In a move that was as outrageous as it was unsurprising, appropriators included $62 million in the omnibus now being pushed through Congress for the United States Enrichment Corporation, or USEC. They even tacked on an additional $56.7 million in transfer authority, sweetening the total to possibly nearly $119 million. USEC was formed as a government entity in 1992 to enrich uranium for fuel in nuclear power plants and was later privatized in 1998, but that didn’t stop the streams of federal money flowing to the corporation. Since then, the Department of Energy has funneled hundreds of millions to USEC through direct project financing and less directly, through uranium transfers.
Despite all the handouts, USEC has struggled financially for years – they’ve reported only six profitable quarters in the last five years, and only one quarter in the black since 2010. In May, the corporation announced it would be closing operations at its facility in Paducah, Kentucky, leaving the uranium enrichers without a means of enriching uranium. Throughout the summer of 2013, the company’s stock (NYSE:USU) performed so poorly that it was threatened with being de-listed from the stock exchange. Finally, after losing $1.8 billion in the three years prior to the fourth quarter of 2013, in December the company announced it would file for bankruptcy.
Evidently imminent bankruptcy is not a disqualifying factor for receiving federal funds, because appropriators decided to give $62 million to the moribund corporation anyway. The writers of the omnibus did stipulate, however, that DOE would have to submit a request to the House and Senate Appropriations committees if they want to give USEC some additional funding for fiscal year 2014 that’s already been set aside for them. If the request is approved, USEC could receive $56.7 million on top of the $62 million that was directly appropriated.
Giving money to a company on the eve of their bankruptcy seems especially senseless when the $62 million is considered in context. USEC is nearing completion of its centrifuge technology research, development, and demonstration (RD&D) project that has received $257 million from the DOE since June 2012, and is being further funded by the omnibus. Commercializing the technology, however, would require billions more USEC doesn’t have and wouldn’t be “economically viable without additional government support,” as the company notes. In addition, $530 million worth of bonds USEC issued will become mature in October, but they have no way to repay their investors. In fact, their only plan at the moment, according to recent financial filings, is to give some stock to the bondholders and issue new bonds, which are almost exclusively backed by the promise of future government handouts.
The first day of Economics 101, students are taught the concept of sunk costs – the idea that you shouldn’t throw good money after bad and every future dollar invested should be justified looking forward, not because of the money wasted in the past. Lawmakers must have skipped class that day.