Status of theFuel Cycle

Industry

Jay K. ThayerVice-President of Nuclear OperationsNuclear Energy Institute

Fuel Cycle Information Exchange 2007

June 12, 2007

Today’s Briefing

Worldwide Reactor New-Build Program

Plans for New Nuclear Power Plants

Status of the Fuel Cycle Industry

Reactor New-Build Impacts on the Fuel Cycle

Fuel Cycle Regulatory Challenges

Worldwide Reactor New-Build Program

50

55

60

65

70

75

80

85

90

95

'81 '82 '83 '84 '85 '86 '87 '88 '89 '90 '91 '92 '93 '94 '95 '96 '97 '98 '99 '00 '01 '02 '03 '04 '05 '06

Sustained Reliability and Productivity

88.1% in 2000

89.4% in 2001

90.3% in 2002

87.9% in 2003

90.1% in 2004

89.3% in 200589.9% in 2006*

Source: Global Energy Decisions / Energy Information Administration

* Preliminary

Cap

acit

y fa

cto

r (%

)

U.S. Nuclear Capacity Factor

0

1,000

2,000

3,000

4,000

5,000

6,000

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

U.S. Nuclear Plant UpratesCumulative Capacity Additions at Existing Plants

2000-2011

Source: Nuclear Regulatory Commission

1,383 MWe Expected

1,002 MWe Under Review

2,964 MWe Approved

U.S. Nuclear Plant Output Growth (billion kWh)

Equivalent to 27 new 1,000-megawatt power plants

576.9

787.2

1990 2006** Preliminary

Source: Global Energy Decisions / Energy Information Administration

Updated: 4/07

48 Granted 8 in 20061 in 2007

8 Under NRC Review 6 Filed in 2006

25 Intend to Renew

Source: U.S. Nuclear Regulatory Commission

22 Unannounced

Renewal of Operating Licenses Continues

Strong Public Support Continues

80% Important

Future Role

81% Renew

Licenses

71%Prepare

toBuild

56%Definitely

Build

66%Acceptable

atNearest

Site

Source: Bisconti Research Inc.April 2007 poll of 1,000 U.S. adults; margin of error is +/- 3%

Plans forNew Nuclear Power Plants

Electricity Marketplace Drives the Need for New Nuclear Power Plants

Growing need for baseload generation

– Near-term need for new baseload capacity (e.g., Northeast, mid-Atlantic, Southeast, South, Texas)

Increasing environmental constraints and compliance costs, potential controls on carbon emissions

Chronic volatility in natural gas prices due to unsustainable pressure on natural gas supply

Increasing support for nuclear energy from the public and policymakers

Preparing for New Nuclear Plant Construction

Licensing

– 3 early site permits in 2007 (Exelon, Dominion, Entergy)

– 2 designs certified (ABWR, AP1000), 2-3 more expected (ESBWR, EPR, US-APWR)

– 16 companies, consortia preparing 20 license applications for as many as 30 reactors

Major investment

– Design and engineering

– Long-lead procurement

– U.S. manufacturing capability

– Fuel cycle (especially uranium mining and enrichment)

Reactor Construction Forecasts(Worldwide)

443 existing reactors (~375GWe)

30 new reactors under construction (24,250 MWe)

64 new reactors planned

158 new reactors proposed

>100 new reactors under consideration

Additional capacity added via up-rates and plant life

extensions (primarily in USA)

Future OutlookNew Construction Forecasts

(Orders; GW Cumulative)

Europe + Asia and IndiaAmericas

1720

25

2010 2015 2020

1217

21

2010 2015 2020

38

47

58

2010 2015 2020

Source: GE Nuclear Fuels – April 2007

Status of the Fuel Cycle

Industry

Projected Fuel Demands

170-200

10-20 (?)

230-300

75 (?)

2025: World

: USA

110

4

180

57

2006: World

: USA

Primary Uranium Production

(Million Pounds U3O8)

Uranium

Demand(Million Pounds U3O8)

Sources: OECD-NEA, Ux Consulting Co, World Nuclear Assn, NEI

Courtesy:

Jim Mustard

Uranium Production/Consumption Imbalances

Source: Ux Consulting Co.: Uranium Market Fundamentals – May 2007

0

20

40

60

80

100

120

140

160

180

200

220

240

260

47 50 53 56 59 62 65 68 71 74 77 80 83 86 89 92 95 98 01 04 07 10 13 16 19

Mill

ion

poun

ds U

3O8.

$0

$10

$20

$30

$40

$50

$60

$70

$80

$90

$100

$110

$120

$130

US$

/lb U

3O8

Eastern ProductionWestern ProductionWNA 2005 UpperRequirementsConstant $ Price

© UxC

World U Supply & DemandWorld U Supply & Demand19471947--20062006

Source: Ux Consulting Co.: Uranium Market Fundamentals – May 2007

Major World Supply SourcesMajor World Supply Sources20022002--2020 2020 –– High Expansion CaseHigh Expansion Case

Source: Uranium Market Outlook, October 2006

0

25

50

75

100

125

150

175

200

225

250

275

02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 20

Mill

ion

poun

ds U

3O8

InventoryShiftingInventoryDrawdownSecondarySuppliesNewProductionExistingProduction

World Market Demand Range

0

5

10

15

20

25

30

35

40

45

50

1949

1951

1953

1955

1957

1959

1961

1963

1965

1967

1969

1971

1973

1975

1977

1979

1981

1983

1985

1987

1989

1991

1993

1995

1997

1999

2001

2003

2005

Year

Mill

ion

s o

f P

ou

nd

s U

3O8

Source: Strathmore Minerals – April 2007

US Uranium Production 1949 - 2005

Conversion Industry

Honeywell’s Metropolis facility is the sole US converter

Expansion to 15 million kgU/yr completed May 2007

AREVA Comurhex II (France) facility expanding to 15-

20 million kgU/yr (both replacement and new capacity)

Discontinuation of the Russian HEU program in 2013

(which provides 7 million kgU/yr or 10% of the world’s

conversion supply) will have major market impacts

Conv e r Dy n

Comur he x

Ca me c o

Te ne x

Toshi ba ( BNFL) HEU LEU I HEU LEU I I

Fe e d Compone nt

Ta i l s

DOE, TVAM OX + Re pU

0

10000

20000

30000

40000

50000

60000

70000

80000

90000

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

DemandDemand

Source: M. Dzhakishev (Kazatomprom) – April 2007

World Conversion DemandWorld Conversion Demandand Nominal Capacitiesand Nominal Capacities

Enrichment Industry

National Enrichment Facility licensed and under construction in New Mexico – 3 million SWU

USEC’s American Centrifuge Plant received 30-year COL license; lead cascade testing to start 2007

Other Developments:

– Discontinuation of Russian HEU agreement after 2013 (provides ~60% of domestic SWU)

– Reduction in enrichment tails assay from 0.30 to 0.25% U235

due to rise in U price, but little spare capacity

– GE SILEX laser enrichment process will pilot in 2008

Enrichment Demand & Supply 00-’20

Source: Enrichment Market Outlook

05

1015202530354045505560657075

00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 20

Mill

ion

SW

U

Repu/Mox

RU HEU

Tenex

Other

LES/NEF

Urenco

Eurodif

USEC

WNA 2005 World SWU Demand Upper & Reference

Fuel Fabrication

Major industry consolidation

Excess production capacity in USA & Europe;

powder production capacity poorly distributed

Increase in enrichment to ~5% U235

Industry focus on improving fuel reliability

Research and engineering focus on new fuel

designs for Gen III and IV reactor designs

Conversion ≈ $1,500,000

Enrichment ≈ $19,000,000

Uranium ≈ $11,000,000

Fabrication ≈ $7,000,000

4%

18%

50%

28%

Percent ofTotal Cost

Costs estimates based on TradeTech’s 11/30/03 long term North America prices

Conversion ≈ $3,675,000

Enrichment ≈ $31,000,000

Uranium ≈ $66,000,000

Fabrication ≈ $8,000,000

3%

7%

29%

61%

Percent ofTotal Cost

Costs estimates based on TradeTech’s 03/31/07 long term North America prices

2003 ≈ $38,500,000 2007 ≈ $108,675,000

Fuel Cost for an Average U.S. Nuclear Power Plant Re-Load

(300,000 kgU as natural UF6)

Fuel Cycle Regulatory Challenges

Regulatory Challenges

Uranium Recovery (Part 40):– overlapping EPA-NRC jurisdiction on groundwater

quality heading towards resolution

– Commission support for a Generic Environmental Impact Statement (GEIS) for in-situ mines

– withdrawal of exploration lands

– environmental and social permitting burdensome

– diverse state initiatives to expedite new mine permitting (5-10 years)

Regulatory Challenges

Enrichment and Fuel Fabrication (Part 70):– ISA approach has yielded a more thorough

understanding and documentation of the safety basis

– consequence criteria have made application of safety systems and protections more objective

– maintenance of the ISA as a “living document” is progressing well

– inspections are evolving to use the ISA Summary as a basis for inspection

Regulatory Challenges

Enrichment and Fuel Fabrication (Part 70):– Steep learning curve for Subpart H implementation

• inadequate NRC resources for timely reviews of ISA Summary submissions

• need for risk-informed, performance-based regulatory guidance

• Interim Staff Guidance should not be considered to be regulatory requirements

• seek consistent interpretation of regulatory requirements

Regulatory Challenges

Enrichment and Fuel Fabrication (Part 70):– major gap on chemical safety re NRC oversight

– facility change process (§70.72) interpretations varied

– Enforcement policy not aligned with risk insights gained from the ISA. Must directly tie to Part 70

– license renewal process far too arduous and time-consuming. Must relate to Part 70 regulations

Concluding Thoughts

Concluding Thoughts

Adoption of risk-informed, performance-based licensing to fuel cycle licensees is progressing well

Alignment of regulatory guidance and enforcement policies is needed

Expeditious processing of license amendments, ISA Summaries and license renewals is essential to support the anticipated new-build reactor program

Streamlined licensing for new uranium mines is of critical importance