In addition, USEC’s plan assumes that $400 million to $600 million will be transferred out of the Treasury when USEC is sold. Expected Impact on the U.S. Treasury

The total impact on the U.S. Treasury of privatization will depend on the proceeds from the sale, projected by Morgan to be between $1.5 billion and $1.8 billion (less transaction fees), plus any additional tax revenues that a private USEC may pay in the future to the government, less the cash that USEC will take with it from its Treasury account when it is sold. While the corporation would play a key role in the privatization, the Treasury would take the lead. USEC’s privatization plan assumes that most of the government corporation’s liabilities will remain with the government. For example, the analysis needs to be updated to reflect current market conditions and recent administration decisions. According to our estimates, the government could eventually pay $17.8 billion or more in costs associated with the former DOE program whether or not USEC is privatized. As discussed in our report, we recognize that under the privatization plan and a subsequent letter, the Department of the Treasury will play an active role in the privatization and will concur in key decisions. Under the first tier, USEC would attempt to sell the uranium in foreign countries. Because the act does not define “undue cost or ongoing obligation” or “net present value of the corporation,” our report identifies the government’s major costs and ongoing obligations associated with the enrichment program and the net present value of USEC under two scenarios: (1) if it were to remain a government corporation and (2) if it were to be sold to the private sector.
Why GAO Did This Study

Pursuant to a legislative requirement, GAO provided information on the proposed privatization of the U.S. Enrichment Corporation (USEC), focusing on: (1) the net present value of the corporation; and (2) whether the privatization plan would result in any ongoing obligation or undue cost to the government.

What GAO Found

GAO found that: (1) the USEC privatization plan predicts that USEC stock could sell for up to $1.8 billion and USEC would take up to $600 million out of its Treasury account after privatization; (2) after privatization, USEC could pay taxes valued up to $1.1 billion annually, although it could have options to minimize taxes; (3) the current net present value analysis needs revision, since it does not reflect the value of excess inventory and current market conditions; (4) although USEC will play the lead role in determining how and when key privatization decisions are made, the Department of the Treasury will also play an active role and concur in key decisions; (5) safeguards may need to be implemented to protect taxpayers if USEC is undervalued when sold; (6) whether or not USEC is privatized, the U.S. government has ongoing obligations related to the uranium enrichment program and could pay $17.8 billion or more to meet requirements; and (7) the privatization plan assumes that most of USEC liabilities would remain with the government.