliable carbon free electricity.

We stand ready to meet these needs through the work of both of our.

Business segments and are optimistic about the future of the nuclear industry.

And about our role as a trusted fuel supplier once again I want to thank all of you for joining the call and more importantly from the trust and confidence that you've put in centers. We look forward to continue to build value for you for the U S nuclear industry and for the country operator, we'd be happy to entertain any questions at this time.

At this time, we'll be conducting a question and answer session. If you would like to ask a question. Please press star one on your telephone keypad.

So we're in the Carolinas in the question queue.

You May press Star two if you will let you move your question from Q4.

For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys, one moment. Please as we poll for questions.

Our first question comes from the line of Rob Brown with Lake Street Capital markets. Please proceed with your question.

Hi, good morning.

Good morning, My question is on me.

And kind of the environment for utility activity, you mentioned a number of.

New orders kind of coming through how is that playing out as you as you go through the year and is there anything driving that or is it just sort of the timing on the reorder cycle.

Well, there's there is a good question and there's a number of factors.

While the March was in the secular decline recall that basically from 2011 until August 2018, there was a lot of demand.

Withheld from the market when you think of it from the perspective of a fuel buyer.

The price of the Shaw was at 68.

By 60, it doesn't look so good if you then see the price growth 50. So one dynamic is that as prices are rising.

On the utilities.

Get the deal sooner rather than later right.

And so that's one factor another factor is during that long period at which they were.

Keeping demand off the market.

What they were doing was working down inventories so.

The cushion so to speak of them being able to kind of stay out of the market also has gone down. So I think it's really that combination of factors and frankly.

Overall.

Bullishness that people expect the prices may continue to rise and they know an environment of rising prices.

On a commodity as it does not spoil what age nuclear fuel there are incentives to get into the market and make a purchase.

Yeah.

And once again as a reminder, if you'd like to ask a question. Please press star one on your telephone keypad or if you would like to ask additional questions. Please press star one on your telephone keypad. Our next question comes from the line of Richard So with Odeon Capital Group. Please proceed with your question.

Good morning, gentlemen, I have two questions.

So on the last several calls we've alluded to the American jobs plan.

And previously to the Energy Act of 2020, where they specifically.

Start to outline.

We should in the U S start up uranium mining.

We havent done since 2013.

Can you guys enlighten us on who were the uranium miners in North America or in the U S.

And are you talking to any warm that may.

<unk> been in the process of opening up uranium.

Mining.

I'm not sure who they were.

On the past.

Okay. Let me there just to make one first of all thank you for the question Richard One clarification I think the thing that we have often said.

Is that theres been no uranium enrichment.

Since 2013, when the predecessor to this company shut down the last of the old gaseous diffusion plants in Paducah, Kentucky, but on the mining thing there are a number of U S mining companies.

Energy fuels U R energy you see in there.

Our other entities such as chemical that May have a foreign headquarters to have properties in the U S.

So I think.

Those are the mindset you know given the right kind of demand signal you will see some additional.

Production coming out of them.

And there's been a whole.

A strong interest from a strategic standpoint, you've seen.

Reflected both.

In the Congress and the administration.

The view that uranium resource base as strategically important to the future of the country and to the energy sector. So for example in April 2020. There was this nuclear fuel working group report that talked about setting up a uranium reserves that would.

Would include not just natural uranium mining, but also the next step in the chain.

<unk> chain, which is the conversion step.

That fund.

That reserve was funded at a level of $75 million.

And the last budget cycle and to get that thing started.

One thing that people are waiting to see is when the new budget comes out which of course has not happened yet to see what happens in the next budget cycle in terms of funding that uranium reserve if that thing gets up and running than you will in fact see a resumption of additional production.

Of uranium from U S mines, which has fallen to very low levels compared to what it once was.

And once again as a reminder, if you would like to ask a question or ask any additional questions. Please press star one on your telephone keypad. Once again, if you'd like to ask a question or make any additional questions. Please press star one on your telephone keypad.

We do have another question from the line of Richard Hill with Odeon Capital Group proceed with your question.

Yeah, I think I got cut off thank you for that explanation.

Any domestic production should benefit.

<unk> I would think.

Oh.

Well when.

When you say <unk>.

I think you're referring to the ticker <unk>.

Not to the commodity right so correct.

But it would be this way.

And I guess now that you say that I think I might not have answered on every jot until all of your earlier question look.

We are we sentras possesses the only.

The U S origin enrichment technology that is ready to deploy period full stop right.

And and and why that's important for the U S. Miners is that means that.

<unk> is uniquely able to satisfy national security missions, a lot of well not a lot the rest the rest of the year.

Uranium enrichment available it comes from foreign sources, and there are legal and policy constraints on using foreign origin enrichment as you can easily imagine for National Security mission, we use enriched uranium ultimately to supply highly enriched uranium for reactors that go on to aircraft.

Areas in submarines, and we actually need as a country to have low energy <unk>. That's on the obligated that means from a U S technology base, which which we uniquely possess for the production of tritium, which is needed continuously to replenish.

The reservoirs of tritium and our actual nuclear weapons and any enriched uranium that we produce for that must also come from domestically mined uranium that's converted in a U S. <unk>.

<unk> facility. So any time you were talking about L. A U.

Or for enriched uranium at all that's used for national security purposes that creates an inherent demand pull signal for a net.

Natural uranium as well as U S conversion as well as U S enrichment and for that reason there was indeed, a strong alignment of interest.

For those who like to see the United States get back on the world stage and to recover this lost Lee.

Our leadership that we used to enjoy insertion on chi.

<unk> way.

It's a good good news signal when we see that kind of focus on any element of supply chain because each one reinforces the other.

Our next question comes from the line of Rob Brown with Lake Street Capital markets. Please proceed with your question.

Hi, Dan I, just wanted to follow up on the on the Tec Tech.

Tech solutions business and really the day OE project.

You remind us the timeline there and when.

Demonstration.

It is produced and then maybe your thoughts on the next steps on how that.

For that project goes from from that.

Yeah. Thanks, Rob So are we.

We as I mentioned, it's been a really tough because the supply chain.

<unk> has had challenges because of COVID-19, but thankfully, we actually are on track.

And we've been working very well with our regulators and we.

Have all 16 machines now for the demonstration Cascade up.

And standing and pipe in Ohio, we're doing the finishing work on all the EPC work et cetera et cetera.

We expect in due course to have an NRC license that will enable us to actual.

Actually begin operations early next year early 2022, so at that point.

We will have a capacity to produce on the order of if you just kept running the <unk>.

Cascade like one metric ton over the course of about a year, but.

We.

Don't as I've mentioned, we don't have at this point a program rolling forward. After that program concludes so wants to your second part of your question. Once we actually demonstrate this capability and deliver a sample of actual 19, 75%.

Hey, Lou to the U S Department of energy to the next step would be to hopefully expand this cascade and.

That's important not only for us, but frankly, it's important for the entire <unk>.

Fourth generation industry, because as we've mentioned several times nine out of 10.

Reactors that received awards under the advanced reactor demonstration program do require haywood fuel and and we will be the only cash source for that fuel and so if one is bullish on on that advanced reactor development program, then it's going to be very important.

For us to expand as rapidly as possible to satisfy the emerging demand for that.

New tranche of of reactors and that's frankly.

I think well reflected in the energy Act of 2020, which calls on the department to make sure that there is a little available for that purpose by 2026.

And once again as a final reminder, if you'd like to ask a question on making any additional questions. Please press star one on your telephone keypad. Once again, if you'd like to ask a question or make any additional questions. Please press star one on your telephone keypad.

Our next question comes from the line of Richard phones with Odeon Capital Group. Please proceed with your question.

Okay. So.

He keeps putting me on mute. Thank you for the color on my first question.

It's very helpful.

And my second question is what are the plans for the growing excess cash.

What are you planning on using that returning it to investors.

Any thoughts there because it certainly more than enough to operate the business.

Thank you Richard.

So I'll start then I'll I think ask Philip two two.

To augment.

So we have a as you would imagine a continuous process.

Continuous analysis of our cash position and continue with continuous analysis of the highest and best uses of those resources. It's been frankly, and obviously a very good thing for us to have this strong cash position and the options include everything from.

Looking for further ways to strengthen our capital structure, we have found a lot of benefit and the steps that we've taken so far as you're well aware too.

As you know we had the initial major tender.

Tender offer that reduced our overall debt load by 60% and extended our maturities out maturities out to 2027, we had the tender offer for the preferred and other preferred transaction. Besides each one of these things has put the company in a better position and and and that's important because on.

All of the things that we want to do moving forward on both the <unk> side of the business and technical solutions side of the business benefit from us being in a stronger financial position overall.

And whether we.

We use it for those or whether we use the resources for added investment in some of these exciting new technological developments that may help generate stronger revenue streams rolling forward is as I said.

Analysis that we have very actively continue from a manager perspective and of course, we keep our board.

Very much apprised and they provide the ultimate oversight for the strategic use of our cash resources, but but Philip could I turned to us for further color.

Yes, Dan I think you said it said it well actually as you know Richard we've been active as Dan mentioned and certainly looking at both the preferred and debt as well as investment in the business, but youre right. I mean, we've got a very strong cash position. So we want to make sure that we utilized properly.

And was that just are no further questions I would now like to turn the call over to Mr. Leistikow for any closing remarks.

Thank you operator, this will conclude our investor call for the first quarter of 2021 on.

Thank all of you who called in or listened online.

Look forward to speaking with you again next quarter.

This concludes today's teleconference. You may now disconnect. Your lines at this time. Thank you for your participation and have a wonderful day.

Sure.

Yeah.

[music].

Yeah.

[music].

Yeah.

[music].

Greetings and welcome to the centers Energy's first quarter 2021 earnings conference call. At this time, all participants are in a listen only mode.

A question on this special follow the phone presentation, if anyone should require operator assistance. During the conference. Please press star zero on your telephone keypad he'd go. This conference is being recorded I would now like to turn the conference over to your host did unless Dicko Vice President corporate communications. Thank you you may begin.

Good morning, Thank you for joining us today's call will cover the results for the first quarter of 2021 ended March 31 share.

Here today are Dan <unk>, President and Chief Executive Officer, Philip Strawbridge, Senior Vice President Chief Financial Officer, Chief administrative officer, and Treasurer, and John Dorrian Controller, and Chief Accounting Officer.

Before turning the call over to day in Parliament 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 quarterly report on form 10-Q later today all of our news releases and SEC filings, including our 10-K 10, Qs and eight Ks are available on our website.

A replay of this call will also be available later this morning on the central <unk> website, I would like to remind.

And 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 may.

<unk> 2021, unless otherwise noticed.

This call is the property of Suntrust energy any transcription redistribution retransmission or rebroadcast of the call on any form without the express written consent of Suntrust is strictly prohibited.

For your participation and I will now turn the call over to Dan Palmer.

Thank you Dan and thank you to everyone on the call today.

I am pleased to report that after returning to profitability in 2020 sensors to energy had a strong and profitable first quarter of 2021.

We saw a total revenue of $55 $6 million and posted a net profit of $5 $1 million through the first three months of the year.

We continue to work through the challenges presented by the pandemic and the ongoing realities of quantity, including extensive telework masking and social distancing.

We've been making our customer deliveries without interruption and benefit from the fact that most of our revenue comes from stable long term contracts.

We are also making tremendous progress towards completing our three year $115 million contract with the U S Department of energy to build and to deploy a cascade of our AC 100 machines.

World stage in support of the next generation of advanced nuclear reactors.

While the pandemic has had some impact on our manufacturing supply chain. We are working through those challenges and expect the project to finish on time.

As you know Halo is an enriched uranium fuel with a higher enrichment level than the standard low enriched uranium that powers. Most commercial reactors today, because it has a higher concentration of fizzle isotope uranium 235, Halo allows for better fuel utilization smaller fuel cores <unk>.

<unk> volumes of waste.

And a number of other advantages for reactor economics and performance.

We've talked a lot about the department of energy advanced reactor demonstration program on <unk> over the last few months nine of the 10 reactor designs selected under that program, including the two major demonstrations are expected to operate on Halo.

Halo is particularly well suited from micro reactors.

Does it allow us from fuel cores that are physically smaller, but which can last for many years or even decades at remote locations.

On a laboratory within two years called Marvel.

Goal is to help accelerate micro reactor development by giving designers a platform to test and to demonstrate their technologies.

<unk> of our long term order book Rose to about $989 million, a $29 million increase from the end of 2020 now for more details on our quarterly financial results I will turn the call over to Philip.

Thank you Dan and good morning to everyone as Dan mentioned for the first quarter of 2021, we had total revenue of $55 6 million and achieved a net profit of $5 1 million.

Revenue from the <unk> segment increased seven 4 million compared to the same quarter of 2020.

Cost of sales from the <unk> segment increased $12 1 million in the three months ended March 31, 2020, when compared to the corresponding period in 2020, primarily due to increased volume.

Excluding legacy costs and previously deferred sales the average unit cost of sales for smoothed decreased 14% in the quarter compared to last year.

As we've mentioned before we tend to see variability from quarter to quarter because of our customers in the <unk> segment generally have multiyear contracts with purchase obligations that are annual not quarterly.

Sides, what month to take their annual purchase commitments in the quarter when we report.

In that quarter that we reported the revenue.

Some quarters look worse, because we have fewer deliveries, while others look better because we have more deliveries.

Another source of variation is the fact that some contracts were signed when prices were higher than they are today.

And others were signed when prices are lower so a quarter can look better or worst depending upon the price points of a particular contract that we're delivering.

In that quarter.

Our technical solutions solutions segment received increase revenue increased $3 2 million in the first quarter of 2021 as compared to the same period in 2020, reflecting.

Increased work performed on the Halo and ex energy contracts.

Cost of sales from this segment increased $6 $4 million on the three months ended March 31, 2021 compared to the corresponding period in 2020, reflecting the increase in contract work performed.

Now I'd like to talk a little bit about our SG&A costs in the first quarter of 2021.

Our SG&A.

Decreased by 300000 compared to the same periods in 2020 that was in spite of a $1 2 million increase in incentive compensation expense primarily related to the remeasurement of obligations under our long term incentive plans, which are based on the price of our stock.

We were able to more than offset that increase by cutting back on other areas, including on $1 $1 million reduction in consulting costs. We will continue to look at opportunities to reduce our SG&A costs as we have over the last several years.

As far as cash we ended the quarter with a strong consolidated cash balance of $163 3 million.

That was the result of an exchange of common and preferred shares.

Without giving effect to that exchange on a non-GAAP basis. The adjusted net income per share was <unk> 34.

Basic and <unk> 33 on a diluted.

Now I'm going to turn the call back over to Dan.

Thank you Philip.

As usual, let me offer a final thought about the importance of the nuclear industry moving forward.

The demonstration program that we're all working so hard to complete.

To demonstrate production of this new Haywood fuel.

It has been a challenge, but an exciting one for the company and early next year in 2022.

We are very much looking forward to seeing for the first time on several years, the United States of America actually producing not only enriched uranium, but this new form that is potentially the enabler of the entire suite of advanced generation reactors that is now under development.

So 2022 is a red letter date for this company, but beyond that there have been several promising developments for industry in the last several months.

Writ large for example.

On the by the administration's American jobs plan, specifically mentioned.

Advanced nuclear reactors and fuel as part of efforts to jumpstart clean energy manufacturing through federal procurement.

Efforts are also underway to sustain the existing fleet of commercial reactors, which contribute one fifth of our nation's power, but over half of our carbon free power.

Unfortunately energy markets don't recognize the full value either of the resilience of this always on power source or.

Or it's tremendous contribution to our climate goals. So serious consideration is now being given to propose that provide for tax credits for the nuclear industry similar to those that have supported the expansion of renewable energy sources like wind and solar from many years.

We don't know yet what might come off these discussions, but it is encouraging to hear of rising support from the largest carbon free energy source currently available.

The updated country commitments to reduce global emissions will require nuclear energy to meet the growing need for reliable carbon free electricity.

We stand ready to meet these needs through the work of both of our business segments and are optimistic about the future of the nuclear industry.

At this time, we'll be conducting a question and answer session. If you would like to ask a question. Please press star one on your telephone keypad calculation. So we're in the Carolinas in the question queue.

You May press Star two if you would like to remove your question from the queue.

For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys, one moment. Please as we poll for questions.

Our first question comes from the line of Rob Brown with Lake Street Capital markets. Please proceed with your question.

Hi, good morning.

Good morning, My question is on me.

And kind of the environment for utility activity, you mentioned a number of.

New orders kind of coming through how is that playing out as you go through the year and is there anything driving that or is it just sort of timing on the reorder cycle.

Well there is there is Rob good question and there's a number of factors.

While the market was in a secular decline recall that basically from 2011 until August 2018, there was a lot of demand.

Withheld from the market when you think of it from the perspective of fuel buyer.

The price of the Shaw was at 60.

You buy at 60, it doesn't look so good if you then see the price growth 50. So one dynamic is that as prices are rising.

On the utilities.

Get the deal sooner rather than later right.

And so that's one factor another factor is during that long period at which they were.

Keeping demand off the market.

What they were doing was working down inventories so.

The cushion so to speak of them being able to kind of stay out of the market also has gone.

Gone down so I think it's really that combination of factors and frankly and overall.

Bullishness that people expect the prices may continue to rise and they know an environment of rising prices.

In a commodity as it does not spoil with age nuclear fuel there are incentives to get into the market and make a purchase.

Good morning, gentlemen, I have two questions.

So on the last several calls we've alluded to American jobs plan.

And previously to the Energy Act of 2020, where they specifically.

Start to outline.

We should in the U S start up uranium mining.

We havent done since 2013.

Can you guys enlighten us on who we are.

The uranium miners in North America or in the U S.

And are you talking to any warm that may.

<unk> been in the process of opening up uranium.

Mining.

I'm not sure who they were.

In the past.

Okay, Let me just.

Just to make one first of all thank you for the question Richard.

One clarification I think the thing that we have often said.

Is that theres been no uranium enrichment.

Since 2013 win on the predecessor to this company shut down the last of the old gaseous diffusion plants in Paducah, Kentucky, but on the mining thing there are a number of U S mining companies.

Energy fuels U R energy.

And there are other entities such as chemical that may have.

Foreign headquarters to have properties in the U S.

So I think.

Those are the mindset, given the right kind of demand signal.

You will see some additional.

Production coming out of them.

And there has been a hole.

Strong interest from a strategic standpoint, you've seen.

Reflected both in.

In the Congress and the administration.

Would include not just natural uranium mining, but also the next step in the chain.

Value chain, which is the conversion step.

That fund.

That reserve was funded at a level of $75 million.

And the last budget cycle and to get that thing started.

One thing that people are waiting to see is when the new budget comes out which of course has not happened yet to see what happens in the next budget cycle in terms of funding that Youre any reserve.

That thing gets up and running than you will in fact see a resumption of additional production of uranium from U S mines, which has fallen to very low levels compared to what it once was.

We do have another question from the line of Richard <unk> with Odeon Capital Group proceed with your question.

Yes, I think I got cut off thank you for that explanation.

Any domestic production should benefit.

<unk> I would think.

Oh well.

When you say <unk> I think youre, referring to the ticker <unk>.

Not to the commodity right so correct.

But it to you this way.

And I guess now that you say that I think I might not have answered on every jot until all of your earlier question look.

We are we sentras possesses the only.

U S origin enrichment technology that is ready to deploy period full stop right.

And why that's important for the U.

U S miners is that means that share.

<unk> is uniquely able to satisfy national security missions, a lot of well not a lot. The rest the rest of the uranium enrichment available. It comes from foreign sources and there are legal and policy constraints on using foreign origin enrichment as you can.

Imagine for National Security mission.

We use enriched uranium ultimately to supply highly enriched uranium for reactors that go on to aircraft carriers and submarines and we actually need as a country to have low energy <unk>. That's on the obligated that means from a U S technology base, which which we uniquely possess for the production.

Of tritium, which is needed continuously to replenish.

The reservoirs of tritium and our actual nuclear weapons and any enriched uranium that we produce for that must also come from domestically mined uranium that's converted in a U S conversion facility. So any time you were talking.

About LTE U.

Or for enriched uranium at all that's used for national security purposes that creates an inherent demand pull signal for <unk>.

<unk> uranium as well as U S conversion as well as U S enrichment and for that reason there was indeed, a strong alignment of interest.

For those who like to see the United States get back on the world stage and to recover this lost.

Leadership that we used to enjoy in session on <unk>.

<unk> way.

It's a good good news signal when we see that kind of focus on any element of supply chain because each one reinforces the other.

Our next question comes from the line of Rob Brown with Lake Street Capital markets. Please proceed with your question.

Hi, Dan I, just wanted to follow up on the on the Tech.

Tech solutions business and really the day OE project could you remind us the timeline there and when.

The demonstration.

This produced and then maybe your thoughts on the next steps on how that.

Or that project goes from from that.

Yeah, Thanks, Rob so.

We as I mentioned, it's been a really tough because the supply chain.

<unk> has had challenges because of COVID-19, but thankfully, we actually are on track.

And we've been working very well with our regulators and we.

Have all 16 machines now for the demonstration Cascade up.

And standing and pipe in Ohio, we are doing the finishing work on all the EPC work et cetera, et cetera, and we expect in due course to have an NRC license that will enable us to actual.

Actually begin operations early next year early 2022, so at that point.

We will have a capacity to produce on the order of if you just kept running the.

Cascade like one metric ton.

Over the course of about a year, but.

We.

Don't as I've mentioned, we don't have at this point a program rolling forward after that program concludes so once.

Your second part of your question once we actually demonstrate this capability and deliver.

Sample of actual 19, 75% Taylor.

To the U S Department of energy the next step would be to hopefully expand this cascade and.

That's important not only for us, but frankly, it's important for the entire <unk>.

Fourth generation industry, because as we've mentioned several times nine out of 10.

Reactors that received awards under the advanced reactor demonstration program do require Haywood fuel.

And we will be the only cash source for that fuel and so if one is bullish on on.

That advanced reactor development program than it is.

We're going to be very important for us to expand as rapidly as possible to satisfy the emerging demand for that.

New tranche of of reactors and Thats frankly.

I think well reflected in the energy Act of 2020, which calls on the department to make sure that there is a little available for that purpose by 2026.

Okay. So.

He keeps putting me on mute. Thank you for the color on my first question.

It's very helpful.

And my second question is what are the plans for the growing excess cash.

What are you planning on using that returning it to investors.

On.

Any thoughts there because it certainly more than enough to operate the business.

Thank you Richard.

So I'll start then I'll I think ask Philip two two.

To augment.

So we have a as you would imagine continuous process.

Continuous analysis of our cash position and continuous continuous analysis of the highest and best uses of those resources. It's been frankly, and obviously a very good thing for us to have this strong cash position and the options include everything from.

Looking for further ways to strengthen our capital structure, we have found a lot of benefit and the steps that we've taken so far as youre well aware too.

As you know we had the initial major tender.

All of the things that we want to do moving forward on both the <unk> side of the business and technical solutions side of the business benefit from us being in a stronger financial position overall.

And whether.

We use it for those.

Whether we use the resources.

For added investment in some of these exciting new technological developments that may help generate stronger revenue streams rolling forward is as I said.

An analysis that we have very actively continue from a manager perspective and of course, we keep our board.

Very much apprised and they provide the ultimate oversight for the strategic use of our cash resources, but but Philip can I turn to you for further color.

Yes, Dan I think you said it said it well.

Actually as you know Richard we have been active as Dan mentioned.

Certainly looking at both the preferred and debt as well as investment in the business, but youre right. I mean, we've got a very strong cash position. So we want to make sure that we utilized properly.

And was that just are no further questions I would now like to turn the call over to Mr. Leistikow for any closing remarks.

Thank you operator, this will conclude our investor call for the first quarter of 2021 I want to thank all of you who called in or listened online. We look forward to speaking with you again next quarter.

This concludes today's teleconference. You may now disconnect. Your lines at this time. Thank you for your participation and have a wonderful day.

Q1 2021 Centrus Energy Corp Earnings Call

Request a DemoDemo

LEU

Centrus Energy

Earnings