Quick update on the USEC loan guarantee

August 4, 2009

It now appears that the Department of Energy has agreed to defer a ruling on USEC’s loan guarantee application until “specific technological and financial goals have been met. The general consensus before the announcement of the pending denial a week ago was that the legislation for the loan guarantee program was tailor-made to allow USEC to pass it, and apart from the upstart French company Areva, no one else even bothered to apply. It seems very much as if the Department is waiting to make sure USEC qualifies for the guarantee before they rule on it, which is a good sign.

However, I am not sure what this implies for the timetable. During the initial denial, the Department had a schedule of 12-18 months before USEC could reapply (possibly also signaling that Areva is not going to get it, I hope). But it does save USEC the trouble of withdrawing its application, which allows the CEO, who publicly refused to pull it, to save himself some embarrassment.

The stock is up after hours, but I sold half of my position after the dead cat bounce over the last couple days. I’m a little better than even overall, which is surprising considering how dramatically the “story” of USEC changed last week. This either shows the wisdom of buying a stock for less than its working capital minus all its debts, or shows that I’m pretty lucky. However, value investors seem to get lucky often enough that something other than luck must be involved.

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