Why Centrus Energy Stock Heated Up Today
Key Points
Centrus Energy says it will produce its own centrifuges for nuclear enrichment.
Production of the centrifuges should begin in 2029.
Centrus Energy (NYSE: LEU) stock soared 14.2% through 3:15 p.m. ET Friday after the nuclear fuel supplier announced plans to expand into centrifuge manufacturing for the enrichment of uranium.
Historically, Centrus Energy has focused on buying and selling, to nuclear plant operators, enriched uranium for use as nuclear fuel. It's lately floated plans to buy and then enrich uranium on its own, including High-Assay, Low-Enriched Uranium, or HALEU, for use in advanced nuclear reactors -- and that's what today's announcement pertains to.
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Centrus's plans
Initially, Centrus will produce Low-Enriched Uranium (LEU) at its Piketon, Ohio, facility, and Centrus has $2.3 billion worth of supply contracts already. First, though, Centrus needs centrifuges to concentrate the uranium into a fuel-grade product.
As part of its "multi-billion-dollar uranium enrichment expansion," the company announced today that it will begin centrifuge manufacturing at a factory in Oak Ridge, Tenn. The centrifuges made there can then be used to produce LEU and HALEU nuclear fuel in Ohio.
Centrus math
Centrus is awaiting confirmation of Department of Energy funding, but says award of these funds is "imminent." The company puts the value of the DOE contracts at "~$900 million per task order," with separate task orders expected for the production of both LEU and HALEU.
The company has already secured $1.2 billion in funding "via convertible note transactions," now has $1.6 billion in the bank, and has announced a sale of stock to raise $1 billion more.
Centrus is putting the pieces in place to dominate uranium enrichment in the U.S. Centrifuge production won't start till 2029, and enrichment presumably thereafter. Time's getting tight, but with most new nuclear power start-ups not expected to begin operating before 2030, the company should be ready to begin supplying nuclear fuel by the time it's needed.
Rich Smith has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.