Q4 2021 Centrus Energy Corp. Earnings Call

March 11, 2022

[music].

Greetings and welcome to the Centris Energy 4th Quarter 2021 Earnings Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation.

Greetings and welcome to the Suntrust Energy fourth quarter 2021 earnings Conference call.

This time, all participants are in a listen only mode.

A question and answer session will follow the formal presentation.

If anyone should require operator assistance during the conference, please press star zero on your telephone keypad.

If anyone should require operator assistance during the conference. Please press star zero on your telephone keypad.

As a reminder, this conference is being recorded. I would now like to turn the call over to Dan Lysakow, Vice President of Corporate Communications. Thank you. You may begin.

As a reminder, this conference is being recorded I would now like to turn the call over to Dan Leistikow Vice President of corporate Communications. Thank you you may begin.

Good morning, Thank you all for us.

Dan Lysakow: Good morning. Thank you all for joining us. Today's call will cover results for the fourth quarter and full year of 2021, ended December 31st. Today we have Dan Poneman, Chief Executive Officer, Philip Strawbridge, Senior Vice President, Chief Financial Officer, Chief Administrative Officer and Treasurer, and Kevin Harrell, Controller and Chief Accounting Officer.

Today's call will cover our results for the fourth quarter and full year of 2021 ended December 31 today, we have Dan Hoffman.

Executive Officer, Philip Strawbridge, Senior Vice President and Chief Financial Officer, Chief Administrative Officer, Treasurer, and Kevin Harold.

Controller, and Chief Accounting Officer.

Philip Strawbridge: Before turning the call over to Dan Poneman, I'd like to welcome all of our callers as well as those listening to our webcast.

Before turning the call over to Dan Donovan I'd like to welcome all of our all of our callers as well as those listening to our webcast. This conference call follows our earnings news release issued yesterday afternoon, we expect to file our report for the year ending December 31, 2021 in the fourth quarter of 2021 on Form 10-K .

Dan Poneman: This conference call follows our earnings news release issued yesterday afternoon. We expect to file our report for the year ending December 31st, 2021 and the fourth quarter of 2021 on Form 10-K later today. All of our news releases and SEC filings, including our 10-K, 10-Qs and 8-Ks are available on our website. A replay of this call will also be available later this morning on the Centris website.

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.

Speaker Change: I'd like to remind everyone that certain of the information we may discuss on the call today may be considered forward-looking information that involves risk and uncertainty, including assumptions about the future performance of centrists. Our actual results may differ materially from those in our forward-looking statement.

I'd like to remind everyone that certain of the information we may discuss on the call today may be considered forward looking information that involves risk and uncertainty, including assumptions about the future performance of Suntrust. Our actual results may differ materially from those in our forward looking statements.

Speaker Change: Additional information concerning factors that could cause additional results to materially differ from those in our forward-looking statements is contained in our filings with the SEC, including our annual report on Form 10-K and quarterly reports on Form 10-Q .

Additional information concerning factors that could cause additional results to materially differ from those in our forward looking statements is contained in our filings with the SEC, including our annual report on Form 10-K quarterly reports on Form 10-Q .

Speaker Change: Finally, the forward-looking information provided today is time-sensitive and accurate only as of today, March 11, 2022, unless otherwise noted.

Finally, the form the forward looking information provided today is time sensitive and accurate only as of today March 11th 2000, 22022, unless otherwise noted.

Speaker Change: This call is the property of Centris Energy. Any transcription, redistribution, retransmission, or rebroadcast of the call in any form without the express written consent of Centris is strictly prohibited. Thank you for your participation, and I'll turn the call over to Anne Poneman.

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

Thank you for your participation.

Turn the call over to standpoint.

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

Anne Poneman: I am pleased to report that Centris Energy had a robust fourth quarter, which helped contribute to a record year in 2021, with annual revenue growth of 21 percent and $175 billion in net income.

Im pleased to report that Center's energy had a robust fourth quarter, which helped contribute to a record year in 2021 with annual revenue growth of 21% and $175 billion in net.

Our financial condition is stronger now than it has been years, even as we reduced our pension debt by more than $100 million.

Anne Poneman: Our financial condition is stronger now than it has been years. Even as we reduced our pension debt by more than $100 million and spent more than $40 million to retire the preferred shares, we still managed to increase our cash balance to $193.8 million at year end.

And that more than $40 million to retire the preferred shares we still managed to increase our cash balance to $193 8 million at year end.

Anne Poneman: In 2021, we completed a series of transactions totaling $43.3 million to repurchase and retire all remaining Series B Senior Preferred Shares at a discount.

In 2021, we completed a series of transactions totaling $43 $3 million to repurchase and retire all remaining series B senior preferred shares at a discount.

Anne Poneman: Wiping out the preferred shares, which were accruing deferred dividends, much like a debt instrument, represents a critical milestone in strengthening our balance.

Why do you have the preferred shares which were accruing deferred dividend much like a debt instrument represents a critical milestone in strengthening our balance sheet.

Furthermore, we reduced our net pension liabilities by more than $100 billion since the beginning of 2021.

Anne Poneman: Furthermore, we reduced our net pension liabilities by more than $100 million since the beginning of 2021.

Anne Poneman: As of December 31st, 2021, the long-term net liability was down to $23.1 million.

As of December 31, 2021, the long term net liability was down to $23 1 million as our funded status has improved we've been taking responsible steps with our pension manager to shift to a more conservative asset allocation to reduce our exposure to market volatility and to help protect the gains.

Anne Poneman: As our funded status has improved, we have been taking responsible steps with our pension manager to shift to a more conservative asset allocation to reduce our exposure to market volatility and to help protect the gains we have made.

Nate.

A key piece of our success story is our <unk> segment, where we saw a 64% increase in our sales volume for uranium enrichment that increase reflects the volume of deliveries we made in 2021 compared to the previous year.

Anne Poneman: A key piece of our success story is our LEU segment, where we saw a 64% increase in our sales volume for uranium enrichment.

Anne Poneman: That increase reflects the volume of deliveries we made in 2021 compared to the previous year.

Anne Poneman: But we've also had a great deal of success in making new long-term sales that will bring us revenue streams in the years to come.

But we've also had a great deal of success and making new long term sales that will bring us revenue streams in the years to come.

Anne Poneman: even after all the deliveries we made in 2021 that came out of your order.

Even after all the deliveries we made in 2021 that came out of your order book.

We increased the overall value of the order book year over year standing at $986 million as of December 31.

Anne Poneman: We increased the overall value of the order book year over year, standing at $986 million as of December 31st.

As we look to the future we are making great progress in our drive to pioneer the market for high assay low enriched uranium or halos.

Anne Poneman: As we look to the future, we are making great progress in our drive to pioneer the market for high-assay, low-enriched uranium, or HALU, the next-generation nuclear fuel that will be needed for the majority of the advanced reactor designs that are currently under development and may also be used in the existing fleet of reactors.

The next generation nuclear fuel that will be needed for the majority of the advanced reactor designs that are currently underdevelopment and may also be used in the existing fleet of reactors.

Anne Poneman: Under our existing contract with the U.S. Department of Energy, we have been building a cascade of centrifuges near Pike and Ohio to demonstrate halide production with the U.S. technology we have developed.

Under our existing contract with the U S Department of energy, we have been building a cascade of centrifuges near piping in Ohio to demonstrate Haley production with the U S technology, we have developed.

Anne Poneman: Manufacturing and assembly of the centrifuges is now done.

Manufacturing and assembly of the centrifuges is now done.

Anne Poneman: All of the support systems are in place and in June .

All of the support systems are in place and in June we.

Anne Poneman: We secured approval from the U.S. Nuclear Regulatory Commission for our license amendment request, making the piping plant the first and only U.S. facility that is licensed to produce HALU with an enrichment level of up to 20 percent uranium-235.

We secured approval from the U S nuclear regulatory Commission for our license Amendment request, making the Piking plant the first and only U S facility that is licensed to produce payroll within the enrichment level of up to 20% uranium 235.

Anne Poneman: As we have previously reported, while Centris has been able to keep our own work on track throughout the pandemic, the pandemic has affected the supply chain, as has been the case for many companies. The Department of Energy has also experienced COVID-related delays in obtaining the HALU storage cylinders that the department was obligated to provide as part of the demonstration.

As we have previously reported while centers has been able to keep our own work on track throughout the pandemic. The pandemic has affected the supply chain as has been the case for many companies. The department of energy has also experienced COVID-19 related delays in obtaining the halo storage cylinders that the department was obligated.

To provide as part of the demonstration.

Anne Poneman: The demonstration cannot begin without the storage cylinders and it wasn't going to be possible to complete the operational portion of the demonstration before the June 1st, 2022 expiration of the current contract. In addition, the administration has now indicated that it wants to help support a longer period of demonstration and operations than would have been possible under the original contract.

The demonstration cannot begin without the storage cylinders and it wasn't going to be possible to complete the operational portion of the demonstration before the June one 2022 exploration of the current contract. In addition, the administration has now indicated that it wants to help support a longer period of demonstration and operations.

Then would have been possible under the original contract as a result, and as we noted in our SEC filings last year. The department changed the scope of the existing contract and indicated that the operational portion of the demonstration would be handled as part of a separate competitively awarded contract.

Anne Poneman: As a result, and as we noted in an SEC filing last

Anne Poneman: the department changed the scope of the existing contract and indicated that the operational portion of the demonstration would be handled as part of a separate competitively awarded contract.

Anne Poneman: More recently, on February 7, the department published a pre-solicitation notice to clarify the path forward. They outlined a two-phase process.

More recently on February seven the Department published a pre solicitation notice to clarify the path forward there.

You outlined a two phase process.

Anne Poneman: The first phase, which the department indicated would take up to two years, would consist of finishing the cascade and demonstrating operations for at least a full year after that. The second phase would consist of up to three, three-year contract extensions to operate the cascade and

The first phase, which the department indicated would take up to two years would insist wood.

Would consist of finishing the cascade and demonstrating operations for at least a full year. After that the second phase would consist of up to three three year contract extensions to operate the cascade and produce heyward.

Anne Poneman: We strongly support the department's decision to increase the demonstration and operations period for the HALU cascade, which we believe will make it easier to fully commercialize the technology and to expand the plant in the future.

We strongly support the department's decision to increase the demonstration of the operation period for the healing Cascade, which we believe will make it easier to fully commercialize the technology and to expand the plant in the future.

Anne Poneman: We are committed to pioneering the market for halib production because we believe it will play a big role in the future of nuclear energy.

We are committed to pioneering the market for Haley production, because we believe it will play a big role in the future of nuclear energy one important development in the fourth quarter, what the Congress passed and the President signed a bipartisan infrastructure package.

Anne Poneman: One important development in the fourth quarter was that Congress passed and the president signed a bipartisan infrastructure package.

Anne Poneman: Among other things, the bill provides nearly $2.5 billion in appropriations over four years to the U.S. Department of Energy's Advanced Reactor Demonstration Program to support construction of the first two commercial-scale advanced reactors in the United States, which the developers expect will be the first of many.

One of the things the Bill provides nearly $2 $5 billion in appropriations over four years to the U S Department of Energy's advanced reactor demonstration program to support construction of the first to commercial scale advanced reactors in the United States, which the developers expect will be the first.

Men.

Anne Poneman: Both of these reactor designs require HALU, as do many others that may be entering the market in coming years.

Both of these reactor designs require halo as do many others that may be entering the market in coming years.

Anne Poneman: Finally, let me take a moment to discuss the tragedy unfolding in Ukraine.

Finally, let me take a moment to discuss the tragedy unfolding in Ukraine.

Anne Poneman: Like most of the world, we were horrified by this unwarranted, unprovoked invasion and the daily toll it is inflicting on innocent civilians. And we are inspired by the courage and the resilience of the Ukrainian people in the face of this threat.

Like most of the World we were horrified by this unwarranted unprovoked invasion and the daily toll it is inflicting on innocent civilians and we are inspired by the courage and the resilience of the Ukrainian people in the face of this threat.

Anne Poneman: These events are a sobering reminder of the importance of energy security and the risks of becoming overly reliant on energy from Russia or, indeed, any other foreign source. We need to be clear-eyed about how Centrists face some of these risks for their own business.

These events are a sobering reminder of the importance of energy security and the risk of becoming overly reliant on energy from Russia, or indeed, any other foreign source, we need to be clear eyed about how central states with some of these risks or business, but.

Anne Poneman: but also how we can play a role in strengthening America's energy security and national security.

But also how we can play a role in strengthening America's energy security and National Security.

Anne Poneman: As you know, while we are working to re-establish a domestic enrichment capability for centers and for the United States, the majority of the company's revenues come from sales of uranium enrichment we purchase from other suppliers. 100% of the world's uranium enrichment is produced by foreign state-owned corporations.

As you know, while we are working to reestablish a domestic enrichment capability for centers and for the United States. The majority of the Companys revenues come from sales of uranium enrichment, we purchase from other suppliers, 100% of the world's uranium enrichment is produced by foreign state owned corporations. According to the world.

Anne Poneman: According to the World Nuclear Association, Russia has 46% of global enrichment capacity. It is by far the largest global producer, and it is our largest source of supply as well. Imports of Russian enriched uranium have, for many years, been subject to strict limits under the Russian Suspension Agreement.

<unk> Association, Russia has 46% of global enrichment capacity. It is by far the largest global producer and it is our largest source of supply as well.

<unk>, a Russian enriched uranium for many years been subject to strict limits under the Russian suspension agreement.

Anne Poneman: The package of energy-related sanctions announced by the Biden administration earlier this week did not include sanctions on nuclear fuel. We are watching the situation very closely. We have worked in recent years to diversify our base of supply and have developed measures to mitigate the near-term impact of any disruption. However, a longer-term disruption would significantly impact the entire nuclear industry, including Central.

Package of energy related sanctions announced by the by the administration earlier. This week did not include sanctions on nuclear fuel we are watching the situation very closely we've worked in recent years to diversify our base of supply and have developed measures to mitigate the near term impact of any disruption however, our longer term disruption would.

Impact the entire nuclear industry, including centers.

Anne Poneman: To reiterate something I have said in the past, only a robust public sector and private sector investment in a domestic enrichment capability can be a long-term solution to national security and global stability concerns. CENTRA stands ready to do our part.

Reiterate something I have said in the past only a robust public sector and private sector investment.

Domestic enrichment capability can be a long term solution to national security and global stability concerns central stands ready to do our part we have developed the only deployment ready NRC license technology that can meet America's commercial and national security requirements for Halo and other forms of enriched uranium.

Anne Poneman: We have developed the only deployment-ready NRC-licensed technology that can meet America's commercial and national security requirements for HALU and other forms of enriched uranium.

Anne Poneman: We stand ready to support the U.S. government and the U.S. nuclear industry in meeting these requirements in the years to come.

We stand ready to support the U S government and the U S nuclear industry in meeting these requirements in the years to come.

Anne Poneman: Now, for more details on the quarterly financial results, I'll turn the call over to Philip.

Now for more details on our quarterly financial results I'll turn the call over to Phil.

Thank you Dan good morning, everyone.

Philip Strawbridge: Thank you, Dan. Good morning, everyone. As Dan mentioned, 2021 was a record year for Centris. With a particularly strong fourth quarter, our annual revenue increased to $298.3 million, which includes a $43.5 million settlement that we secured with the U.S. government.

As Dan mentioned 2021 was a record year for centers with a particularly strong fourth quarter. Our annual revenue increased to $298 3 million, which includes a $43 $5 million settlement that we secured with U S government.

Philip Strawbridge: during the third quarter that helped us reduce our long-term liabilities for pension and post-retirement health benefits.

During the third quarter that helped us reduce our long term liabilities for pension and post retirement health benefits.

Philip Strawbridge: Even excluding that settlement as well as the settlement we received in 2020 as part of the bankruptcy, customer's bankruptcy, we achieved revenue growth of 18% in our LEU segment and 21% in our technical solutions segment.

Even excluding that settlement as well as the settlement we received in 2020 as part of the bankruptcy customers bankruptcy, we achieved revenue growth of 18% and our <unk> segment and 21% our technical solutions segment.

In our <unk> segment.

Philip Strawbridge: In our LEU segment, SWU revenue increased 8% in 2021 over 2020.

<unk> revenue increased 8% in 2021 over 2020.

Philip Strawbridge: Recall that SWU revenue in 2020 included a $32.6 million customer settlement of a supply contract that was subject to the customer's bankruptcy proceedings.

Recall that flu revenue in 2020 included a $32 $6 million.

Customer settlement of a supply contract that was subject to the customer's bankruptcy proceeding.

Philip Strawbridge: excluding the one-time settlement of 32.6 in 2020.

Excluding the one time settlement of $32 six and 2020.

<unk> revenue increased an impressive 36% over 21% in 'twenty one over 'twenty.

Philip Strawbridge: SWU revenue increased an impressive 36% in 21 over 20.

Philip Strawbridge: Our cost of sales were $183 million in 2021 compared to $149.6 million in the prior year. The biggest drive

Our cost of sales for $183 million in 2021 compared to $149 6 million in the prior year the biggest driver in that number.

Philip Strawbridge: was a 64% increase in our sales volume for uranium enrichment, which is dominated or denominated in SWOOZ.

A 64% increase in our sales volume for uranium enrichment, which is dominated are denominated and smooth.

Philip Strawbridge: It also reflects an increase in the amount of work that we perform under the HALO contract and other contracts.

It also reflects an increase in the amount of work that we perform under the Halo contract and other contracts.

Philip Strawbridge: Overall, we achieved a gross profit of $114.5 million in 2021, a 17% increase year-over-year. Our net profit was even higher, $175 million for the year.

Overall, we achieved a gross profit of $114 $5 million in 2021, a 17% increase year over year. Our net profit was even higher at $175 million for the year. That's in part because in addition to the strong sales and good margins. We also achieved growth in the value of our pension.

Philip Strawbridge: That's in part because, in addition to the strong sales and the good margins, we also achieve growth in the value of our pension assets.

Assets.

Philip Strawbridge: We also recognize $39.1 million primarily as a result of releasing a portion of our valuation allowance related to our deferred tax estimate.

We also recognized $39 1 million, primarily as a result of releasing a portion of our valuation allowance related to turn deferred tax assets.

Philip Strawbridge: Our accumulated federal net operating losses from prior years can be used to reduce future tax liability to the extent the company generates taxable income.

Our accumulated federal net operating losses from prior years can be used to reduce future tax liability to the extent the company generates tax taxable income.

Philip Strawbridge: The release of valuation allowance reflects the company's view that a portion of the federal net operating losses can be used to offset future taxable income.

The valuation allowance reflects the company's view that a portion of the federal net operating losses can be used to offset future taxable income.

For the year, we maintained our SG&A cost of $36 million with no increase over the prior year.

Philip Strawbridge: For the year, we maintained our SG&A cost at $36 million with no increase over the prior year.

Philip Strawbridge: That's a $10 million reduction from five years ago, reflecting a multi-year effort to reduce our overhead costs.

That's a $10 million reduction from five years ago, reflecting our multiyear effort to reduce our overhead costs.

Philip Strawbridge: The fourth quarter was particularly strong in terms of revenue, gross profit, and net income.

The fourth quarter was particularly strong in terms of revenue gross profit and net income.

Philip Strawbridge: Recall that we focus more on annual results because our revenues and margins vary considerably from quarter to quarter.

We focus more on annual results, because our revenues and margins to vary considerably from quarter to quarter and.

Philip Strawbridge: And as we've said before, that's driven by two factors, both of which relate to our LEU segment.

And as we've said before that's driven by two factors both of which relate to our <unk> segment first.

Philip Strawbridge: First, our customers generally have an annual purchase commitment, not a quarterly commitment.

First our customers generally have an annual purchase commitments on a quarterly commitment.

Philip Strawbridge: And due to revenue recognition rules, we recognize the revenue from a sale in whatever quarter the customer elects to take delivery.

And due to revenue recognition rules, we recognize the revenue from a sale in whatever quarter that customer elects to take delivery.

Philip Strawbridge: tends to be one quarter that has the most delivery and that's not the same quarter every year.

Tends to be one quarter that is the most blurry and thats not the same quarter every year.

Philip Strawbridge: Second, long-term sales contracts in our order book vary widely because SWOOP prices have changed a lot over the years.

Long term sales contracts and our order book very widely because swoop prices have changed a lot over the years.

Philip Strawbridge: Prices steadily decline after Fukushima, bottomed out in 2018 and have been rising ever since. We have sales contracts up and down.

Steadily decline after Fukushima bottomed out in 2019 and rising ever since.

We have sales contracts up and down that price curve.

Philip Strawbridge: given quarter will look better or worse depending on what portion of our annual deliveries happen to fall in that quarter and whether those particular deliveries are at higher price contracts or lower price contracts.

A given quarter will look better or worse, depending on what portion of our annual deliveries happened to fall in that quarter and whether those particular deliveries are higher priced contracts or lower price contracts.

As Dan highlighted we ended the quarter with a cash balance of $193 8 million puts us in a strong position going forward.

Philip Strawbridge: As Dan highlighted, we ended the quarter with a cash balance of $193.8 million, putting us in a strong position going forward. With that, I'm going to turn it back over to Dan.

I'm going to turn it back over to Dan.

Yeah.

Thank you Philip.

Dan: Let me just take a moment to recap, because I think the numbers speak for themselves. Gross profit of 17%.

Let me just take a moment to recap because I think the numbers speak for themselves gross profit of.

17% revenue up.

Dan: of 21% cash balance of $25,000.

21% cash balance up 25% through sales volume up 64% and net income up 222%.

Dan: full sales volume up 64% and net income up 222%. We have a proven technology, a one-of-a-kind NRC license for Haley Productions.

We have a proven technology.

One of the kind of NRC license for Haynesville production.

An order book of almost $1 billion plenty of opportunities to win new sales and a rising market and an exceptionally talented workforce and dedicated workforce ready to take on the future.

Dan: Plenty of opportunities to win new sales in a rising market and an exceptionally talented workforce and dedicated workforce ready to take on the future.

Dan: I am proud of what our team has accomplished so far, but firmly believe that the best is yet to come. And with that, Operator, we would be happy to entertain questions.

Hi.

Out of what our team has accomplished so far but firmly believe that the best is yet to come and with that operator, we would be happy to entertain questions.

Thank you we will now be conducting a question and answer session.

Speaker Change: If you would like to ask a question, please press star 1 on your telephone keypad. The confirmation tone will indicate your line is in the question queue. You may press star 2 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 key.

I would like to ask a question. Please press star one on your telephone keypad.

A confirmation tone will indicate your line is in the question queue.

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

For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys.

Speaker Change: We ask that you please limit yourself to one question and one follow-up question.

We ask that you please limit yourself to one question and one follow up question.

Please while we poll for your questions.

Yeah.

Speaker Change: Our first questions come from the line of Rob Brown with Lake Street Capital. Please proceed with your questions.

Our first questions come from the line of Rob Brown with Lake Street Capital. Please proceed with your questions.

Hi, good morning.

Good morning, Ron first question.

Rob Brown: Morning, Rob.

The.

There was a contract change with it.

On the Haley project, how is that different I guess ultimately if they're if they're running out over three years or a longer period of time.

Rob Brown: project. How is that different, I guess, ultimately, if they're, if they're

The contract side.

What you have or what's the kind of difference at this point.

Rob Brown: Well, the principal difference, Rob, is because of the

Well the principal difference Rob is because of the.

Events that I mentioned in my opening remarks.

Rob Brown: event that I mentioned in my opening remarks, a three-year contract is over on

Three year contract is over.

On.

Rob Brown: the calendar, June 22. And because the cylinders were not there, what we had initially anticipated doing in the original contract as drafted and as executed was to finish up the standing up of these demonstration machines and then actually running them for a little while to produce some actual 19.75.

The calendar June 'twenty, two and because of the cylinders were not there what we had initially anticipated doing in the original contract as as drafted.

Excuse me.

You finish up the standing up of these demonstration machines, and then actually running them for a little while to produce some actual.

19, 75% product.

Rob Brown: and you can't do that if you don't have these cylinders to take the gas that comes off the and and so they just sort of timed out so to speak and therefore that aspect

And you can't do that if you don't have these cylinders to take the gas that comes off the chip.

Yes.

And so they just.

Sort of timed out so to speak and therefore that aspect.

Was.

Taken out of the scope of this contract and put into the scope of a new contract that they intend to.

Rob Brown: taken out of the scope of this contract and put into the scope of a new contract that they intend to negotiate and have put out this notice that they are going to accept proposals to do.

Negotiate and have put out this notice that they are going to accept proposals to do so that's one key difference that the actual at that last step.

Rob Brown: So that's one key difference, that the actual, that last step.

Rob Brown: that we would have been ready to do, we simply couldn't do it because DOE's COVID supply chain challenges prevented them from producing the cylinders that we were going to put that gas into. But the other thing is, as I also indicated in my opening remarks, now they're talking about sustaining that. We were only going to do that for just a little while.

We would it would have been ready to do we simply couldnt do it because the least COVID-19 supply chain challenges prevented them from producing the cylinders that we were going to put that gas into but the other thing is as I also indicated in my opening remarks now they're talking about sustaining that we were only going to do.

That for just a little while.

Rob Brown: And now they're talking about doing this for potentially much longer under their pre-solicitation notice, which you have seen, I'm sure. And that's a good thing because it's always, well, two things. Number one, it's always used to keep running these machines once they're up and running. It's, you might as well sort of get the benefit out of it. And that leads to the second point, which is it actually could produce a meaningful amount of highly enriched.

And now they're talking about doing so potentially much longer under their pre solicitation notice, which you have seen I'm sure and that's a good thing because it's always well two things number one it's always used to keep running these machines once they're up and running.

You might as well sort of get the benefit out of it and that leads to the second point, which is actually could produce a meaningful amount of highly enriched I'm, sorry high assay low enriched uranium.

Rob Brown: sorry, high assay well-enriched uranium over a longer period of time and there are of course much larger requirements that we hope will be supported by building out further on a much larger program that we also expect.

Over a longer period of time and there are of course much larger requirements that.

We hope will be supported by building out further on a much larger program that we also expect to see coming our way but.

Rob Brown: see coming our way, but those are two reasons why actually moving to the second contract could be a very useful.

But those are two reasons why actually moving to the second contract it could be a very useful thing.

Speaker Change: Great, thank you. And then a follow up just on the kind of the Russian exposure and the supply of 10x. I know it's a meaningful part of your supply, but how, how is that sort of, you know, how do you.

Okay, great. Thank you and then a follow up just on the kind of the Russian exposure or the supply of <unk>.

I know, it's a meaningful part of your supply but how.

Is that sort of.

How do you mitigate that risk in the near term and what are your sort of thoughts on.

Some of the risk mitigation that you can do.

Well.

Even before this crisis it's inherent.

Speaker Change: inherent in our business that we are always looking to diversify our sources of supply. You know from reading our SEC filings of course we have

Inherent in our business that we are always looking to diversify our sources of supply you know from reading our SEC filings of course, we have <unk>.

Speaker Change: major supply arrangements with Orono, the French enricher. We have other arrangements besides, and we are continually refreshing and updating that. Obviously, more recently with the events in Ukraine, we have doubled down on those efforts and continue to look at ways to move things around. We have people who are very good at it. It's a very diversified market with lots of pockets.

Major supply arrangements with orono, the French and Richard we have other arrangements besides and we are continually refreshing and updating that.

Obviously more recently with the events in Ukraine, we have doubled down on those efforts and continued to look at ways to.

To move things around.

We have people who are very good at it's a very diversified market with lots of pockets of different parts of the fuel components and so forth and we're just continuing to do that as much as we can the other thing of course, we have done is.

Speaker Change: of different parts of the fuel components and so forth. We're just continuing to do that as much as we can. The other thing, of course, we have done is, as you've seen, over many quarters, continue to strengthen the balance sheet, including building up a good cushion of cash. If there are disruptions that are requiring more cash or

As you've seen over many quarters to continue to strengthen the balance sheet, including.

Building up a good cushion of cash so if there are disruptions that are.

Requiring more.

Cash or whatever two to achieve the kind of diversification and mitigation that we need to we have some of that as well. So we're just in a continual mode.

Speaker Change: the kind of diversification and mitigation that we need to we have some of that as well. So we're just in a continual mode of continuing to diversify and find alternatives but you know obviously the longer a disruption would go on the more challenging that would become because

Continuing to diversify and find alternatives, but.

Obviously the longer a disruption would go on the more challenging that would become because.

Speaker Change: As again, I'm sure you know, Russia accounts, and I said this in my opening remarks, 46% of world capacity, and it's not like oil where you can just start pumping.

Again, I'm sure you know, Russia accounts and I've said this in my opening remarks, 46% of world capacity.

And it's not like oil where you can just start pumping.

Speaker Change: It's not like a genie that you have a massive amount of enrichment pop out onto the market when you rub a bottle or clap your hands. So it's a challenge not only for centrists, it's a challenge for U.S. utilities, it's a challenge for the whole industry.

I mean, it's not like a genie that.

You have.

Massive amount of enrichment pop out onto the market when you rub.

Butler closet hands, so it's a challenge not only for centers.

The channel for U S utilities challenge challenge for the whole industry.

Speaker Change: If 46%, it's just common sense, of world enrichment capacity is removed from the global market, there's just not enough enrichment left to power the existing fleet of world reactors worldwide. So, we are a small part of a very large puzzle.

46%, it's just common sense of world retro capacity is removed from.

The global market, there's just not enough the enrichment left.

The power of the existing fleet of World reactors worldwide. So it's a we are a small part of a very large puzzle.

Great. Thank you. Thank you for all the info and turn it over.

Yeah.

Thank you. Our next question is come from the line of Joseph Reagor with Roth Capital. Please proceed with your questions.

Speaker Change: Thank you. Our next questions come from the line of Joseph Rager with Roth Capital. Please proceed with your questions.

Hey, Dan and team thanks for taking the questions.

Joe.

Okay. So kind of following on the last question.

Joseph Rager: So kind of following on the last question.

Joseph Rager: I know you guys don't talk in specific numbers for legal reasons and other reasons, but if we think about this hypothetically, if Russia, let's say, represents X amount of uranium atoms. If we think about this hypothetically, if Russia, let's say, represents X amount of uranium atoms. If we think about this hypothetically, if Russia, let's say, represents X amount of uranium

I know you guys don't talk in specific numbers for legal reasons and other reasons, but if we think about this hypothetically if Russia, let's say represents X amount of uranium supply this year.

The efforts, you've taken and what percent of that whatever that X number is do you think you could mitigate like over let's call. It a six month period.

Joseph Rager: With the efforts you've taken, what percent of that, whatever that X number is, do you think you could mitigate, like, over, let's call it a six-month period?

Joseph Rager: Yeah, Joe, I'm pretty sure that that gets to a level of detail that and there, I'll defer to Philip, I don't think we can get into that kind of detail on this call, but perhaps Philip has any other insight.

Yeah, Joe I'm pretty sure that that gets to a level of detail that.

Sure.

I'll defer to Philip I don't think we can get into that kind of detail on this call but.

Perhaps Philip has any other insight.

Philip Strawbridge: Yeah, I'll just say this, as Dan said in his comments, and we've said before, we do have a diversified supply capability. That's not to say that there won't be an impact, but we think that we have the capability in the near term. It all depends on how long it is, Joe.

Yes, I'll just say this as Dan said in his comments and we said before we do have we do have a diversified supply chain.

Capability.

Start to say that there won't be an impact, but we think that we have the capability and the near term and it all depends on how long it is Joe.

Mhm, Okay and then.

Maybe different question, obviously, the utilities are aware of this issue as well.

Speaker Change: Maybe it's a different question. Obviously, the utilities are aware of this issue as well.

Have you guys seen any indication that the utilities are.

Speaker Change: Have you guys seen any indication that the utilities are interested in taking a higher percentage than the...

Interested in taking.

A higher percentage than the <unk>.

Speaker Change: expectation for the year divided by four early this year because they're trying to build a domestic stockpile. I know you can't give specifics, but have you seen anything that indicates that?

The expectation for the year divided by four early this year because there.

Because they are trying to build a domestic stockpile.

I know you can't give specifics, but have you seen anything that indicates that.

Speaker Change: Well, I would just say this. We have always remained, and we are today, in regular communication with our customers about their needs and timing deliveries. There sometimes are discussions about

Well I would just say this we are.

We have always remained than we are today in regular communication with our customers about their needs and timing of deliveries, there's sometimes our discussions about.

Speaker Change: moving things around, not only in this crisis, frankly, but in other situations as well. Right now, there's a particular focus on it, but we're working with them to meet their needs, but I'm not in a position here today to sort of get very precise about quantities or timelines, et cetera.

Moving things around.

Not only in this.

Crisis, frankly, but in other situations as well right now there is a particular focus on it but we're working with them to meet their needs, but I'm not in a position.

<unk> here today sort of get very precise about quantities or timelines et cetera.

Okay I'll hop back in the queue.

Okay.

Speaker Change: Thank you. There are no further questions at this time. I would like to turn the call back over to Dan Leistakow for any closing

Thank you there are no further questions at this time I would like to turn the call back over to Dan <unk> to account for any closing comments.

Thank you operator, this will conclude our investor call for the fourth quarter of 2021 is always the one I think.

Dan Leistakow: Thank you, operator. This will conclude our investor call for the fourth quarter of 2021. As always, I want to thank our listeners online and our investors who called in, and we look forward to speaking with you again in the future.

Our listeners online and our investors who called in and we look forward to speaking with you again in the future.

Speaker Change: Thank you. This does conclude today's teleconference. We appreciate your participation. You may disconnect your lines at this time. Have a great weekend.

Thank you. This does conclude today's teleconference. We appreciate your participation you may disconnect your lines at this time.

Great weekend.

Yeah.

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Speaker Change: Greetings and welcome to the Centris Energy fourth quarter 2021 earnings conference call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation.

Greetings and welcome to the Suntrust Energy fourth quarter 2021 earnings Conference call.

At this time all participants are in a listen only mode.

And answer session will follow the formal presentation.

Speaker Change: If anyone should require operator assistance during the conference, please press star zero on your telephone keypad.

If anyone should require operator assistance during the conference. Please press star zero on your telephone keypad.

Speaker Change: As a reminder, this conference is being recorded. I would now like to turn the call over to Dan Lysakow, Vice President of Corporate Communications. Thank you. You may begin.

As a reminder, this conference is being recorded.

Now I'd like to turn the call over to Dan Leistikow, Vice President of corporate Communications. Thank you you may begin.

Good morning, Thank you all for us.

Today's call will cover our results for the fourth quarter and full year of 2021 ended December 31 today, we have Dan Hoffman Chief Executive Officer.

Philip Strawbridge, Senior Vice President and Chief Financial Officer, Chief administrative officer, Treasurer, and Kevan Herold.

Troll are chief accounting officer.

Philip Strawbridge: Before turning the call over to Dan Poneman, I'd like to welcome all of our callers, as well as those listening to our webcast.

Additional information concerning factors that could cause additional results to materially differ from those in our forward looking statements is contained in our filings with the SEC, including our report on Form 10-K quarterly reports on Form 10-Q .

Speaker Change: Finally, the forward-looking information provided today is time-sensitive and accurate only as of today, March 11, 2022, unless otherwise noted.

Finally, the form the forward looking information provided today is time sensitive and accurate only as of today March 11, 2000, 22022, unless otherwise noted.

This call is the property of central energy any transcription redistribution retransmission or rebroadcast of the call in any form without the express written consent of Suntrust is strictly prohibited. Thank you for your participation and I'll turn the call over to Sam Pollock.

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

I am pleased to report that Center's energy had a robust fourth quarter, which helped contribute to a record year in 2021 with annual revenue growth of 21% and $175 million.

Got it.

Our financial condition is stronger now than it has been years.

Even as we reduced our pension debt by more than $100 million and more than $40 million to retire the preferred shares we still managed to increase our cash balance to $193 8 million at year end.

Anne Poneman: In 2021, we completed a series of transactions totaling $43.3 million to repurchase and retire all remaining Series B Senior Preferred Shares at a discount.

In 2021, we completed a series of transactions totaling $43 $3 million to repurchase and retire all remaining series B senior preferred shares at a discount.

Anne Poneman: Wiping out the preferred shares, which were accruing deferred dividends, much like a debt instrument, represents a critical milestone in strengthening our balance.

Wiping out the preferred shares which were accruing deferred dividend much like a debt instrument represents a critical milestone in strengthening our balance sheet.

Anne Poneman: Furthermore, we reduced our net pension liabilities by more than $100 million since the beginning of 2021.

Furthermore, we reduced our net pension liabilities by more than $100 billion since the beginning of 2021.

Anne Poneman: As of December 31st, 2021, the long-term net liability was down to $23.1 million.

Nate.

Anne Poneman: A key piece of our success story is our LEU segment, where we saw a 64% increase in our sales volume for uranium enrichment.

Anne Poneman: That increase reflects the volume of deliveries we made in 2021 compared to the previous year.

Anne Poneman: But we've also had a great deal of success in making new long-term sales that will bring us revenue streams in the years to come.

But we've also had a great deal of success and making new long term sales that will bring us revenue streams in the years to come evenly.

Anne Poneman: even after all the deliveries we made in 2021 that came out of your order.

Even after all the deliveries we made in 2021 that came out of your order book.

Anne Poneman: We increased the overall value of the order book year over year, standing at $986 million as of December 31st.

We increased the overall value of the order book year over year standing at $986 million as of December 31.

As we look to the future we are making great progress in our drive to pioneer the market for high assay low enriched uranium or Halo. The next generation nuclear fuel that will be needed for the majority of the advanced reactor designs that are currently underdevelopment and may also be used in the existing fleet.

Reactors.

Under our existing contract with the U S Department of energy, we have been building a cascade of centrifuges near Pike in Ohio to demonstrate Haley production with the U S technology, we have developed.

Anne Poneman: Manufacturing and assembly of the centrifuges is now done.

Manufacturing and assembly of the centrifuges has now done.

Anne Poneman: All of the support systems are in place and in June .

All of the support systems are in place and in June we.

We secured approval from the U S nuclear regulatory Commission for our license Amendment request, making the tightening plant the first and only U S facility that is licensed to produce halo with an enrichment level of up to 20% uranium 235.

To provide as part of the demonstration.

Anne Poneman: The demonstration cannot begin without the storage cylinders, and it wasn't going to be possible to complete the operational portion of the demonstration before the June 1st, 2022 expiration of the current contract. In addition, the administration has now indicated that it wants to help support a longer period of demonstration and operations than would have been possible under the original contract.

Anne Poneman: As a result, and as we noted in the SEC filing last

Anne Poneman: More recently, on February 7, the department published a pre-solicitation notice to clarify the path forward. They outlined a two-phase process.

More recently on February seven the Department published a pre solicitation notice to clarify the path forward there.

Outlined a two phase process.

The first phase, which the department indicated would take up to two years would insist wood.

We strongly support the department's decision to increase the demonstration and operation period for the healing Cascade, which we believe will make it easier to fully commercialize the technology and to expand the plant in future.

Anne Poneman: We strongly support the department's decision to increase the demonstration and operations period for the HALU Cascade, which we believe will make it easier to fully commercialize the technology and to expand the plant in the future.

We are committed to pioneering the market for Hailand production, because we believe it will play a big role in the future of nuclear energy one important development in the fourth quarter, what the Congress passed and the President signed a bipartisan infrastructure package.

Anne Poneman: We are committed to pioneering the market for halibut production because we believe it will play a big role in the future of nuclear energy.

Anne Poneman: One important development in the fourth quarter was that Congress passed and the president signed a bipartisan infrastructure package.

One of the things the Bill provides nearly $2 $5 billion.

<unk> over four years to the U S Department of Energy's advanced reactor demonstration program to support construction of the first to commercial scale advanced reactors in the United States, which the developers expect will be the first of many.

Anne Poneman: Both of these reactor designs require HALU, as do many others that may be entering the market in coming years.

Both of these reactor designs require halo as do many others that may be entering the market in coming years.

Anne Poneman: Finally, let me take a moment to discuss the tragedy unfolding in Ukraine.

Finally, let me take a moment to discuss the tragedy unfolding in Ukraine.

Anne Poneman: but also how we can play a role in strengthening America's energy security and national security.

But also how we can play a role in strengthening America's energy security and National Security.

As you know, while we are working to reestablish a domestic enrichment capability four centers and for the United States. The majority of the company's revenues come from sales of uranium enrichment, we purchase from other suppliers, 100% of the world's uranium enrichment is produced by foreign state owned corporations. According to the world.

<unk> Association, Russia has 46% of global enrichment capacity. It is by far the largest global producer and it is our largest source of supply is well imports of Russian enriched uranium for many years been subject to strict limits under the Russian suspension agreement.

Package of energy related sanctions announced by the by the administration earlier. This week did not include sanctions on fuel we are watching the situation very closely we've worked in recent years to diversify our base of supply and have developed measures to mitigate the near term impact of any disruption however, our longer term disruption would.

<unk> impact the entire nuclear industry, including centers do you reiterate something I have said in the past only a robust public sector and private sector investment in a domestic enrichment capability can be a long term solution to national security and global stability concerns centre stands ready to do our part.

Anne Poneman: We have developed the only deployment ready NRC license technology that can meet America's commercial and national security requirements for HALU and other forms of enriched uranium.

We have developed the only deployment ready NRC license technology that can meet America's commercial and national security requirements for Halo and other forms of enriched uranium.

Anne Poneman: We stand ready to support the U.S. government and the U.S. nuclear industry in meeting these requirements in the years to come.

We stand ready to support the U S government and the U S nuclear industry in meeting these requirements in the years to come.

Anne Poneman: Now, for more details on the quarterly financial results, I'll turn the call over to Philip.

Now for more details on our quarterly financial results I'll turn the call over to Phil.

Thank you Dan good morning, everyone.

Dan mentioned 2021 was a record year for centers with a particularly strong fourth quarter. Our annual revenue increased to $298 3 million, which includes a $43 $5 million settlement that we secured with U S government during.

Philip Strawbridge: during the third quarter that helped us reduce our long-term liabilities for pension and post-retirement health benefits.

During the third quarter that helped us reduce our long term liabilities for pension and post retirement health benefits.

In our <unk> segment revenue increased 8% in 2021 over 2020.

Philip Strawbridge: In our LEU segment, SWU revenue increased 8% in 2021 over 2020.

Philip Strawbridge: Recall that SWU revenue in 2020 included a $32.6 million customer settlement of a supply contract that was subject to the customer's bankruptcy procedure.

Recall that <unk> revenue in 2020 included a $32 $6 million.