As budget conferees in Congress look for ways to eliminate wasteful spending, find revenues that don't look like tax hikes and fund the remainder of this fiscal year (and a way forward into the fiscal future), there are plenty of folks with their hands out, hoping for undeserved federal support in the scrum of the negotiations.
A case in point is the United States Enrichment Corporation, which recently released its third quarter results, reporting a net loss of $44.3 million. That marks the fourth unprofitable quarter in a row, and 10th in the last 12. The company concedes it will need more government support to keep operating. Over the years, USEC has been adept at securing federal subsidies from every possible channel – including as add-ons to a continuing resolution, which Congress happens to be negotiating, again, right now.
Providing more subsidies for USEC is unwise and throws good money after bad. One illustration of this is USEC's American Centrifuge Project. In May, 2013, USEC announced it would close its Paducah, Ky., facility this past spring, leaving the uranium-enriching company without a means to enrich uranium. The ACP was intended to demonstrate that USEC's new centrifuge technology is viable before USEC spends billions more (that it would need to borrow) to construct a new full-scale enrichment facility. Progress on this research and development program has not fared well.
USEC acknowledged this bleak outlook and states, "we do not believe that our plans for ACP commercialization are economically viable." So the company, in effect, is admitting it doesn't currently have a means to, well, enrich uranium and the possibility of regaining such capability in the near future is slim.
Unsurprisingly, investors' reaction to such an acknowledgement was negative: USEC stock lost more than 20 percent of its value in the first day of trading after the company's announcement. Even before the recent plummet, USEC's poor stock performance merited its removal from the New York Stock Exchange according to the institution's rules. The NYSE has already threatened to do so and any further price slides aren't likely to help USEC's chances. Delisting would eliminate any hope USEC has of raising money from new investors. In fact, USEC currently does not have the means to pay $530 million owed to existing investors.
In such dire straits, the company notes, there's only one source of funding that could bail them out: the taxpayer. The company doesn't have any financing lined up after December and would need federal financing for years until ACP is ready for commercial deployment. USEC has spent $1.21 million lobbying Congress this year, requesting subsidies.
Just a month after shutting down the government and with statements from both sides of political aisle worrying that important programs need to tighten their belts, it's time for the Department of Energy and Congress to say no and end the stream of subsidies to an outright failure. There's no sense in buying tickets for a ship that's already sunk.
Ryan Alexander is the president of Taxpayers for Common Sense.