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UNITED STATES
SECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549



FORM 10-K

(Mark One)ý

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934For the fiscal year ended December 31, 2008oro

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934For the transition period
from                 to


Commission file number 001-33830

EnergySolutions,Inc. (Exact name of registrant as specified in its charter)

Delaware(State or Other Jurisdiction of
Incorporation or Organization)

51-0653027(I.R.S. Employer Identification Number)423 West 300 South, Suite 200Salt Lake City, Utah

84101(Address of principal executive offices)

(Zip Code)


Registrant's
telephone number, including area code:(801) 649-2000

Securities
registered pursuant to Section 12(b) of the Act:

Title of Class

Name of Exchange on which registeredCommon Stock, $0.01 par value per share

The New York Stock Exchange


Securities
registered pursuant to Section 12(g) of the Act:None

Indicate
by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities
Act. Yes o    No ý

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the
Act. Yes o    No ý

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past
90 days. Yes ý    No o

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§ 229.405 of this
chapter) is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this
Form 10-K or any amendment to this Form 10-K. o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting
company. See the definitions of "large accelerated filer," "accelerated filer," and "smaller reporting company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer ý

Accelerated filer o

Non-accelerated filer o (Do not check if a smaller reporting company)

Smaller reporting company o


Indicate
by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the
Act). Yes o    No ý

The aggregate market value of the voting and non-voting common equity held by non-affiliates of the registrant on June 30, 2008, was
approximately $744 million based upon the closing price reported for such date on the New York Stock Exchange. For purposes of this disclosure, shares of common stock held by persons who hold
more than 5% of the outstanding shares of common stock and shares held by executive officers and directors of the registrant have been excluded because such persons may be deemed to be affiliates.
This determination of executive officer or affiliate status is not necessarily a conclusive determination for other purposes.

As
of February 24, 2009, 88,343,659 shares of registrant's common stock were outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

Sections of Registrant's Proxy Statement to be filed with the Securities and Exchange Commission no later than April 30, 2009, namely: "Compensation
Discussion and Analysis," "Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters," "Certain Relationships and Related Transactions and Director Independence"
and "Principal Accounting Fees and Services," are incorporated in this Form 10-K by reference under Part III.



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ENERGYSOLUTIONS, INC.  ANNUAL REPORT ON FORM 10-K  For Fiscal Year Ended December 31, 2008



PagePART I.Item 1.

Business


1Item 1A.

Risk Factors


30Item 1B.

Unresolved Staff Comments


47Item 2.

Properties


48Item 3.

Legal Proceedings


49Item 4.

Submission of Matters to a Vote of Security Holders


49PART II.Item 5.

Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities


50Item 6.

Selected Financial Data


51Item 7.

Management's Discussion and Analysis of Financial Condition and Results of Operation


54Item 7A.

Qualitative and Quantitative Disclosures about Market Risk


81Item 8.

Financial Statements and Supplementary Data


81Item 9.

Changes in and Disagreements With Accountants on Accounting and Financial Disclosure


81Item 9A.

Controls and Procedures


82Item 9B.

Other Information


82PART III.Item 10.

Directors, Executive Officers and Corporate Governance


83Item 11.

Executive Compensation


88Item 12.

Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters


88Item 13.

Certain Relationships and Related Transactions and Director Independence


88Item 14.

Principal Accounting Fees and Services


89PART IV.Item 15.

Exhibits, Financial Statement Schedules


89Signatures


90


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GLOSSARY OF DEFINED TERMS

The following defined terms are used throughout this Annual Report on Form 10-K.

AEA

Atomic Energy Act of 1954, as amendedARO

Asset Retirement ObligationASX

Autosampling Pneumatic Transfer SystemBNGA

British Nuclear Group of AmericaCERCLA

Comprehensive Environmental Response, Compensation and Liability Act of 1980D&D

Decontamination and DecommissioningDOD

U.S. Department of DefenseDOE

U.S. Department of EnergyEPA

U.S. Environmental Protection AgencyERA

Energy Reorganization Act of 1974HSE

Health and Safety ExecutiveHSWA

Hazardous and Solid Waste Amendments of 1984LIBOR

London Interbank Offer RateLLRW

Low-Level Radioactive WasteM&O

Management and OperationMLLW

Mixed Low-Level WasteNDA

U.K. Nuclear Decommissioning AuthorityNORM

Naturally Occurring Radioactive MaterialNRC

Nuclear Regulatory CommissionNWPA

Nuclear Waste Policy Act of 1982NYSE

New York Stock ExchangeORNL

Oak Ridge National LaboratoryOSHA

Occupational Safety and Health AdministrationPRS

Paducah Remediation Services, LLCRCRA

Resource Conservation and Recovery Act of 1976REA

Request for Equitable AdjustmentRFP

Request for ProposalRSA 1993

Radioactive Substances Act 1993RSMC

Reactor Sites Management CompanySAFSTOR

Safe Storage (nuclear plant in retirement)SEC

U.S. Securities and Exchange CommissionSEPA

Scottish Environment Protection AgencySMUD

Sacramento Municipal Utility DistrictSRS

Savannah River SiteTN DEC

Tennessee Department of Environment and ConservationTSCA

Toxic Substances Control Act of 1976USEC

United States Enrichment CorporationWCS

Waste Control SpecialistsWRPS

Washington River Protection Solutions LLC


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This Annual Report on Form 10-K ("Form 10-K") contains forward-looking statements that involve risks
and uncertainties. Many of the forward-looking statements are located in "Management's Discussion and Analysis of Financial Condition and Results of Operations." Forward-looking statements provide
current expectations of future events based on certain assumptions and include any statement that does not directly relate to any historical or current fact. Forward-looking statements can also be
identified by words such as "anticipates," "believes," "estimates," "expects," "intends," "plans," "predicts," and similar terms. Forward-looking statements are not guarantees of future performance
and the Company's actual results may differ significantly from the results discussed in the forward-looking statements. Factors that might cause such differences include, but are not limited to, those
discussed in the subsection entitled "Risk Factors" under Part I, Item 1A of this Form 10-K. We undertake no obligation to revise or update any forward-looking
statements for any reason, except as required by law.



PART I

Item 1.    Business

Overview

We are a leading provider of specialized, technology-based nuclear services to government and commercial customers. Our customers rely
on our expertise to address their needs throughout the lifecycle of their nuclear operations. Our broad range of nuclear services includes engineering, in-plant support services, spent
nuclear fuel management, decontamination and decommissioning ("D&D"), operation of nuclear reactors, logistics, transportation, processing and disposal. We also own and operate strategic facilities
that complement our services and uniquely position us to provide a single-source solution to our customers.

We
derive almost 100% of our revenues from the provision of nuclear services and believe that virtually every company or organization in the United States that holds a nuclear license
uses our services or facilities, directly or indirectly. Our government customers include the United States Department of Energy ("DOE"), United States Department of Defense ("DOD") and United Kingdom
Nuclear Decommissioning Authority ("NDA"). Our commercial customers include many of the largest owners and operators of nuclear power plants in the United States, such as Constellation Energy
Group, Inc., Duke Energy Corporation, Entergy Corporation, Exelon Corporation and Florida Power & Light Company. We have entered into long-term arrangements, which we refer
to as "life-of-plant" contracts, with nuclear power and utility companies representing 84 of the 104 operating nuclear reactors in the United States. Under these
long-term arrangements, we have agreed to process and dispose of substantially all low-level radioactive waste ("LLRW") and mixed low-level waste ("MLLW") generated
by their nuclear power plants, and ultimately the waste materials generated from the D&D of those plants. Our commercial customers also include hospitals, pharmaceutical companies, research
laboratories, universities or research reactors, industrial facilities and other commercial facilities.

We
operate strategic facilities for the safe processing and disposal of radioactive materials, including a facility in Clive, Utah, four facilities in Tennessee and two facilities in
Barnwell, South Carolina. According to the General Accounting Office, our facility in Clive, Utah is the largest privately-owned LLRW disposal site in the United States and currently handles over 95%
of all commercial LLRW disposal volume in the United States. We also manage 10 sites in the United Kingdom with 22 reactors for the NDA, of which four currently operate producing electricity and 18
are in various stages of decommissioning. We have a comprehensive portfolio of nuclear processing technology and know-how, supported by more than 175 patents that we own or license. As of
December 31, 2008, we had more than 5,000 employees, including approximately 1,150 scientists and engineers and 400 radiation and safety professionals. Approximately 3,000 of our employees are
located

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at
the 10 sites we manage in the United Kingdom. We also manage approximately 200 site employees at various DOE sites. We have received multiple awards for our safety record.

We
provide our services through four segments: Federal Services; Commercial Services; Logistics, Processing and Disposal ("LP&D"); and International. When a project involves the
provision of both specialized on-site nuclear services and processing and disposal services, our Federal Services or Commercial Services segment, depending on the type of customer, will
coordinate with our LP&D segment to provide integrated services.

Since
2005, we have expanded and diversified our operations through a series of strategic acquisitions, including the D&D division of Scientech, LLC in October 2005, British
Nuclear Group of America ("BNGA") in February 2006, Duratek, Inc. ("Duratek") in June 2006, Safeguard International Solutions, Ltd. ("Safeguard") in December 2006, Parallax, Inc.
("Parallax") in January 2007, Reactor Sites Management Company ("RSMC") in June 2007, NUKEM Corporation ("NUKEM") in July 2007, and Monserco Limited ("Monserco") in December 2007. Our acquisition of
RSMC significantly expanded our international capabilities. Beginning with the second quarter of 2007, we began reporting results from our operations outside North America in a new International
segment. For the year ended December 31, 2008, we derived 65.1% and 28.3% of our revenues and segment operating income, respectively, from our operations outside North America.

Our Segments

We provide specialized, technology-based nuclear services to government and commercial customers through our Federal Services,
Commercial Services, LP&D and International segments.

Federal Services

We derive revenues from U.S. government customers for the management and operation ("M&O") or clean-up of DOE facilities
that are contaminated by radioactive materials. The services that we provide to our government customers include the on-site characterization, sorting, segregation, transportation,
management and disposal of classified and unclassified solid and liquid LLRW, MLLW and other special wastes. We also manage high-level radioactive waste inventories at a number of
government sites, pending their future off-site disposition. In addition, we perform D&D and demolition of facilities, including disposal of radioactive materials. Our work includes the
development of technologies, engineering, fabrication and operation of facilities to reduce the hazards posed by high-level radioactive waste pending final disposition in a national
geological repository. In addition, we derive revenues from the provision of D&D, processing and disposal services to the DOD, including decontamination of classified equipment and retrieval or
recycling of other classified or specialty parts. In some instances, as a member of a Tier 1 project team, we also manage site operations.

Our
government work generally involves providing customized waste management, decommissioning, environmental remediation, engineering and technology-based expertise at major DOE
facilities, such as Richland, Washington, Idaho Falls, Idaho, Los Alamos, New Mexico, Oak Ridge, Tennessee, or Savannah River, South Carolina. Our contract role for government customers is either
under Tier 1 or Tier 2 contracts. Under a Tier 1 contract, we typically provide services as an integrated member of a prime contract team. Where we act as part of a Tier 1
team under a prime contract with the DOE, our employees often work alongside and manage dedicated employees at the site who are employed by the Tier 1 contractor for the duration of the prime
contract and are covered by local benefit packages but are not employees of any of the Tier 1 team members. Under a Tier 2 contract arrangement, we provide services to Tier 1
contractors on a subcontracted basis.

Government
customers have in the past and may in the future account for a significant portion of our revenues. During the fourth quarter of 2007 and the first quarter of 2008, we assumed
voting control over two joint ventures at the request of the DOE. Consolidation of these joint ventures added

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$113.8 million
to our segment revenues in 2008. Revenues from DOE contractors and subcontractors represented approximately 11.2% in 2008, 16.7% in 2007 and 47.9% in 2006. The decrease in 2008
and 2007 is primarily the result of significantly increased revenues in the International segment due to the acquisition of RSMC in June 2007.

Much
of our Federal Services work is highly customized to the specific needs of the site. The following are examples of our Federal Services work in recent years:

Fernald Closure Project

The 1,050-acre Fernald site was a former uranium processing facility located 18 miles northwest of Cincinnati, Ohio. In
1989, after 37 years of operations to support the U.S. weapons program, the DOE shut down uranium metal production and began to concentrate on environmental compliance, radioactive and mixed
waste management and remediation. Since 1992, Fluor Fernald, Inc. has managed the clean-up of the site.

As
an integrated Fluor Fernald team member, we led the waste management and mixed waste projects, providing project management and environmental expertise for site-wide waste
retrieval, sorting and segregation, packaging, shipping and transportation for radioactive and hazardous materials disposition. A significant amount of the LLRW removed from Fernald was transported to
and disposed of at our Clive facility. We also provided management and technical staff who supervised more than 300 dedicated professional and technical employees of the DOE at the site. As an
integrated team member, we played a key role in the off-site disposition of highly radioactive uranium residues stored in two on-site silos at Fernald. Our services included
the provision of key personnel to support the operational management, processing design, logistics and transportation systems. The Fernald closure project was substantially completed in October 2006.

Hanford Site Operations

The 586-square mile Hanford site was a former plutonium production complex with nine nuclear reactors and associated
processing facilities located along the Columbia River in southeastern Washington State. In 1989, the DOE, the U.S. Environmental Protection Agency, or EPA, and the Washington State Department of
Ecology signed the Tri-Party Agreement, which established milestones for the clean-up of the Hanford site. Currently, the DOE is shifting a portion of the site from inactive
storage to waste characterization, treatment, storage and disposal operations. Massive plants are being designed and built either to vitrify Hanford's waste or to contain it in blocks of concrete
grout. About 300 contaminated buildings are slated for clean up, and a radioactive waste packaging program is expected to continue until the Hanford clean-up is complete.

On
May 29, 2008, we won the contract for the management of all high-level waste/tanks systems at Hanford as part of the Washington River Protection
Solutions LLC ("WRPS") team. WRPS has the responsibility for safely managing approximately 53 million gallons of radioactive and chemical waste until it can be prepared for disposal.
This is one of the largest and most complex environmental cleanup projects in the DOE complex. The waste, stored in 177 underground tanks near the center of the Hanford Site, will be vitrified into
glass logs in a treatment plant that is now under construction at Hanford. WRPS will also be responsible for safely storing the treated waste until permanent disposal
facilities are available. Under separate agreements, we provide management and technical services as a subcontractor to other prime contractors at the Hanford site. For example, we designed the
vitrification system for the high-level waste treatment plant, and we continue to provide engineering, research and testing services to the DOE. We also manage several subprojects,
including the following:



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Oak Ridge National Laboratory Operations

Oak Ridge National Laboratory, or ORNL, located in Oak Ridge, Tennessee, is one of the DOE's largest science and energy laboratories.
Managed since April 2000 by a
partnership of the University of Tennessee and Battelle Memorial Institute in Columbus, Ohio, ORNL was established in 1943 as a part of the Manhattan Project to pioneer a method for producing and
separating plutonium. We have provided on-going technical and management support to the ORNL since 1987. Our work at ORNL includes sampling, characterization, abatement, segregation,
packaging, transportation, D&D and disposal of hazardous materials. We are also responsible for sorting, segregating and reducing the volume of the LLRW at ORNL.

Savannah River Site Operations

Established in 1950 by the Atomic Energy Commission, the DOE's Savannah River Site, or SRS, is a 310-square mile facility
near Aiken, South Carolina. The site was constructed during the early 1950s to produce materials, primarily tritium and plutonium-239, used in the fabrication of nuclear weapons in support
of U.S. defense programs. Due to changes in the national security strategy of the United States, many SRS facilities are no longer needed to produce or process nuclear materials. The DOE has
identified approximately 300 structures as surplus and requiring clean-up, ranging in size and complexity from large nuclear reactors to scores of small storage buildings.

The
Washington Savannah River Company operated the SRS since 1992. As an integrated Washington Savannah River Company team member, we supported the liquids waste management contract at
the site. High-activity liquid waste is generated at SRS as by-products from the processing of nuclear materials for national defense, research and medical programs. The waste,
totaling about 36 million gallons, is currently stored in 49 underground carbon-steel waste tanks grouped into two "tank farms" at SRS. This contract was substantially completed in 2008.

Our
scope encompassed managing the high-level waste tanks and the processing of those liquids. This includes both the solidification of highly radioactive liquid wastes
stored in SRS's tank farms and the disposal of liquid low-level waste generated as a by-product of the separations process and tank farm operations. This low-level
waste is treated in the Effluent Treatment Facility.

We
are also part of a team that has been contracted by the DOE for the design, construction, commissioning and operation of a new salt waste processing facility at the SRS. The facility
will be a pre-treatment plant to remove cesium from DOE's inventory of 38 million gallons of highly radioactive waste stored in 49 tanks at the SRS. On December 8, 2008, the
DOE awarded the Savannah River Site's contract to manage liquid waste to Savannah River Remediation, LLC, under which we are a pre-selected tier 2 contractor. Under this
contract, we will provide technology support to upgrades at the SRS vitrification facility.

Idaho National Laboratory

Established in the late 1950s, the Idaho National Laboratory comprises approximately 700 square miles and was originally established as
the National Reactor Testing Station. More than 60 nuclear reactors were designed, built and tested on the site. Spent nuclear fuel reprocessing missions were subsequently added to the site, whereby
the DOE extracted highly enriched uranium from used nuclear

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fuel
for recycling into the weapons program. Idaho was also a disposal site for transuranic waste generated during processing operations at Rocky Flats in Colorado.

We
built the Advanced Mixed Waste Treatment Plant at the Idaho National Laboratory to safely treat transuranic-contaminated waste for final disposal at the Waste Isolation Pilot Plant in
Carlsbad, New Mexico. The contract for continued operation of the Advanced Mixed Waste Treatment Plant is currently out for competition. We have submitted an application with respect to the contract
and expect the contract to be awarded in August of 2009.

Portsmouth Gaseous Diffusion Plant

The Portsmouth Gaseous Diffusion Plant in Piketon, Ohio occupies approximately 640 acres, situated in a 3,714 acre federal site. It is
operated by the United States Enrichment Corporation ("USEC"), a subsidiary of USEC Inc. The plant has a long history of enriching uranium for defense and commercial nuclear power needs,
beginning in the early 1940s with a U.S. defense initiative to produce fissionable material for the atomic bomb. Portsmouth ended enrichment operations in 2001. Piketon is expected to be the site for
USEC's next-generation uranium enrichment facility, the American Centrifuge Plant.

Through
a joint venture with Los Alamos Technical Associates, we are currently providing environmental management services at the Portsmouth Gaseous Diffusion Plant project, including
site characterization, decommissioning, waste processing and environmental restoration.

The Paducah Gaseous Diffusion Plant

The Paducah Gaseous Diffusion Plant occupies approximately 750 acres of a 3,600 acre federal site located approximately 15 miles west
of Paducah, Kentucky. The Paducah site began operations in 1952 to produce low assay enriched uranium for use as commercial nuclear reactor fuel. In 1993 uranium enrichment operations were turned over
to USEC as a result of the Energy Policy Act of 1992. Under USEC, production of enriched uranium for use in the United States and abroad continues today.

Over
the past several years, we have been responsible for the waste management program at the Paducah site. In 2009, we will transition to work on the decommissioning program that will
support decommissioning of over 50 facilities at the site.

Atlas Mill Tailings Cleanup

In June 2007, the DOE awarded us a $98.4 million contract to clean up the Atlas mill tailings that lie alongside the Colorado
River near Moab, Utah. The site encompasses approximately 435 acres, of which approximately 130 acres contain uranium mill tailings (16 million tons). This contract includes the design and
construction of the disposal cell, design and construction of the transportation system and shipment and disposal of 2.5 million tons of tailings. The contract runs through September 2011.

Commercial Services

We provide a broad range of on-site services to commercial customers, including commercial power and utility companies that
operate nuclear power plants, pharmaceutical companies, research laboratories, universities, industrial facilities and other entities that generate radioactive materials or are involved in the nuclear
services industry. Our services include D&D, project planning, site surveys, radioactive material characterization and management, liquid waste processing, spent nuclear fuel services, emergency
response and other nuclear services.

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Examples
of our on-site commercial nuclear services include:



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Logistics, Processing and Disposal

We provide a broad range of logistics, processing and disposal services and own and operate strategic facilities for the safe
processing and disposal of radioactive materials. Our processing and disposal facilities include our disposal facility in Clive, Utah, which is the largest privately-owned LLRW disposal site in the
United States, three processing facilities in Tennessee and separate processing and disposal facilities in Barnwell, South Carolina. We operate the Barnwell disposal facility pursuant to a
long-term lease with South Carolina. We also own a facility in Tennessee that we believe is the only commercial facility in the world with the ability to cast, flat-roll and
machine casks and other products from depleted uranium. We believe that virtually every company or organization that holds a nuclear license in the United States uses our facilities, directly or
indirectly.

Our
transportation and logistics services encompass all aspects of transporting radioactive materials, including obtaining all required local and federal licenses and permits, loading
and bracing shipments, conducting vehicle radiation surveys and providing transportation assistance to other companies throughout the United States. Through our Hittman Transportation, Inc., or
Hittman, subsidiary, we own and operate a dedicated fleet of tractors, trailers and shipping containers for transporting radioactive materials and contaminated equipment for processing and disposal.

Our
fleet of specialized shipping casks are specially engineered containers for the safe transport of radioactive material. We also have expertise in transporting very large,
contaminated reactor components from a commercial power plant to a processing or disposal site. These components include reactor pressure vessels, steam generators and other smaller components.
Transportation modes include barge, rail and truck transport.

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We have the capability to store, treat and dispose of several types of radioactive materials, including the following:



The
LLRW that we dispose of at our Clive facility primarily derives from the clean-up of contaminated sites (including DOE facilities, nuclear power plants, Superfund sites
and industrial sites) and from the routine operations of utilities, industrial sites and hospitals. Although we only treat and dispose of Class A LLRW, MLLW and 11e(2) materials at our Clive
facility and do not plan to seek authorization to take Class B and C wastes at that site, we are currently able to dispose of Class A, B and C waste at the state-owned Barnwell, South
Carolina facility that we operate. On July 1, 2008, the State of South Carolina closed the Barnwell disposal site to customers located outside of the Atlantic Compact States of South Carolina,
New Jersey and Connecticut.

Our
MLLW treatment facility in Clive uses several treatment technologies to reduce the toxicity of the waste materials prior to their disposal. These technologies include thermal
desorption, stabilization, amalgamation, reduction/oxidation, deactivation, chemical fixation, neutralization, debris spray washing, macro-encapsulation and micro-encapsulation.

Many
of our LP&D projects complement our services in our Federal and Commercial Services segments. The following are examples of LP&D services that we have performed in
recent years:

Life-of-Plant Contracts

Our life-of-plant contracts integrate our LP&D services into a tailored solution for our commercial
customers' needs, and we believe that these contracts will represent a significant source of future revenues for our LP&D segment. Life-of-plant contracts provide our
customers with LLRW and MLLW processing and disposal services for the remaining lives of their nuclear power plants, as well as D&D waste disposal services when the plants are shut down. We have
signed life-of-plant contracts with commercial customers representing 84 of the
104 operating nuclear reactors in the United States. Some of the customers with whom we have entered into life-of-plant contracts include Dominion Resources, Inc., Duke
Energy Corporation, Entergy, Exelon Corporation, Florida Power & Light Company and Progress Energy.

Rocky Flats Closure Project

The Rocky Flats Environmental Technology Site is a DOE environmental clean-up site located approximately 16 miles northwest
of downtown Denver, Colorado. Historically, Rocky Flats made components for nuclear weapons using various radioactive and hazardous materials, including plutonium, uranium and beryllium. Nearly
40 years of nuclear weapons production left behind a legacy of contaminated facilities, soils and ground water. In 1995, the Rocky Flats site was designated by the EPA as a Superfund
clean-up site.

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In
1995, the DOE entered into a contract with Kaiser-Hill Company, LLC to manage the clean-up and closure of the Rocky Flats site. Kaiser-Hill
was responsible for assigning and integrating tasks among various subcontractors. We were the major subcontractor to Kaiser-Hill for the transportation and disposal of LLRW, MLLW and other
contaminated materials at our Clive facility. The clean-up of Rocky Flats was declared complete in October 2005.

Large Components

An important service provided to commercial nuclear power plants is the disposition of overweight and oversized nuclear components,
such as reactor pressure vessels, steam generators, reactor heads, pressurizers, turbine rotors, reactor coolant pumps and feed water heaters. As operational nuclear power plants age, their equipment
and components are replaced either to provide increased operational capacity or as part of plant maintenance. For example, in 2004 we handled the transportation, processing and disposal of four steam
generators from American Electric Power/Indiana Michigan Power's Donald C. Cook nuclear plant located in Southwest Michigan on the shores of Lake Michigan. Our successful completion of this project
enabled us to procure a subsequent contract with this customer to package, transport and dispose of two reactor pressure vessel heads from this plant in 2006 and 2007. In late 2008, we began work on a
contract to remove 8 retired steam
generators from Duke Energy's McGuire Nuclear Station in Huntersville, North Carolina. The preparation of these large components for transportation, processing and disposal is often handled through
our Commercial Services segment.

Paducah Project

The Paducah Gaseous Diffusion Plant in Paducah, Kentucky was constructed in the mid-1950s as part of a U.S. government
program to produce highly enriched uranium to fuel military reactors and produce nuclear weapons and is currently the only operating uranium enrichment facility in the United States. Owned by the DOE
and operated through a lease with USEC, today the plant produces low-enriched uranium fuel for commercial nuclear power plants in the United States and around the world. In December 2005,
the DOE announced a contract award to Paducah Remediation Services, LLC ("PRS"), for environmental remediation and waste management activities at the plant. We are the major subcontractor to
PRS. Under the DOE contract, PRS's responsibilities include groundwater and soil remedial actions, removing legacy waste, D&D services, operating on-site waste storage facilities and
surveillance and maintenance activities. Revenues from these services are recognized in our Federal Services segment. We are also responsible for all on-site waste management and
off-site waste disposition activities through contract completion. We have transported and disposed of LLRW, MLLW and other contaminated materials from the Paducah site at our Clive
facility. Revenues from these services are recognized in our LP&D segment.

U.S. Navy Contracts

We are the principal service provider to the U.S. Navy for the disposition of radiological materials under the Naval Nuclear Propulsion
Program. Through a series of long-term contracts, we process and dispose of LLRW and MLLW generated by the U.S. Navy's nuclear operations worldwide.

Several
of our facilities provide services to the U.S. Navy, including our Clive, Utah, Barnwell, South Carolina and Oak Ridge and Memphis, Tennessee facilities. These services include
volume reduction, metal recycling, and specialized processing. The materials may then be disposed of at our Clive and Barnwell facilities. In addition to processing liquid and solid radioactive
materials, we also provide transportation and logistics services to the U.S. Navy, as well as on-site support at Naval bases around the United States for the removal of radioactive
materials. Revenues from these services are recognized in our LP&D segment.

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International

As a result of our acquisition of RSMC in June 2007, we began reporting the results of our operations outside North America in a new
International segment in the second quarter of 2007. The revenues we receive from the NDA for the operation and management of its 10 Magnox sites currently constitute the predominant portion of our
International segment revenue. The NDA requested the restructuring of Magnox Electric Limited into Magnox North Limited and Magnox South Limited, which was successfully completed on October 1,
2008, to facilitate separate competition for the contracts although they currently have no plans to do so. Under these contracts, we are responsible for the operation, defueling and decommissioning of
10 nuclear power sites. Two of these sites currently generate electricity and eight other sites are now in varying stages of decommissioning.

In
December 2008, the NDA announced that the competition to select a single parent body organization for Magnox North Limited, Magnox South Limited, and Research Sites Restoration
Limited is now expected to commence in 2011, rather than in 2009, and be completed by March 31, 2013. We will continue to lead this important clean-up project and will bid on the
new contract. Also, in December 2008, following receipt of the required regulatory approvals, Magnox North announced that the Oldbury Power Station, originally planned to cease generation at the end
of 2008, will continue to generate electricity through 2009 and beyond.

During
the contract year ending March 31, 2009, Magnox South and Magnox North expect to receive funding from the NDA of approximately $424.9 million and
$615.2 million, respectively, based on average currency exchange rates from April 2, 2008 to February 17, 2009.

In
addition, through our acquisition of Safeguard, we have positioned ourselves as a leading provider in the United Kingdom of turn-key services for the disposal of
radioactive sources from non-nuclear power generating facilities such as hospitals, research facilities and other manufacturing and industrial facilities. We provide waste management and
technology-based services to customers in Italy, Germany, and Spain. We continue to pursue other opportunities in Europe and Asia. Our discussions with Sogin SpA, the Italian state-owned utility
company, to provide D&D and radioactive materials management services in support of the clean-up of Sogin's nuclear facilities, have been delayed pending ruling on our request for a
declaratory judgment relating to the importing of foreign waste.

Results
of our operations for services provided to our customers in Canada and Mexico are included in our Commercial Services or LP&D segments.

Customer Concentrations

Our International segment derives its revenues primarily through contracts with the NDA. For the years ended December 31, 2008
and 2007, respectively, 64.8% and 48.6% of our revenues were from contracts funded by the NDA. Accounts receivable relating to the NDA at December 31, 2008 and 2007 were $115.0 million
and $273.7 million, respectively.

We
have contracts with various offices within the DOE, including with the Office of Environmental Management, the Office of Civilian Radioactive Waste Management, the National Nuclear
Security Administration and the Office of Nuclear Energy. Revenues from DOE contractors and subcontractors represented approximately 11.2%, 16.7% and 47.9% of consolidated revenues for the years ended
December 31, 2008, 2007 and 2006, respectively. Accounts receivable and costs and estimated earnings in excess of billings on uncompleted contracts relating to DOE contractors and
subcontractors at December 31, 2008 were $45.6 million and $42.0 million, respectively. Accounts receivable and costs and estimated earnings in excess of billings on completed
contracts relating to DOE contractors and subcontractors at December 31, 2007 were $31.3 million and $17.0 million, respectively.

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Our Processing and Disposal Facilities

Clive Facility

Our Clive facility is located in Tooele County, Utah, approximately 75 miles west of Salt Lake City. The DOE and the State of Utah
investigated 29 sites to identify the safest
permanent disposal location for radioactive materials before settling on what is now our Clive disposal site. The location had been originally selected and used by the DOE as a disposal site for
uranium tailings due to its remote location, low precipitation, naturally poor groundwater quality and relatively impermeable clay soils. Tooele County has designated the area around the facility as a
hazardous industrial district, which restricts the future use of land in the area to heavy industrial processes and to industries dealing with hazardous wastes. Our Clive facility is located 35 miles
away from the nearest residence.

The
State of Utah authorizes our Clive facility to dispose of Class A LLRW, NORM, 11e(2) materials and MLLW. The facility's location enables it to receive radioactive materials
year-round via bulk truck, containerized truck, enclosed truck, bulk rail, rail boxcars and rail intermodals. We are served by the Union Pacific Railroad at our private siding and maintain
more than seven miles of track and three locomotives for rail cars to be unloaded, decontaminated and released. This direct rail access and our gondola railcar rollover system provide a
cost-effective method of unloading up to 100,000 cubic feet of radioactive materials per day. We maintain a fleet of approximately 300 high capacity gondola railcars under
long-term operating leases, as well as custom-designed flat cars and other multi-model containers to facilitate the safe transport of radioactive materials to our Clive facility. We also
maintain an all-weather paved asphalt road to the site from Interstate 80 to facilitate truck shipment.

Unlike
the two other existing commercial LLRW disposal sites, which are owned by states, we own the site at Clive and also own the buildings and the processing equipment. We have made
numerous improvements to the Clive site in the past several years. We purchased a debris shredder, which significantly increases the efficiency of disposal for larger objects at the site. In addition,
we made upgrades to the railcar rollover and power system, and we added new decontamination facilities. These changes already have begun to result in significant operating cost efficiencies and
enhanced safety.

Disposal Cells

Our Clive facility uses an above-ground, engineered disposal design, also known as a secure landfill. We use a near-surface
engineered embankment design for our disposal cells. Using standard heavy construction equipment, radioactive material is placed in 24-inch thick layers and then compacted in a continuous
"cut and cover" process that provides for long-term disposal with minimal active maintenance. The system relies on natural, durable materials to ensure performance over time. Each cell has
a 24-inch liner system designed to assist in isolating the material from the environment. A cell bottom liner of compacted low-permeability clay covers a foundation of
compacted indigenous clay and soils. The cell embankment top slopes are covered with a compacted two-foot to seven-foot thick clay cover, a rock drainage layer, and a
two-foot thick rock erosion barrier to ensure long-term protection of the environment. Cover construction begins as areas of the cell are filled to capacity. The process of
continual building, filling and capping of cells ensures long-term cell stability and minimizes work that would be required at site closure. In addition to the standard liner and cover
used in the LLRW and 11e(2) materials cells, the MLLW cell has a triple-synthetic-liner system with a synthetic cover barrier. The
mixed waste liner system includes leachate collection and leak detection systems required for containment of hazardous waste.

Disposal Capacity

We believe that we have sufficient capacity for more than 30 years of operations at our Clive facility based on our estimate of
lower future disposal volumes than experienced in recent years, our ability to optimize disposal capacity through reduction and compaction techniques, and our assumption

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that
we will obtain a license amendment to convert a disposal cell originally intended for 11e(2) waste to Class A LLRW. The license amendment would increase our capacity for Class A
LLRW disposal by 83 million cubic feet to approximately 150 million cubic feet of available capacity. If we are unable to obtain the license amendment, our projected capacity to dispose
of Class A LLRW would be materially reduced. If future disposal volumes increase beyond our expectations or if our other assumptions prove to be incorrect, then the remaining capacity at Clive
would be exhausted more quickly than projected. See "Risk FactorsWe and our customers operate in a politically sensitive environment, and the public perception of nuclear power and
radioactive materials can affect our customers and us" and "Risk FactorsOur business depends on the continued operation of our Clive, Utah facility."

Tennessee Processing Facilities

We operate facilities at three locations in Tennessee where we process and transfer radioactive materials generally en route to our
Clive facility. The facilities are operated in an integrated fashion to maximize the breadth of options available to us and to our customers.

Our
Bear Creek facility includes a licensed commercial LLRW processing facility, including the only commercially licensed radioactive metals recycling furnace and the largest LLW
incinerators in the US. It primarily receives waste from nuclear utilities, government agencies, industrial facilities, laboratories and hospitals. Our Bear Creek facility also manages classified
nuclear waste, which is specially processed to obscure any classified information.

Our
Gallaher Road facility in Kingston, Tennessee is located adjacent to Oak Ridge, Tennessee and provides specialty waste processing and transportation logistical services. The Gallaher
Road facility also is the base for our Hittman trucking operations and maintains our fleet of tractors, trailers and shipping containers for transporting radioactive materials.

Our
Memphis facility's riverside location allows for access by barge as well as truck and rail. The facility is specifically designed to handle large components such as steam generators,
turbine rotors, heat exchangers, large tanks and similar components. From Memphis, disassembled components can be shipped to our other facilities for ultimate disposition. The facility also leases
radioactive shop space to various Nuclear Service Suppliers vendors who support commercial nuclear power generation outage activities.

In
addition to the three Tennessee processing facilities, we own a facility in Oak Ridge, Tennessee that provides metals manufacturing, processing, casting and rolling, fabrication and
other services to our customers and we believe it is the only commercial facility in the world with the ability to cast, flat-roll and machine products from depleted uranium. Material
processed at this facility can be found in a variety of products, including electronics, medical isotope shipping containers, nuclear accelerators, nuclear fuel storage casks and fighter jets.

South Carolina Facilities

We operate a LLRW disposal facility in Barnwell, South Carolina pursuant to a long-term lease and an operating agreement
with the state of South Carolina that expires on April 5, 2075. Barnwell is the only commercial facility in the United States that is permitted to accept all classes of commercially generated
LLRW. This facility provides disposal services for large components not suitable for volume reduction and for ion exchange resins and other radioactive materials that are generated by nuclear power
plants, hospitals, research laboratories and industrial facilities. On July 1, 2008, the State of South Carolina restricted our Barnwell disposal site to receive Class A, B and C LLRW
only from customers located in the three Atlantic Compact States. We will continue to operate the Barnwell site for the Atlantic Compact States on a cost-reimbursable basis under our
long-term lease.

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We also operate a facility adjacent to the Barnwell disposal facility to support preparation of materials for disposal, including equipment decontamination and
parts retrieval and recycling. The facility also provides specialty processing services.

Engineering and Technologies

Engineering Services

We employ highly trained personnel with technical and engineering experience in critical areas of the nuclear services industry. Our
technical capabilities include engineering (chemical, process, mechanical, nuclear, civil and structural), radiological safety, chemistry, environmental, safety and other disciplines that are critical
to the provision of technology-based nuclear services.

We
provide on-site engineering services to support the deployment of radioactive, hazardous and mixed waste treatment, transportation, and disposal technologies. We design
equipment, components and integrated turnkey systems, train customer personnel and perform a broad range of engineering consultation services. We also have significant experience designing and
licensing storage and transport cask systems and can provide complete "pool-to-pad" services to customers implementing dry cask storage systems at their facilities. Our
engineering staff has successfully developed and licensed numerous storage and transport cask systems, including specialized containers for various Type A, Type B and fissile material
contents. Our FuelSolutions cask system technology, for example, provides an integrated means for both storage and transportation of spent nuclear fuel. We have designed packages for
transport (via trailer, rail and barge) and storage applications, including spent fuel baskets, wood and polyurethane foam impact limiters, and auxiliary components such as cask tie-downs,
lifting gear and personnel barriers.

As
part of the BNGA acquisition, we obtained the rights in the United States, Canada and Mexico to the full suite of spent nuclear fuel recycling technology of BNFL, including
intellectual property. We also employ many of the employees who designed, constructed, commissioned and operated the existing spent fuel recycling facilities in the United Kingdom.

We
believe that our vitrification technology and expertise gives us a competitive advantage. Vitrification is a technique in which waste mixes with glass-forming chemicals to form molten
glass that solidifies and immobilizes the embedded waste. It is an established means for the disposal and long-term storage of nuclear and other hazardous wastes that produces a
non-leaching, durable material that effectively traps waste and can be stored for relatively long periods without concern for air or groundwater contamination. Our patented system is the
baseline technology for the high-level waste and low-active waste vitrification processes at the DOE's Hanford Waste Treatment Plant. We designed, constructed and operated
nonradioactive, nonhazardous pilot melters to test design concepts for the full scale units that will vitrify millions of gallons of highly radioactive tank waste at the Hanford site.

Processing and Treatment Technologies

We believe that, in addition to our disposal capabilities, we offer the most diverse capabilities in the United States for handling,
treating and processing radioactive materials prior to ultimate disposal. Depending on the nature of a particular radioactive waste stream, we employ the following proprietary waste processing and
treatment technologies to optimize the disposal capacity of our facilities:



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Research and Development

We conduct research and development that is critical to the development of technologies used in the nuclear services industry,
especially those used as part of our services to manage radioactive waste from DOE facilities. Our research and development efforts are funded either directly or through partnership with government,
commercial or academic entities. We contract or subcontract with the Vitreous State Laboratory of the Catholic University of America, located in Washington, DC, to provide research and development
services for us under fixed-price and cost-reimbursable contracts. Typically, these contracts are funded by our customers and involve the stabilization or vitrification of radioactive
materials. We have an agreement with some of the Catholic University professors to exclusively license a number of patents related to vitrification and ion exchange technologies, which they own.

We
also have relationships with the University of Nevada, Las Vegas and Washington State University to provide technology-based research capabilities in support of some of the projects
and technical initiatives that we are working on.

The
majority of our research and development costs are funded by our customers. Our non-reimbursed research and development expenses included in our results of operations are
immaterial.

Patents and Other Intellectual Property Rights

We own or license approximately 60 patents for use in North America. We also have the right to use in the United States, Canada and
Mexico approximately 115 patents from BNFL that came with the acquisition of BNGA. These licenses cover the fields of radioactive material management, storage,

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treatment,
separation, spent nuclear fuel recycling and transport. Our patent portfolio also includes areas such as biotechnology, lasers, containers and D&D. We also own non-patent
intellectual property that essentially consists of research, design, safety, construction, operations and know-how. Our patents expire between 2009 and 2027. We do not believe that our
business, results of operations or financial condition will be adversely affected by any of the patent expirations over the next several years.

Project Integration

Engineering and Technologies manages complex Engineering, Procurement, and Construction ("EPC") integration projects by combining our
technologies, expertise in the implementation of NQA-1 quality programs, and engineering and project management team experience. The following are examples of Project Integration work in
recent years:

Re-tube Waste Container ProjectBruce Power Ontario, Canada

Design, build, and deliver 188 containers and overpacks for the Bruce Power, Station A, Units 1 & 2 Re-tube Waste
Container Project in Ontario, Canada. This is one of the largest deliveries of fabricated stainless steel containers of this type in the nuclear industry. The Engineering and Technologies Group
managed five concurrent fabricators as part of the supply chain made up of both U.S. and International suppliers. The weight of the stainless steel for this project equated to 5.2 million
pounds.

Autosampling Pneumatic Transfer SystemWaste Treatment Plant, Hanford Washington

The Autosampling Pneumatic Transfer System ("ASX") is an integrated process and control system for the Waste Treatment Plant Project in
Hanford Washington. The ASX system collects waste and process effluent samples from vessels and equipment of the Pretreatment Facility, Low-Activity Waste Facility, and High Level Waste
Facility and pneumatically sends the samples to the Analytical Laboratory for testing confirmation. Our scope is to design, supply, test, and provide technical services for installation, commissioning
and training for 10 shielded autosamplers and associated equipment.

Contracts

Our work is performed under cost-reimbursable contracts, unit-rate contracts and fixed-price contracts, most of
which may be modified by incentive and penalty provisions.

Each
of our contracts may contain components of more than one of the contract types discussed below. During the term of a project, the contract or components of the contract may be
renegotiated to a different contract type. Most of our government work in our Federal Services and International segments is typically performed on a cost-reimbursable basis awarded
through a competitive bidding process. We believe this type of contract reduces our exposure to unanticipated and unrecoverable cost overruns. Fixed-price contracts, on the other hand, are generally
obtained by direct negotiation rather than by competitive bid. Our commercial D&D projects are generally fixed-price contracts. Almost all of the contracts entered into by our LP&D segment are
unit-rate contracts.

The
following table sets forth the percentages of revenues represented by these types of contracts during the year ended December 31, 2008:

% of RevenuesCost-reimbursable


80
%Unit-rate


16
%Fixed-price


4
%


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Cost-Reimbursable Contracts

Most of the government contracts in our Federal Services and International segments are cost-reimbursable contracts. Under
a cost-reimbursable contract, we are reimbursed for allowable or otherwise defined costs incurred plus an amount of profit. The profit element may be in the form of a simple
mark-up applied to the labor costs incurred or it may be in the form of a fee, or a combination of a mark-up and a fee. The fee element can also take several forms. The fee may
be a fixed amount as specified in the contract; it may be an amount based on the percentage of the estimated costs; or it may be an incentive fee based on targets, milestones, cost savings or other
performance factors defined in the contract.

Our
government contracts are typically awarded through competitive bidding or negotiations and may have involved several bidders or offerors. Many of these contracts are
multi-year Indefinite Delivery Order agreements. These programs provide estimates of a maximum amount the agency expects to spend. Our program management and technical staffs work closely
with the customer to define the scope and amount of work required. Although these contracts do not initially provide us with any specific amount of work, as projects are defined, the work may be
awarded to us without further competitive bidding. Government contracts also typically have annual funding limitations and are limited by public sector budgeting constraints. Government contracts may
be terminated at the discretion of the government agency with payment of compensation only for work performed and commitments made at the time of termination. In the event of termination, we generally
receive some allowance for profit on the work performed.

Our
government contracts generally are subject to oversight audits by government representatives, to profit and cost controls and limitations and to provisions permitting modification or
termination, in whole or in part, at the government's convenience. Government contracts are subject to specific procurement regulations and a variety of socioeconomic and other requirements. Failure
to comply with such regulations and requirements could lead to suspension or debarment, for cause, from future government contracting or subcontracting for a period of time. Among the causes for
debarment are violations of various statutes, including those related to employment practices, the protection of the environment, the accuracy of records and the recording of costs.

Unit-Rate Contracts

Almost all of the contracts entered into by our LP&D segment, including our life-of-plant contracts, are
unit-rate contracts. Under a unit-rate contract, we are paid a specified amount for every unit of work performed. A unit-rate contract is essentially a fixed-price
contract with the only variable being units of work performed. Variations in unit-rate contracts include the same type of variations
as fixed-price contracts. We are normally awarded these contracts on the basis of a total price that is the sum of the product of the specified units and unit prices.

Our
life-of-plant contracts provide our customers with LLRW and MLLW processing and disposal services for the remaining lives of their nuclear power plants, as
well as D&D waste disposal services when the plants are shut down. As a result, the contracts expedite individual project contract negotiations with customers through means other than the formal
bidding process. Life-of-plant contracts typically contain a standardized set of purchasing terms and pre-negotiated pricing provisions and often provide for
periodic price adjustments.

Fixed-Price Contracts

Under a fixed-price contract, the price is not subject to any adjustment by reason of our cost experience or our performance under the
contract. As a result, we benefit from costs savings while generally being unable to recover any cost overruns on these contracts. However, these contract prices

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may
be adjusted for changes in scope of work, new or changing laws and regulations and other negotiated events.

Sales and Marketing Strategy

We conduct our marketing efforts principally through sales forces dedicated to servicing existing or pursuing new opportunities in each
of our segments.

The
current target market for our Federal Services segment involves site M&O and clean-up of radioactive materials in two target segments. The first is for Tier 1
contracts. These are large prime contracts for the M&O of federal facilities. The second segment is Tier 2 contracts, which are project-driven contracts. For these, we generally act as a
subcontractor to an M&O-type contractor. Each of these opportunities requires a unique business development and sales approach. We have entered into and will continue to enter into joint
venture or teaming arrangements with competitors with respect to bidding on large, complex government contracts.

Federal
customers generally procure nuclear services through highly structured processes. Tier 1 opportunities involve contracts for the operation of a federal site, which is
typically a DOE site. We generally pursue these contracts as a member of a consortium. The sales cycle for these contracts begins at least one year and generally two years before the release of a RFP.
Tier 2 opportunities are discrete project-based opportunities to act as a subcontractor to Tier 1 contractors. The sales cycle for Tier 2 opportunities can be six months or less.

We
generally pursue procurements that are decided on a "best-value" basis, in which the decision-makers consider a combination of technical and cost factors, as well as
project management experience. Factors include the technical approach to managing and performing the project, key project personnel, experience performing similar projects and past performance, which
includes customer references. Cost factors are generally weighed to include cost structure as it would be applied in a specific project.

In
our Commercial Services segment, our sales team actively markets our integrated services and technical expertise to nuclear power and utility customers. For example, our commercial
sales team was instrumental in developing and marketing the concept of life-of-plant contracts with commercial power and utility customers and has also been involved in
developing our license stewardship initiative to serve the shut-down nuclear reactor D&D market.

In
our LP&D segment, we maintain dedicated sales forces at our Clive and Barnwell facilities to market to and serve customers that require logistics, transportation and disposal
of radioactive materials. Our LP&D sales team members' duties include visiting customer sites, assisting customers in completing all required paperwork and obtaining necessary licenses and
permits for the transportation of radioactive materials to one of our facilities and managing the transportation process.

Our
sales efforts in the International segment mirror our sales efforts in the United States. Our business development and technical teams approach bidding opportunities in the United
Kingdom in a similar manner as for bids for opportunities in the United States. In addition, our international business development team works closely with key nuclear power operators to pursue
commercial opportunities.

Safety

We devote significant resources to ensuring the safety of the public, our employees and the environment. In the United States, we have
built a safety record that is critical to our reputation throughout our markets, particularly DOE contractor services. Our domestic safety incident record is substantially better than standards for
other similar businesses according to the North American Industrial Classification System with total Occupational Safety and Health Administration, or OSHA, recordable and lost time incidence rates of
1.16 and 0.32, respectively, versus industry averages of 6.4

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and
2.4, respectively. None of our safety incidents has involved radioactive contamination. We have received numerous safety achievement awards in recognition of our industry leading safety record.

We
also have traditionally met or exceeded the occupational and public radiation safety requirements for the U.S. nuclear services industry. The average employee radiation dose at our
Clive site is less than 50 millirem annually, which is 1.0% of the Federal government's allowable annual guideline of 5,000 millirem.

In
2008, we passed over 500 person-days of regulatory inspections by state regulators, the NRC, the DOE and the Nuclear Procurement Issues Committee. We submit routine
reports to the applicable state and federal regulatory agencies demonstrating compliance with rules and regulations set forth in our licenses and permits.

We
also have established an extensive safety education program for our employees. Before employees are permitted to work in restricted areas, they are required to complete a
four-day training course on radiation theory, proper procedures and radiation safety. Each employee is required to participate in semi-annual refresher courses, and our
employees completed over 15,000 cumulative hours of safety training in 2008. In addition to extensive training, we employ more than 120 safety professionals and technicians who are responsible for
protecting workers, the public and the environment. We also employ a round-the-clock security staff to prevent unauthorized access to our sites. Three of our facilities in the
US are recognized by OSHA as Voluntary Protection Program Star Sites.

In
addition, in the United Kingdom, every Magnox site is accredited under the ISO 14001 system, which is an internationally accepted specification for environmental management
systems, as well as Occupational Health and Safety Management Systems 18001, which establishes standards for occupational health and safety. Magnox North and Magnox South have also won numerous awards
for
health and safety, including consecutive Royal Society for the Prevention of Accidents Engineering Construction Sector Awards.

Insurance

Like all companies in the nuclear industry, we derive a significant benefit from the provisions of the Price-Anderson Act, as amended.
The Price-Anderson Act was enacted in 1957 to indemnify the nuclear industry against liability claims arising from nuclear incidents, while still ensuring compensation coverage for the general public.
The Price-Anderson Act, as amended, establishes a no-fault insurance-type system for commercial reactors that indemnifies virtually any industry participant against third party
liability resulting from a nuclear incident or evacuation at a commercial reactor site or involving shipments to or from a commercial reactor site. Through primary layer insurance and a secondary
layer insurance pool collectively funded by the nuclear industry, each reactor has coverage for approximately $10.8 billion in claims that covers activities at the reactor site and the
transportation of radioactive materials to or from the site. Price-Anderson limits liability for an incident to $10.8 billion, unless the Federal government decides to provide additional
funding. Activities conducted under a contract with the DOE are covered by a $10 billion indemnity issued by the DOE. For activities at our facilities that are not covered by the Price-Anderson
Act, we maintain nuclear liability insurance coverage issued by American Nuclear Insurers, as follows:

Facility

LimitGeneral (All)Supplier's and Transporter's

$
100 millionBarnwell, South Carolina facility

$
100 millionOak Ridge, TennesseeBear Creek facility

$
50 millionKingston, TennesseeGallaher Road facility

$
5 millionOak Ridge, TennesseeManufacturing Sciences Corporation facility

$
5 millionMemphis, Tennessee facility

$
10 million


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We
do not maintain third party nuclear liability coverage for our Clive, Utah facility, because we do not believe such coverage is warranted.

Competition

We compete with major national and regional services firms with nuclear services practices for government and commercial customers. The
following are key competitive factors in these markets:



Our
competitors, primarily in the Federal Services and International segments, include national engineering and construction firms such as Bechtel Group, Inc., CH2M Hill, Fluor
Corporation, Jacobs Engineering Group, URS Corporation, AMEC plc and AREVA. Some of our competitors have greater financial and other resources than we do, which can give them a competitive
advantage. We also face competition from smaller local firms. Our major U.S. government customer, the DOE, has substantially increased small business set-asides for prime contracts.
Because we are not a small business, we have responded by teaming in certain circumstances as a subcontractor to small businesses responding to requests for proposals as a prime contractor on selected
procurements. We expect intense competition to continue for nuclear service contracts, challenging our ability to maintain strong growth rates and acceptable profit margins. If we are unable to meet
these competitive challenges, we could lose market share and experience an overall reduction in our profits.

In
the Commercial Services area, our major competitors include large nuclear services firms such as Bechtel Group, Inc., URS Corporation's Washington Division, AREVA, and the Shaw
Group. This competition is primarily for major projects in the nuclear utility decommissioning market. To some degree, we also face competition from nuclear utilities, since many elect to
self-perform decommissioning of their plants using existing plant operations staff. However, our new license stewardship approach capitalizes on the unique capabilities we can offer
nuclear utilities through our ownership of low-level waste disposal facilities.

Other
competition in the Commercial Services market also includes numerous smaller companies that have the capability to provide similar services in our key business lines, which include
large component removal, facility decontamination, site remediation, radiological consulting services, staff augmentation, fuel pool services, cask services, and liquid waste processing. We typically
have a competitive advantage due to our wider range of in-house services, and larger staff resources; however, we often face stiff price competition on bids where smaller companies are
willing to accept lower margins or have lower indirect cost structures.

We
also face competition to provide radioactive material transportation, processing and disposal services to our customers. Currently, the predominant radioactive material treatment and
disposal
methods include direct landfill disposal, on-site containment/processing and incineration or other thermal treatment methods. Our competitors may possess or develop alternate technologies
that compete with our radioactive material processing technologies. Competition in this area is based primarily on cost, regulatory and permit restrictions, technical performance, dependability and
environmental integrity.

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Currently, we are the only commercial disposal outlet for MLLW and operate two of the three commercial LLRW disposal sites in the United States, through our
Clive, Utah and Barnwell, South Carolina disposal facilities. The third facility is a state-owned facility located in Richland, Washington that is relatively small, does not accept radioactive
materials from outside the Northwest Interstate Compact on Low-Level Radioactive Waste Management States and may eventually stop receiving materials from outside Washington State itself.
Several other companies have tried to obtain site licensing and have failed. We are the only company to have an operating license received subsequent to the enactment of the Low-Level
Radioactive Waste Policy Act.

With
respect to bulk Class A waste, we compete with processors who reduce volumes through treatment (compaction, sorting and incineration). The situation is similar for large
components with processors being able to cut, scrap and partially decontaminate the components. Eventually, in both instances, most of the waste ends up at our Clive site but in reduced volumes. The
other option available for utilities and industrial sites is to store waste on-site. This is generally a temporary solution, especially if local communities become aware of such
situations.

In
the future, other commercial sites could be licensed for the disposal of radioactive waste. One such site could be the WCS site in Andrews County, Texas. WCS filed a license
application with the Texas Commission on Environmental Quality in August 2004 for a LLRW disposal facility and announced receipt of a conditional license on January 20, 2009. In order to
receive an active license, the conditional license requires WCS to complete several major environmental studies, examples of which include groundwater, air emissions, and seismic stability studies.
WCS must also demonstrate that the
leachate from the landfill will not reach the Ogallala-Antlers-Gatuna Aquifer. The conditional license states that prior to accepting federal facility waste, WCS must receive an agreement signed by
the U.S. Secretary of Energy that it will assume all rights, title and interest in land and buildings for the disposal of federal facility waste. Should the conditional license become active, WCS will
be allowed to receive waste from the Texas Compact, which includes the states of Texas and Vermont, and from federal facilities (i.e., DOE). WCS will not be able to receive waste via railcar or
receive depleted uranium, and will be required to dispose of commercial waste in specially designed containers in the compact portion of the facility.

Employees

As of December 31, 2008, we had more than 5,000 employees, including approximately 1,150 scientists and engineers and 400
radiation and safety professionals. With the acquisition of RSMC in June 2007, approximately 3,000 of these employees are in the United Kingdom. These employees are associated with RSMC's contract
with the NDA to operate the Magnox North and South sites. Should RSMC no longer be under contract with the NDA to operate the Magnox sites, these individuals will no longer be employed by RSMC through
its subsidiaries, Magnox North Limited and Magnox South Limited, with the exception of approximately 70 employees who would continue to be employed by RSMC. The NDA reimburses us for the salaries and
benefits for the majority of the direct RSMC employees, excluding approximately 12 employees that are not in the Magnox North or Magnox South contracts. A significant portion of our workforce in the
United Kingdom is unionized, and we have annual agreements that cover most of the Magnox North and Magnox South employees, which are negotiated in conjunction with the NDA. A majority of our employees
are skilled professionals, including nuclear scientists and engineers, hydrogeologists, engineers, project managers, health physics technicians, environmental engineers and field technicians. At the
Hanford, Washington, Oak Ridge, Tennessee, and Paducah, Kentucky, DOE sites that we manage, approximately 180 of our employees are represented by labor unions. In addition to our own employees, we
manage approximately 200 DOE site employees through various Tier 1 arrangements at DOE sites, a portion of who belong to unions. Our labor relations with those employees represented by labor
unions at Hanford are governed under a site stabilization agreement which will expire when the D&D services at Hanford are complete.

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We
have five separate collective bargaining agreements at Oak Ridge, four of which will expire on June 22, 2009. Our collective bargaining agreement relating to the Paducah site will expire on
July 31, 2010.

Regulation

Applicable U.S. Statutes

We operate in a highly regulated industry, and are subject to extensive and changing laws and regulations administered by various
federal, state and local governmental agencies, including those governing radioactive materials and environmental and health and safety matters. Some of the laws affecting us include, but are not
limited to, the Atomic Energy Act of 1954 ("AEA"), the Resource Conservation and Recovery Act of 1976 ("RCRA"), the Energy Reorganization Act of 1974 ("ERA"), the Comprehensive Environmental Response,
Compensation and Liability Act of 1980 ("CERCLA"), the Hazardous Materials Transportation Act, the Uranium Mill Tailings Radiation Control Act, the Hazardous Waste Transportation Act, the
Low-Level Radioactive Waste Policy Act, the Nuclear Waste Policy Act of 1982 ("NWPA"), the Utah Radiation Control Act, the Utah Air Conservation Act, the Utah Solid and Hazardous Waste
Act, the Utah Water Quality Act, the Tennessee Radiological Health Service Act, the South Carolina Radiation Control Act, the South Carolina Radioactive Waste Transportation and Disposal Act, the
Tennessee Solid Waste Disposal Act, the Clean Water Act, the Clean Air Act of 1970, as amended ("Clean Air Act"), the Toxic Substances Control Act of 1976 ("TSCA"), the Federal Insecticide, Fungicide
and Rodenticide Act, the Oil Pollution Act of 1990 and the Occupational Safety and Health Act; each as from time to time amended.

The
AEA and the ERA authorize the NRC to regulate the receipt, possession, use and transfer of commercial radioactive materials, including "source material," "special nuclear material"
and "by-product material." Pursuant to its authority under the AEA, the NRC has adopted regulations that address the management, treatment, and disposal of LLRW, and that require the
licensing of LLRW disposal sites by NRC or states that have been delegated authority to regulate low-level radioactive material under Section 274 of the AEA. Nearly all of our
nuclear related licenses are overseen by Agreement States (i.e., a state to which the NRC has delegated some authority). Our primary regulators are
government agencies of the states where our processing and disposal facilities are located, namely Utah, South Carolina and Tennessee.

RCRA,
as amended by the Hazardous and Solid Waste Amendments of 1984 ("HSWA"), provides a comprehensive framework for the regulation of the generation, transportation, treatment, storage
and disposal of hazardous and solid waste. The intent of RCRA is to control hazardous and solid wastes from the time they are generated until they are properly recycled or treated and disposed. As
applicable to our operations, RCRA prohibits improper hazardous waste disposal and imposes criminal and civil liability for failure to comply with its requirements. RCRA requires that hazardous waste
generators, transporters and operators of hazardous waste treatment, storage, and disposal facilities meet strict standards set by government agencies. In certain circumstances, RCRA also requires
operators of treatment, storage and disposal facilities to obtain and comply with RCRA permits. The land disposal restrictions developed under the HSWA prohibit land disposal of specified wastes
unless these wastes meet or are treated to meet best demonstrated available technology treatment standards, unless certain exemptions apply. In the same way that the NRC may delegate authority under
the AEA, the EPA may delegate some federal authority under RCRA to the states.

TSCA
provides the EPA with the authority to regulate over 60,000 commercially produced chemical substances. The EPA may impose requirements involving manufacturing, record keeping,
reporting, importing and exporting. TSCA also established a comprehensive regulatory program, analogous to the RCRA program for hazardous waste, for the management of polychlorinated biphenyls.

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The
Clean Water Act, regulates the discharge of pollutants into streams and other waters of the United States (as defined in the statute) from a variety of sources. If wastewater or
runoff from our facilities or operations may be discharged into surface waters, the Clean Water Act requires us to apply for and obtain discharge permits, conduct sampling and monitoring and, under
certain circumstances, reduce the quantity of pollutants in those discharges.

The
Clean Air Act empowers the EPA and the states to establish and enforce ambient air quality standards and limits of emissions of pollutants from facilities. This has resulted in tight
control over emissions from technologies like incineration, as well as dust emissions from locations such as waste disposal sites.

The
processing, storage, and disposal of high-level radioactive waste (e.g., spent nuclear fuel) are subject to the
requirements of the NWPA, as amended by the NWPA Amendments. These statutes regulate the disposal of high-level radioactive waste by establishing procedures and schedules for the DOE to
site geologic repositories for such waste, and such repositories are to be licensed by the NRC. The NRC has issued regulations that address the storage and disposal of high-level
radioactive waste, including storage and transportation of such waste in dry casks and storage at Independent Spent Fuel Storage Installations.

Applicable U.K. Statutes

Through our subsidiaries, RSMC and Safeguard, we are subject to extensive and changing laws and regulations in the United Kingdom. Some
of the laws affecting us include, but are not limited to, the Nuclear Installations Act 1965, the Health and Safety at Work Act 1974, the Radioactive Substances Act 1993 ("RSA 1993"), the Environment
Act 1995, the 2004 Energy Act and the Electricity Act 1989.

The
Nuclear Installations Act 1965 governs the construction and operation of nuclear installations, including fuel cycle facilities, in the United Kingdom. The Health and Safety at Work
Act 1974 governs Health Protection at those installations.

The
RSA 1993 provides a comprehensive framework for the keeping and use of radioactive materials as well as accumulation and disposal of radioactive waste.

The
Environment Act 1995 created the Environment Agency in England and Wales and the Scottish Environment Protection Agency, or SEPA. Under the Environment Act 1995, these agencies
enforce environmental protection legislation including the RSA 1993.

The
2004 Energy Act established the NDA to ensure the decommissioning and clean-up of Britain's civil public sector nuclear sites including the sites operated by RSMC.

The U.S. Regulatory Environment

The State of Utah regulates our operations at our Clive disposal facility. Our Utah licenses include our Clive facility's primary
radioactive materials license (UT2300249) and our 11e(2) by-product license (UT2300478), which is currently in timely renewal (which allows us to operate under the terms of our prior
license until a new license is issued). Four different divisions of the Department of Environmental Quality regulate this facility with approximately 14 employees devoted to the facility. The Division
of Radiation Control and the Division of Solid and Hazardous Waste regulate our ability to receive LLRW, NORM/NARM (naturally-occurring/accelerator-produced radioactive material), 11e(2) and MLLW.
Additionally, the Division of Water Quality and the Division of Air Quality also regulate the facility. The site is inspected daily to ensure strict compliance with all Utah regulations. The Division
of Radiation Control also requires us to provide financial assurance for the decommissioning or "closure" of our Clive facility, including areas that are closed on an ongoing basis. The adequacy of
the funding provided is reviewed annually to assure that adequate financial resources are set aside and maintained

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to
fund any required on-site clean-up activities. Finally, we also maintain nine Tooele County, Utah Conditional Use Permits for the facility.

The
South Carolina Department of Health and Environmental Control, regulates our South Carolina operations through multiple groups, including the Division of Waste Management, the Bureau
of Air Quality, and the Bureau of Water. Our licensed operations in South Carolina include the Barnwell disposal facility (the license is currently in timely renewal), the Calibration Laboratory, the
Nuclear Services Support Facility, the Barnwell Environmental and Dosimetry Lab and the Chem-Nuclear Systems, Service Operations Division. The South Carolina Department of Health and
Environmental Control has staff specifically devoted to the regulation of our facilities which continually inspects us and assures that we fully comply with all regulations. We lease the Barnwell site
from the State of South Carolina and under the terms of the Atlantic Compact. As part of that lease and as part of its regulatory oversight, South Carolina requires us to contribute to a
long-term care fund for the site and maintain decommissioning or closure assurance.

The
Tennessee Department of Environment and Conservation ("TN DEC"), regulates our Tennessee operations. Multiple groups within the TN DEC regulate our operations including the Division
of Radiological Health, the Division of Solid Waste Management and the Division of Water Pollution Control. The TN DEC has staff that continually oversees our facilities and also requires each
facility to provide decommissioning assurance. Several of our Tennessee licenses are currently in timely renewal.

When
we engage in the transportation of hazardous/radioactive materials, we are subject to the requirements of the Hazardous Materials Transportation Act, as amended by the Hazardous
Materials Transportation Uniform Safety Act. Pursuant to these statutes, the United States Department of
Transportation regulates the transportation of hazardous materials in commerce. Our wholly-owned subsidiary, Hittman, is our primary shipping operation. Shippers and carriers of radioactive materials
must comply with both the general requirements for hazardous materials transportation and with specific requirements for the transportation of radioactive materials. Many states also regulate our
shipping business including California, Colorado, Florida, Georgia, Idaho, Massachusetts, New Jersey, New York, Oregon and Pennsylvania.

We
are also regulated by the federal governmentincluding by the NRC and EPA. The NRC regulates us regarding the certification of casks used to transport waste and regarding
operations in non-Agreement States. We have multiple current Certificates of Compliance, which allow us to manufacture and sell radioactive material packages for the storage and
transportation of radioactive material, including dry casks for spent nuclear fuel. These Certificates of Compliance permit the use of these packages by third parties as well as for our own
transportation needs. The NRC requires us to maintain a Quality Assurance program associated with these Certificates of Compliance. Furthermore, the NRC regulates several nuclear materials licenses
which facilitate EnergySolutions' work at worksites other than those located in South Carolina, Tennessee or Utah. These licenses do not have any
decommissioning requirements.

To
the extent we engage in the storage, processing, or disposal of mixed waste, the radioactive components of the mixed waste are subject to NRC regulations promulgated under the AEA.
The EPA, under RCRA, regulates the hazardous components of the waste. To the extent that these regulations have been delegated to the states, the states may also regulate mixed waste.

Under
RCRA, wastes are classified as hazardous either because they are specifically listed as hazardous or because they display certain hazardous characteristics. Under current
regulations, waste residues derived from listed hazardous wastes are considered hazardous wastes unless they are delisted through a formal rulemaking process that may last a few months to several
years. For this reason, waste residue that is generated by the treatment of listed hazardous wastes, including waste treated with our vitrification technologies, may be considered a hazardous waste
without regard to the fact that this

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waste
residue may be environmentally benign. Full RCRA regulation would apply to the subsequent management of this waste residue, including the prohibition against land disposal without treatment in
compliance with best demonstrated available technology treatment standards. In some cases, there is no current technology to treat mixed wastes, although EPA policy places these wastes on a low
enforcement priority. Our ownership and operation of treatment facilities also exposes us to potential liability for clean-up of releases of hazardous wastes under RCRA.

Operators
of hazardous waste treatment, storage and disposal facilities are required to obtain RCRA Part-B permits from the EPA or from states authorized to implement the
RCRA program. We have developed procedures to ensure compliance with RCRA permit provisions at our Bear Creek facility, including procedures for ensuring appropriate waste acceptance and scheduling,
waste tracking, manifesting and reporting and employee training.

CERCLA
effectively imposes strict, joint and several retroactive liabilities upon owners or operators of facilities where a release of hazardous substances occurred, the parties who
generated the hazardous substances released at the facilities and parties who arranged for the transportation of hazardous substances to these facilities.

Because
we own and operate vitrification, storage, incineration and metal processing facilities, we are exposed to potential liability under CERCLA for releases of hazardous substances
into the environment at those sites. If we use off-site storage or disposal facilities for final disposition of the glass and other residues from our vitrification, incineration and other
treatment processes, or other hazardous substances relating to our operations, we may be subject to clean-up liability under CERCLA, and we could incur liability as a generator of these
materials or by virtue of having arranged for their transportation and disposal to such facilities. We have designed our processes to minimize the potential for release of hazardous substances into
the environment. In addition, we have developed plans to manage and minimize the risk of CERCLA or RCRA liability by training operators, using operational controls and structuring our relationships
with the entities responsible for the handling of waste materials and by-products.

Certain
of our facilities are required to maintain permits under the Clean Water Act, the Clean Air Act and corresponding state statutes. The necessity to obtain such permits depends
upon the facility's location and the expected emissions from the facility. A state may require additional state licenses or approvals. Further, many of the federal regulatory authorities described in
this section have been delegated to state agencies; accordingly, we hold the required licenses, permits and other approvals from numerous states.

We
believe that our treatment systems effectively trap particulates and prevent hazardous emissions from being released into the air, the release of which would violate the Clean Air
Act. However, our compliance with the Clean Air Act may require additional emission controls and restrictions on materials stored, used and incinerated at existing or proposed facilities in the
future.

Many
of the government agencies overseeing our operations require us to regularly monitor the impacts of our operations on the environment, and to periodically report the results of such
monitoring. The costs associated with required monitoring activities have not been, and are not expected to be, material. In complying with existing environmental regulations in past years, we have
not incurred material capital expenditures. We do not expect to incur material capital expenditures in future periods. However, we could be required to remediate any adverse environmental conditions
discovered in the future.

OSHA
provides for the establishment of standards governing workplace safety and health requirements, including setting permissible exposure levels for hazardous chemicals that may be
present in mixed wastes. We must follow OSHA standards, including the preparation of material safety data sheets, hazardous response training and process safety management, as well as various record-
keeping

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disclosure
and procedural requirements. The NRC also has set regulatory standards for worker protection and public exposure to radioactive materials or wastes that we adhere to. See
"Safety."

The U.K. Regulatory Environment

Through our subsidiary RSMC, we hold the contracts and licenses to operate and decommission 22 reactors at 10 sites in the United
Kingdom. Four of these reactors are operating and 18 are in various stages of decommissioning. Approximately 3,000 employees in the United Kingdom operate these sites and are subject to the U.K.
regulatory environment. Through our subsidiary Safeguard, we also have other operations in the United Kingdom that are also subject to this regulatory environment.

The
Health and Safety Executive ("HSE"), is responsible for licensing nuclear installations. The HM Nuclear Installations Inspectorate ("NII"), which is part of the Nuclear Directorate
of the HSE, ensures that nuclear installations comply with all statutory safety requirements. The NII staff regularly inspects our facilities to confirm that the relevant licensing requirements are
met throughout the life of the facility, including decommissioning.

The
Environment Agency in England and Wales and the Scottish Environmental Protection Agency ("SEPA") in Scotland have extensive powers and statutory duties to improve and protect the
environment across England, Wales and Scotland. The Environmental Protection Directorate of the Environmental Agency regularly inspects and regulates our facilities in England and Wales to confirm
compliance with regulations regarding radioactive substances, integrated pollution control, waste regulation and water quality. SEPA fulfills a similar function in Scotland. Memoranda of Understanding
between the Environment Agency/SEPA and the HSE facilitate effective coordination between the multiple agencies regarding overlapping functions.

Under
the Energy Act 2004, the NDA was given responsibility for the operation, clean-up and decommissioning of 20 civic public sector nuclear sites, including reactor
facilities used for the storage, disposal or treatment of hazardous material. We are operating or decommissioning 22 of the reactors for the NDA at these sites. Accordingly, we serve as a prime
contractor for the NDA.

Financial Information About Business Segments and Foreign and Domestic Operations

For financial information relating to (a) each of our business segments and (b) our foreign and domestic sales, transfers
between geographic areas, net income and identifiable assets, see Note 16 to our consolidated financial statements included within this report.

General Development of Our Business

The Company was initially formed as Envirocare of Utah, Inc. in 1988 to operate a disposal facility for mixed waste, uranium
mill tailings and Class A low-level radioactive waste in Clive, Utah. In January 2005, the Company converted to a limited liability company, Envirocare of Utah, LLC
("Envirocare"). Immediately thereafter, the sole member of Envirocare sold all of its member interest to ENV Holdings LLC. In 2006, we changed our name from Envirocare of Utah, LLC to
EnergySolutions, LLC. Since 2005, we have expanded and diversified our operations through a series of strategic acquisitions, including the
decontamination and decommissioning division of Scientech, LLC ("Scientech") in October 2005, BNG America, LLC in February 2006, Duratek, Inc. in June 2006, Safeguard
International Solutions, Ltd. in December 2006, Parallax, Inc. in January 2007, Reactor Sites Management Company Limited in June 2007, NUKEM Corporation in July 2007, and Monserco
Limited in December 2007.

On
November 20, 2007, the date of the completion of our initial public offering, we completed our conversion to a corporate structure whereby
EnergySolutions, LLC converted to EnergySolutions, Inc.
EnergySolutions, Inc. is now organized and existing under the General Corporation Law of the State of Delaware.

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On July 30, 2008, we completed a secondary offering of 35 million shares of common stock offered by ENV Holdings, previously our majority
shareholder, as selling shareholder. The underwriters of the offering subsequently exercised their over-allotment option and purchased 5.25 million additional shares of our common
stock from ENV Holdings. Following completion of the offering, ENV Holdings owned approximately 16.7% of our outstanding shares of common stock.

On
February 13, 2009, ENV Holdings completed a distribution of all of our shares to its members on a pro rata basis for no consideration. As a result, ENV Holdings is no longer
the beneficial owner, directly or indirectly, of any shares of our common stock.

We
provide our services through four segments: Federal Services; Commercial Services; Logistics, Processing and Disposal ("LP&D"), and International. Our Federal Services segment derives
revenues from U.S. government customers for the management and operation or clean-up of facilities with radioactive materials. Our U.S. government customers are primarily individual
offices, departments and administrations within the U.S. Department of Energy and U.S. Department of Defense. Our Commercial Services segment provides a broad range of on-site services,
including decontamination and decommissioning, to commercial customers. Our commercial customers include power and utility companies, pharmaceutical companies, research laboratories, universities,
industrial facilities and other commercial entities with nuclear materials, as well as state agencies in the United States. Our LP&D segment provides a broad range of logistics, transportation,
processing and disposal services to government and commercial customers. This segment also operates our facilities for the safe processing and disposal of radioactive materials, including a facility
in Clive, Utah, four
facilities in Tennessee and two facilities in Barnwell, South Carolina. Our acquisition of Reactor Sites Management significantly expanded our international capabilities. Prior to this acquisition in
2007 and the acquisition of Safeguard in 2006, we derived less than 1% of our revenues from our international operations. Accordingly, through the first quarter of 2007, we reported results from our
international operations in our Commercial Services segment. Beginning with the second quarter of 2007, we began reporting results from our operations outside North America in a new International
segment. Our International segment derives revenues primarily through contracts with the Nuclear Decommissioning Authority in the UK.

Available Information

We file annual, quarterly and current reports and other information with the SEC. These materials can be inspected and copied at the
SEC's Public Reference Room at 100 F Street, N.E., Washington, D.C. 20549. Copies of these materials may also be obtained by mail at prescribed rates from the SEC's Public Reference Room at the
above address. Information about the Public Reference Room can be obtained by calling the SEC at 1-800-SEC-0330. The SEC also maintains an Internet site that
contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC. The address of the SEC's Internet site is www.sec.gov.

We
make available, free of charge, on our Internet website, located atwww.energysolutions.com, our most recent Annual Report on
Form 10-K, our most recent Quarterly Report on Form 10-Q, any current reports on Form 8-K filed since our most recent Annual Report on
Form 10-K, and any amendments to such reports as soon as reasonably practicable following the electronic filing of such report with the SEC. Such reports can be found under "SEC
Filings" behind the "Investor Relations" tab. In addition, we provide electronic or paper copies of our filings free of charge upon request.

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Item 1A.    Risk Factors.

You should carefully consider the following factors and other information contained in this Form 10-K before deciding to invest in our common
stock.

We and our customers operate in a highly regulated industry that requires us and them to obtain, and to comply with, national, state and local government permits and
approvals.

We and our customers operate in a highly regulated environment. Our facilities are required to obtain, and to comply with, national,
state and local government permits and approvals. Any of these permits or approvals may be subject to denial, revocation or modification under various circumstances. Failure to obtain or comply with
the conditions of permits or approvals may adversely affect our operations by temporarily suspending our activities or curtailing our work and may subject us to penalties and other sanctions. Although
existing licenses are routinely renewed by various regulators, renewal could be denied or jeopardized by various factors, including:



In
addition, if new environmental legislation or regulations are enacted or existing laws or regulations are amended or are interpreted or enforced differently, we or our customers may
be required to obtain additional operating permits or approvals. Changes in requirements imposed by our environmental or other permits may lead us to incur additional expenses by requiring us to
change or improve our waste management technologies and services to achieve and maintain compliance. We may be unable to meet all potential regulatory changes.

We and our customers operate in a politically sensitive environment, and the public perception of nuclear power and radioactive materials can affect our customers and us.

We and our customers operate in a politically sensitive environment. The risks associated with radioactive materials and the public
perception of those risks can affect our business. Various public interest groups frequently oppose the operation of disposal sites for radioactive materials such as our Clive, Utah and Barnwell,
South Carolina facilities. For example, public interest groups and the governor of Utah have made public statements regarding their desire to limit the source and volume of radioactive materials that
we process and dispose at our Clive facility. Representatives in Congress have introduced federal legislation to ban the importation of foreign waste. If any efforts to limit our operations at these
or any of our other current or future facilities were successful, then our business would suffer.

Opposition
by third parties to particular projects can delay or prohibit the construction of new nuclear power plants and can limit the operation of nuclear reactors or the handling and
disposal of radioactive materials. Adverse public reaction to developments in the use of nuclear power or the disposal of radioactive materials, including any high profile incident involving the
discharge of radioactive materials, could directly affect our customers and indirectly affect our business. In the past, adverse public reaction, increased regulatory scrutiny and litigation have
contributed to extended construction periods for new nuclear reactors, sometimes extending construction schedules by decades or more, contributing to the result that no new reactor has been ordered
since the 1970s. Adverse public reaction also could lead to increased regulation or outright prohibition, limitations on the

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activities
of our customers, more onerous operating requirements or other conditions that could have a material adverse impact on our customers and our business.

In
addition, we may seek to address public and political opposition to our business activities through voluntary limitations on our operations. For example, as part of our response to
public statements made by public interest groups and the governor of Utah regarding their desire to limit the source and volume of radioactive materials that we process and dispose at our Clive
facility, we voluntarily agreed with the governor to withdraw a request for a license amendment to increase our capacity at our Clive facility. We are also experiencing both local and national
expressions of opposition to the importation of LLRW from international sources, including opposition articulated in U.S. congressional proposals
and from the Northwest Interstate Compact on Low-Level Radioactive Waste Management, or the Northwest Compact. The Northwest Compact, which consists of Alaska, Hawaii, Idaho, Montana,
Oregon, Utah, Washington, and Wyoming, was created pursuant to a federal statute that enables states to enter into interstate compacts for the purposes of managing LLRW. In response to this
opposition, we have volunteered to limit the amount of foreign LLRW accepted at our Clive facility to a maximum of 5% of the total remaining facility capacity. We also have filed a declaratory
judgment action in the U.S. District Court in Utah seeking an order that the Northwest Compact does not have jurisdictional or regulatory authority over our Clive facility and that the Northwest
Compact may not discriminate between domestic and foreign materials. Our actions to diffuse public and political opposition to our business can divert time and resources away from our core business
operations and strategies, and failure to achieve the intended results of our actions may have a material adverse effect on our business, financial condition and results of operations.

Our business depends on the continued operation of our Clive, Utah facility.

Our disposal facility in Clive, Utah is a strategic asset and is vital to our business. This facility is the largest privately owned
commercial facility for the disposal of LLRW in the United States, and contributed 7.7% and 14.2% of our revenues for the years ended December 31, 2008 and 2007, respectively. Because of the
greater profitability of the Clive facility in comparison with the rest of our business, a loss of revenue from Clive would have a disproportionate impact on our gross profit and gross margin. The
Clive facility is subject to the normal hazards of operating any disposal facility, including accidents and natural disasters. In addition, access to the facility is limited, and any interruption in
rail or other transportation services to and from the facility will affect our ability to operate the facility. Our Clive facility is highly regulated and subject to extensive licensing and permitting
requirements and continuous air and ground water monitoring. Changes in federal, state or local regulations, including changes in the interpretation of those regulations, can affect our ability to
operate the facility. Actions by states or the federal government may affect facility capacity, expansion or extension of the Clive facility. The Northwest Compact also has asserted authority over our
Clive facility and restrictions over our ability to import foreign LLRW for disposal at the facility, and federal legislation has been introduced to prohibit the importation of foreign LLRW waste.
Such actions may hinder, delay or stop shipments to the facility, which could seriously impair our ability to execute disposal projects and significantly reduce future revenues. We believe that we
have sufficient capacity for more than 30 years of operations based on our estimate of future disposal volumes, our ability to optimize disposal capacity utilization and our assumption that we
will obtain a license amendment to convert a disposal cell originally intended for 11e(2) waste to Class A LLRW. If we are unable to obtain the license amendment, our projected capacity to
dispose of Class A LLRW would be materially reduced. If future disposal volumes increase beyond our expectations or if our other assumptions prove to be incorrect, then the remaining capacity
at Clive would be exhausted more quickly than projected.

Any
interruption in our operation of the Clive facility or decrease in the effective capacity of the facility would adversely affect our business, and any prolonged disruption in the
operation of the facility or reduction in the capacity or useful life of the facility would have a material adverse effect on our business, financial condition and results of operations.

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Our quarterly operating results may fluctuate significantly and may not meet our financial guidance or published analyst forecasts, which could have a negative effect on the
price of our common stock.

Our quarterly operating results may fluctuate significantly because of a number of factors, many of which are outside our control,
including:



Fluctuations
in quarterly results, lower than anticipated revenues or our failure to meet financial guidance or published analysts' forecasts could have a negative effect on the price of
our common stock.

Our international operations involve risks that could have a material adverse effect on our results of operations.

For the year ended December 31, 2008, we derived 65.1% and 28.3% of our revenues and segment operating income, respectively, and
for the year ended December 31, 2007, we derived 49.5% and 1.9% of our revenues and segment operating income, respectively, from our operations outside of North America. Our business is
dependent on the success of our international operations, and we expect that our international operations will continue to account for a significant portion of our total revenues. Our international
operations are subject to a variety of risks, including:



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Changes in existing environmental and other laws, regulations and programs could harm our business.

A significant amount of our business of processing and disposing of radioactive materials derives directly or indirectly from existing
national and state laws, regulations and programs related to pollution and environmental protection. National, state and local environmental legislation and regulations require substantial
expenditures and impose liabilities for noncompliance. Accordingly, a real or perceived relaxation or repeal of these laws and regulations, or changes in government policies regarding the funding,
implementation or enforcement of these programs, could result in a material decline in demand for nuclear services. The ultimate impact of the proposed changes will depend upon a number of factors,
including the overall strength of the economy and the industry's views on the cost-effectiveness of remedies available under the changed laws and regulations.

Our
operations are subject to taxation by the U.S. and U.K. governments, the State of Utah, Tooele County, Utah and other foreign governments. In the event of a material increase in our
taxes resulting from an increase in our effective tax rate or change in our scheme of taxation, we may not have the ability to pass on the effect of such increase to our customers and, as a result,
our stockholders could bear the burden of any such tax increase. The risk of a material tax increase may be exacerbated by political pressure to limit our operations. See"We and our customers
operate in a politically sensitive environment, and the public perception of nuclear power and radioactive
materials can affect our customers and us."

Our
facilities are also subject to political actions by government entities which can reduce or completely curtail their operations. For example, the State of South Carolina closed the
Barnwell disposal site on July 1, 2008 to customers outside of the Atlantic Compact States of South Carolina, New Jersey and Connecticut. Although we do not expect the Barnwell closure to be
significant to our revenues or net income, political pressures to reduce or curtail other operations could have a material adverse effect on our results of operations.

Our life-of-plant contracts may not remain effective through a nuclear power plant's decontamination and decommissioning.

Although our life-of-plant contracts are intended to provide us with revenue streams from the processing and
disposal of substantially all LLRW and MLLW generated over the remaining lives of nuclear power plants operated by our commercial power and utility customers, and ultimately waste disposal revenue
streams when the plants are shut down, these contracts may not actually remain effective for that entire period. A typical "life-of-plant" contract may terminate before D&D
because the contract may:



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The
early termination or renegotiation of a life-of-plant contract may reduce our revenues and profits. In addition, life-of-plant
contracts may expose us to liability in the event that government bodies limit our ability to accept radioactive materials by capping the capacity of one or more of our disposal facilities or taking
other actions.

We may not be successful in winning new business mandates from our government and commercial customers.

We must be successful in winning new business mandates from our government and commercial customers to replace revenues from projects
that are nearing completion and to increase our revenues. Our business and operating results can be harmed by the size and timing of a single material contract. For example, during 2005, we were the
primary subcontractor to Kaiser-Hill Company, LLC for the transportation and disposal of LLRW, MLLW and other contaminated materials from the DOE's Rocky Flats Environmental
Technology site near Denver, Colorado. Pursuant to this contract, we generated $105.4 million of revenues during 2005. The DOE declared the clean-up complete in October 2005, and we
have not generated significant revenues from Rocky Flats since 2005.

Our
business strategy includes bidding on government contracts as a lead prime contractor in a consortium. We expect to bid on a significant portion of the approximately
$25.8 billion of federal nuclear services contracts that we estimate will be awarded within the next five years. In the past, we have operated primarily as a subcontractor or in a minority
position on a prime contractor team. In pursuing a lead prime contractor role, we will be competing directly with a number of large national and regional nuclear services firms that may possess or
develop technologies superior to our technologies and have greater financial, management and marketing resources than we do. Many of these companies also have long-established customer
relationships and reputations. As a result, we may not be successful in being awarded the lead prime contractor role for any of these contracts.

We may fail to win re-bids in the United Kingdom for the Southern and Northern Region decommissioning contracts currently held by our subsidiary RSMC.

In December 2008, the NDA announced that the current NDA contracts held by RSMC through its subsidiaries, Magnox North Limited and
Magnox South Limited, in relation to the Southern Region sites and Northern Region sites will be put out for re-bid in 2011. During the contract year ended March 31, 2008, RSMC
recognized revenues of $1.1 billion from these contracts. We expect the competition for these contracts to be intense, and our failure to win the re-bid of either or both contracts
would have a material adverse effect on our results of operations. Even if we win the re-bid, the participation of a partner could reduce our profits from these contracts. In addition, any
limitations on our ability to import international waste to our Clive facility could reduce one of our competitive advantages in competing for these contracts. See risk factor "We and our
customers operate in a politically sensitive environment, and the public perception of nuclear power and radioactive materials can affect our customers and us."

The loss of one or a few customers could have an adverse effect on us.

One or a few government and commercial customers have in the past and may in the future account for a significant portion of our
revenues in any one year or over a period of several consecutive years. For example, the NDA accounts for virtually all of our revenue in the International segment (which is our largest segment based
on 2008 revenues). For the years ended December 31, 2008 and 2007, respectively, 64.8% and 48.6% of our revenues were from contracts funded by the NDA. In addition, in 2007, we had contracts
with various offices within the DOE, including with the Office of Environmental Management, the Office of Civilian Radioactive Waste Management, the

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National
Nuclear Security Administration and the Office of Nuclear Energy. For the years ended December 31, 2008 and 2007, respectively, 11.2% and 16.7% of our revenues were from contracts
funded by the DOE. Because customers generally contract with us for specific projects, we may lose these significant customers from year to year as their projects with us are completed. Our inability
to replace this business with other projects could have an adverse effect on our business and results of operations.

The elimination or any modification of the Price-Anderson Act's indemnification authority could harm our business.

In the United States, the Atomic Energy Act of 1954, as amended, or the AEA, comprehensively regulates the manufacture, use and storage
of radioactive materials. Section 170 of the AEA, which is known as the Price-Anderson Act, supports the nuclear services industry by offering broad indemnification to commercial nuclear power
plant operators and DOE contractors for liabilities arising out of nuclear incidents at power plants licensed by the NRC and at DOE nuclear facilities. That indemnification protects not only the NRC
licensee or DOE prime contractor, but also companies like us that work under contract or subcontract for a licensed power plant or under a DOE prime contract or transporting radioactive material to or
from a site. The indemnification authority of the NRC and DOE under the Price-Anderson Act was extended through 2025 by the Energy Policy Act of 2005.

The
Price-Anderson Act's indemnification provisions generally do not apply to our processing and disposal facilities, and do not apply to all liabilities that we might incur while
performing services as a contractor for the DOE and the nuclear energy industry. If an incident or evacuation is not covered under Price-Anderson Act indemnification, we could be held liable for
damages, regardless of fault, which could have an adverse effect on our results of operations and financial condition. In connection with international transportation of toxic, hazardous and
radioactive materials, it is possible for a claim to be asserted which may not fall within the indemnification provided by the Price-Anderson Act. If such indemnification authority is not applicable
in the future, our business could be adversely affected if the owners and operators of new facilities fail to retain our services in the absence of commercially adequate insurance and indemnification.

Our existing and future customers may reduce or halt their spending on nuclear services from outside vendors, including us.

A variety of factors may cause our existing or future customers to reduce or halt their spending on nuclear services from outside
vendors, including us. These factors include, but are not limited to:



These
events also could adversely affect us to the extent that they result in the reduction or elimination of contractual requirements, the suspension or reduction of nuclear reactor
operations, the reduction of supplies of nuclear raw materials, lower demand for nuclear services, burdensome regulation, disruptions of shipments or production, increased operational costs or
difficulties or increased liability for actual or threatened property damage or personal injury.

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Economic downturns and reductions in government funding could harm our businesses.

Demand for our services has been, and we expect that demand will continue to be, subject to significant fluctuations due to a variety
of factors beyond our control, including economic and industry conditions. The stress experienced by global capital markets that began in the second half of 2007 continued and substantially increased
during the second half of 2008. Recently, concerns over inflation, energy costs, geopolitical issues, the availability and cost of credit, the U.S. mortgage market and a declining real estate market
have contributed to increased volatility and diminished expectations for the global economy and expectations of slower global economic growth going forward. These factors, combined with volatile oil
prices, declining business and consumer confidence and increased unemployment, have precipitated an economic recession.

During
economic downturns, the ability of private and government entities to make expenditures on nuclear services may decline significantly. Economic or political conditions may be
unfavorable to our industry and there may be significant fluctuations adversely affecting our industry as a whole. In addition, our operations depend, in part, upon government funding, particularly
funding levels at the NDA or DOE. Significant changes in the level of government funding (for example, the annual budget of the NDA or DOE) or specifically mandated levels for different programs that
are important to our business could have an unfavorable impact on our business, financial position, results of operations and cash flows. For example, although the Magnox contract funding for the
2008/09 contract year increased
over the 2007/08 contract year, the NDA has stated that the Magnox North and Magnox South sites, for which we are currently a prime contractor, may receive reduced funding allocations in the future so
that the NDA may address other sites that contain more hazardous materials that pose a greater degree of risk. In addition, it is likely that Congress will not pass a fiscal year 2009 appropriations
bill until the new administration has been in office for some time, which may delay spending on new government contracts.

In
addition, current market conditions have exerted downward pressure on the price of our common stock, which could limit our ability to raise capital, if necessary, through borrowings
or the issuance of additional securities. A protracted economic downturn could exacerbate these adverse conditions. Although numerous governments have taken steps to mitigate the disruption to
financial markets, there can be no assurances that government responses will restore consumer confidence for the foreseeable future.

The
current state of the financial markets could also exert pressure on our customers and could limit their ability to secure working capital. This may impact their liquidity and their
ability to make timely payments of their invoices to us. The inability of our customers to make timely payments of our invoices may negatively impact our cash flows.

As a government contractor, we are subject to extensive government regulation, and our failure to comply with applicable regulations could subject us to penalties that may
restrict our ability to conduct our business.

Our government contracts, which are primarily with the NDA and the DOE, are a significant part of our business. Allowable costs under
U.S. government contracts are subject to audit by the U.S. government. Similarly, some U.K. contracts are subject to audit by U.K. regulatory authorities, including the NDA. If these audits result in
determinations that costs claimed as reimbursable are not allowed costs or were not allocated in accordance with applicable regulations, we could be required to reimburse government authorities for
amounts previously received.

Government
contracts are often subject to specific procurement regulations, contract provisions and a variety of other requirements relating to the formation, administration, performance
and accounting of these contracts. Many of these contracts include express or implied certifications of compliance with applicable regulations and contractual provisions. We may be subject to qui tam
litigation brought by private individuals on behalf of the government under the Federal Civil False

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Claims
Act, which could include claims for up to treble damages. Additionally, we may be subject to the Truth in Negotiations Act, which requires certification and disclosure of all factual costs and
pricing data in connection with contract negotiations. If we fail to comply with any regulations, requirements or
statutes, our existing government contracts could be terminated or we could be suspended from government contracting or subcontracting. If one or more of our government contracts are terminated for
any reason, or if we are suspended or debarred from government work, we could suffer a significant reduction in expected revenues and profits. Furthermore, as a result of our government contracting,
claims for civil or criminal fraud may be brought by the government for violations of these regulations, requirements or statutes.

Our commercial customers may decide to store radioactive materials on-site rather than contract with us to transport, process and dispose of the radioactive
materials at one of our off-site facilities.

Our LP&D segment's results of operations may be affected by the decisions of our commercial customers to store radioactive
materials on-site. There has been little regulatory, political or economic pressure for commercial utilities and power companies to dispose of radioactive materials at off-site
facilities. Some of these commercial entities have the ability to store radioactive materials generated by their operations on-site, instead of contracting with an outside service
provider, such as us, to transport, process and dispose of the radioactive materials at an off-site location, such as our Clive facility. The decision to store radioactive materials
on-site rather than contracting to dispose of them at an off-site facility may be influenced by the accounting treatment for radioactive materials. Currently, the liability for
the disposal of radioactive materials stored on-site may be capitalized on the owner's balance sheet and amortized over the expected on-site storage period. In contrast,
radioactive materials shipped off-site for disposal are expensed during the period in which the materials are shipped off-site. The NRC has rejected our proposal to undertake
an amendment of current NRC rules to permit operators of nuclear reactors to access decommissioning funds for transportation and disposal of retired large components of currently operating nuclear
power plants. We will continue to work with the NRC to request, on a case-by-case basis, that operators of these nuclear reactors be permitted to access decommissioning funds
for transportation and disposal of retired large components. The NRC's refusal to grant such requests could have an adverse impact on the prospects for our Commercial Services and LP&D
segments.

We may not be successful in entering into license stewardship arrangements with owners and operators of shut-down nuclear reactors.

We are marketing our license stewardship solution to the owners and operators of shut-down nuclear reactors in SAFSTOR or
monitored storage. Although we believe that our license stewardship initiative is an attractive alternative to deferring decommissioning and related risks to the reactor owner, including future cost
increases and the future availability of disposal capacity, the following factors may adversely affect our license stewardship initiative:



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As
discussed elsewhere in this report, we have entered into an agreement with Exelon to dismantle Exelon's nuclear facility located in Zion, Illinois, which ceased operation in 1998. We
expect that the NRC will grant approval for the transfer of the license to operate this facility from Exelon to us before the end of 2009. However, because of the current market downturn, the nuclear
decommissioning trust fund balance for the Zion Station, a significant portion of which is invested in the stock market, has declined in value. As a result, we intend to defer the completion of this
transaction until we reaffirm that there is sufficient value in the decommissioning trust funds to ensure adequate funds for the accelerated decommissioning of the plant. As of December 31,
2008, we have incurred costs of $12.4 million that have been deferred until the closing of the transaction. We will continue to defer these costs until we close the transaction, at which time
we will recognize the costs and related revenues. If we determine that it is not probable that we will close this transaction, we will expense these costs in the period of such determination.

Our
inability to successfully complete the transaction with Exelon or to enter into other license stewardship arrangements may harm our business, financial position, results of
operations and cash flows.

We are subject to liability under environmental laws and regulations.

We are subject to a variety of environmental, health and safety laws and regulations governing, among other things, discharges to air
and water, the handling, storage and disposal of hazardous or radioactive materials and wastes, the remediation of contamination associated with releases of hazardous substances and human health and
safety. These laws and regulations and the risk of attendant litigation can cause significant delays to a project and add significantly to its cost. Our projects often involve highly regulated
materials, including hazardous and radioactive materials and wastes. Environmental laws and regulations generally impose limitations and standards for regulated materials and require us to obtain
permits and licenses and comply with various other requirements. Fees associated with such environmental permits and licenses can be costly. In addition, the improper characterization, handling,
testing, transportation or disposal of regulated materials or any other failure to comply with these environmental, health and safety laws, regulations, permits or licenses have resulted in fines or
penalties from time to time and could subject us and our management to civil and criminal penalties, the imposition of investigatory or remedial obligations or the issuance of injunctions that could
restrict or prevent our operations. These laws and regulations may also become more stringent, or be more stringently enforced, in the future.

Various
national, state and local environmental laws and regulations, as well as common law, may impose liability for property damage and costs of investigation and clean-up
of hazardous or toxic substances on property currently or previously owned by us or arising out of our waste management, environmental remediation or nuclear D&D activities. These laws may impose
responsibility and liability without regard to knowledge of or causation of the presence of contaminants. The liability under these laws can be joint and several, meaning liability for the entire cost
of clean-up can be imposed upon any responsible party. We have potential liabilities associated with our past radioactive materials management activities and with our current and prior
ownership of various properties. The

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discovery
of additional contaminants or the imposition of unforeseen clean-up obligations at these or other sites could have an adverse effect on our results of operations and financial
condition.

When
we perform our services, our personnel and equipment may be exposed to radioactive and hazardous materials and conditions. We may be subject to liability claims by employees,
customers and third parties as a result of such exposures. In addition, we may be subject to fines, penalties or other liabilities arising under environmental or safety laws. Although to date we have
been able to obtain liability insurance for the operation of our business, there can be no assurance that our existing liability insurance is adequate or that it will be able to be maintained or that
all possible claims that may be asserted against us will be covered by insurance. A partially or completely uninsured claim, if successful and of sufficient magnitude, could have a material adverse
effect on our results of operations and financial condition.

Our operations involve the handling, transportation and disposal of radioactive and hazardous materials and could result in liability without regard to our fault or
negligence.

Our operations involve the handling, transportation and disposal of radioactive and hazardous materials. Failure to properly handle
these materials could pose a health risk to humans or animals and could cause personal injury and property damage (including environmental contamination). If an accident were to occur, its severity
could be significantly affected by the volume of the materials and the speed of corrective action taken by emergency response personnel, as well as other factors beyond our control, such as weather
and wind conditions. Actions taken in response to an accident could result in significant costs.

In
our contracts, we seek to protect ourselves from liability associated with accidents, but there is no assurance that such contractual limitations on liability will be effective in all
cases or that our, or our customers', insurance will cover all the liabilities we have assumed under those contracts. The costs of defending against a claim arising out of a nuclear incident or
precautionary evacuation, and any damages awarded as a result of such a claim, could adversely affect our results of operations and financial condition.

We
maintain insurance coverage as part of our overall risk management strategy and due to requirements to maintain specific coverage in our financing agreements and in many of our
contracts. These policies do not protect us against all liabilities associated with accidents or for unrelated claims. In addition, comparable insurance may not continue to be available to us in the
future at acceptable prices, or at all.

We are engaged in highly competitive businesses and typically must bid against other competitors to obtain major contracts.

We are engaged in highly competitive businesses in which most of our government contracts and some of our commercial contracts are
awarded through competitive bidding processes. We compete with national and regional firms with nuclear services practices, as well as small or local contractors. Some of our competitors have greater
financial and other resources than we do, which can give them a competitive advantage. In addition, even if we are qualified to work on a new government contract, we might not be awarded the contract
because of existing government policies designed to protect small businesses and underrepresented minority contractors. Competition also places downward pressure on our contract prices and profit
margins. Intense competition is expected to continue for nuclear service contracts, challenging our ability to maintain strong growth rates and acceptable profit margins. If we are unable to meet
these competitive challenges, we could lose market share and experience an overall reduction in our profits. In the event that a competitor is able to obtain the necessary permits, licenses and
approvals to operate a new commercial LLRW disposal site, our business could be adversely affected.

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For
example, Waste Control Specialists LLC, or WCS, filed a license application with the Texas Commission on Environmental Quality in August 2004 for a LLRW disposal facility and
announced receipt of a conditional license on January 20, 2009. In order to receive an active license, the conditional license requires WCS to complete several major environmental studies,
examples of which include groundwater, air emissions, and seismic stability studies. WCS must also demonstrate that the leachate from the landfill will not reach the Ogallala-Antlers-Gatuna Aquifer.
The conditional license states that prior to accepting federal facility waste, WCS must receive an agreement signed by the U.S. Secretary of Energy that it will assume all rights, title and interest
in land and buildings for the disposal of federal facility waste. Should the conditional license become active, WCS will be allowed to receive waste from the Texas Compact, which includes the states
of Texas and Vermont, and from federal facilities (i.e., DOE). WCS will not be able to receive waste via railcar or receive depleted uranium, and will be required to dispose of commercial waste
in specially designed containers in the compact portion of the facility. We cannot predict whether WCS will successfully resolve the contingencies related to the draft LLRW license, or whether the
State of Texas will issue a final license to WCS. In addition, WCS recently received a separate license to permanently dispose of 11e(2) materials at its facility.

Our historical financial statements do not fully reflect our results of operations as a newly combined company.

Our business today consists of a combination of recently acquired businesses. However, the historical financial statements for 2006 and
2007 included in this report only reflect the results of the acquired businesses from the dates of their acquisition. Therefore, these financial statements reflect our operations as a combined
business for only a limited time.

Our business and operating results could be adversely affected by losses under fixed-price contracts.

Fixed-price contracts require us to perform all work under the contract for a specified lump-sum. Fixed-price contracts
expose us to a number of risks not inherent in cost-reimbursable contracts, including underestimation of costs, ambiguities in specifications, unforeseen costs or difficulties, problems
with new technologies, delays beyond our control, failures of subcontractors to perform and economic or other changes that may occur during the contract period. If we have under estimated the costs of
our fixed-price contracts, we may experience losses on such contracts.

If we guarantee the timely completion or performance standards of a project, we could incur additional costs to cover our guarantee obligations.

In some instances, we guarantee a customer that we will complete a project by a scheduled date. For example, in connection with our
license stewardship initiative, we guarantee that we will complete the decommissioning of a nuclear power plant that is currently shut down within both a particular time frame and budget. We also
sometimes guarantee that a project, when completed, will achieve certain performance standards. If we fail to complete the project as scheduled or if the project fails to meet guaranteed performance
standards, we may be held responsible for the impact to the customer resulting from any delay or for the cost of further work to achieve the performance standards, generally in the form of
contractually agreed-upon penalty provisions. As a result, the project costs could exceed our original estimate, leading to reduced profits or a loss for that project.

Our use of proportional performance accounting could result in a reduction or elimination of previously reported profits.

A significant portion of our revenues are recognized using the proportional performance method of accounting. Generally, the
proportional performance accounting practices we use result in recognizing contract revenues and earnings based on output measures, where estimable, or on other measures such as the proportion of
costs incurred to total estimated contract costs. For some of our

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long-term
contracts, completion is measured on estimated physical completion or units of production. The cumulative effect of revisions to contract revenues and estimated completion costs,
including incentive awards, penalties, change orders, claims and anticipated losses, is recorded in the accounting period in which the amounts are known or can be reasonably estimated. Due to
uncertainties inherent in the estimation process, it is possible that actual completion costs may vary from estimates. A significant downward revision to our estimates could result in a material
charge to our results of operations in the period of such a revision.

Acquisitions that we pursue may present unforeseen integration obstacles and costs, increase our debt and negatively impact our performance.

Our growth strategy includes selective acquisitions of other nuclear services businesses, both domestic and international, that we
expect will enhance our existing portfolio of services and strengthen our relationships with our government and commercial customers. In 2007, we completed the acquisitions of RSMC, Parallax, NUKEM
and Monserco. From time to time, we may consider additional acquisitions, which, if consummated, could be material. We cannot give any assurance as to whether any such transaction could be completed
or as to the price, terms or timetable on which we may do so. If we are able to consummate any such acquisition, it could result in dilution of our earnings, an increase in indebtedness or other
consequences that could be adverse.

The
expense incurred in consummating acquisitions, or our failure to integrate such businesses successfully into our existing businesses, could result in our incurring unanticipated
expenses and losses. Furthermore, we may not be able to realize anticipated benefits from acquisitions. The process of integrating acquired operations into our existing operations may result in
unforeseen operating difficulties and may require significant financial resources that would otherwise be available for the ongoing development or expansion of existing operations. Some of the risks
associated with our acquisition strategy include:



We
may not be able to identify suitable acquisition targets or negotiate attractive terms in the future. In addition, our ability to complete acquisitions is limited by covenants in our
credit facilities and our financial resources, including available cash and borrowing capacity. Given the serious decline in our stock price and tight debt markets, we may be unable to make
acquisitions. If we are unable to make successful acquisitions, our ability to grow our business could be adversely affected. We made no acquisitions during 2008. Due to the condition of the financial
markets it is unlikely we will make any acquisitions during 2009.

Our success depends on attracting and retaining qualified personnel in a competitive environment.

Our operations require the services of highly qualified managerial and business development personnel, skilled technology specialists
and experts in a wide range of scientific, engineering and health and safety fields. Partly because no new nuclear reactors have commenced construction since the mid-1970s, there has been
a limited number of qualified students graduating from universities with specialized nuclear engineering or nuclear science-based degrees. As a result, the nuclear services industry is experiencing a
shortage of qualified personnel. We face increasing competition and expense to attract and retain such personnel. Loss of key personnel or
failure to attract personnel to expand our operations could have an adverse effect on our ability to operate our business and execute our business strategy.

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Our failure to maintain our safety record could have an adverse effect on our business.

Our safety record is critical to our reputation. In addition, many of our government and commercial customers require that we maintain
certain specified safety record guidelines to be eligible to bid for contracts with these customers. Furthermore, contract terms may provide for automatic termination in the event that our safety
record fails to adhere to agreed-upon guidelines during performance of the contract. As a result, our failure to maintain our safety record could have a material adverse effect on our
business, financial condition and results of operations.

An impairment charge could have a material adverse effect on our financial condition and results of operations.

Under Statement of Financial Accounting Standards No. 142,Goodwill and Other Intangible
Assets, we are required to test acquired goodwill for impairment on an annual basis based upon a fair value approach, rather than amortizing it over time. Goodwill represents
the excess of the amount we paid to acquire our subsidiaries and other businesses over the fair value of their net assets at the date of the acquisition. We have chosen to perform our annual
impairment reviews of goodwill as of the end of the first quarter of each fiscal year. We also are required to test goodwill for impairment between annual tests if events occur or circumstances change
that would more likely than not reduce our enterprise fair value below its book value. In addition, we are required to test our finite-lived intangible assets for impairment if events occur or
circumstances change that would indicate the remaining net book value of the finite-lived intangible assets might not be recoverable. These events or circumstances could include a significant change
in the business climate, including a significant sustained decline in an entity's market value, legal factors, operating performance indicators, competition, sale or disposition of a significant
portion of our business, potential government actions towards our facilities and other factors. If the fair market value of our reporting units is less than their book value, we could be required to
record an impairment charge. The valuation of reporting units requires judgment in estimating future cash flows, discount rates and other factors. In making these judgments, we evaluate the financial
health of our business, including such factors as industry performance, changes in technology and operating cash flows. The amount of any impairment could be significant and could have a material
adverse effect on our reported financial results for the period in which the charge is taken.

In
June 2006, we acquired Duratek for an aggregate purchase price of $440.8 million. Goodwill recognized for this acquisition was $310.5 million. We paid a premium in
excess of the fair value of $216.9 million. We were willing to pay this premium as a result of our identification of significant synergies that we expect to realize through the acquisition.
However, if we determine that we are not able to realize these expected synergies and determine that the fair value of the assets acquired is less than the book value of those assets, then we would
have to recognize an impairment to goodwill as a current-period expense. Because of the significant amount of goodwill recognized in the Duratek acquisition, an impairment of that goodwill could
result in a material expense and could result in a decrease in the market price of our common stock.

Since
our annual impairment test, which was completed in the second quarter of 2008, we have updated our forecasts to reflect the impacts of the global economic down turn and have
determined that goodwill is not impaired as of December 31, 2008. However, further changes in our forecasts or decreases in the value of our common stock could cause book values of certain
operating segments to exceed their fair values, which may result in goodwill impairment charges in future periods. We had $528.3 million of goodwill and $357.1 million of finite-lived
intangible assets, which collectively represented 57.1% of our total assets of $1.6 billion as of December 31, 2008.

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We have substantial debt, which could harm our financial condition, business and growth prospects.

As of December 31, 2008, the outstanding balance under our credit facilities was $566.8 million. Our substantial debt
could have important consequences to us, including the following:



We
currently have $19.7 million letters of credit issued against our $75.0 million revolving credit facility, which matures on June 7, 2011; a $566.8 million
balance on our first lien term loan facilities, which matures on June 7, 2013 with minimum payments of $3.0 million in 2009, $5.9 million in 2010, 2011 and 2012; and a
$100.0 million synthetic letter of credit facility, which matures on June 7, 2013.

Borrowings
under our credit facilities bear interest at variable rates. As of December 31, 2008, the weighted average interest rate under our credit facilities was 4.14%. At this
rate and assuming an outstanding balance of $566.8 million as of December 31, 2008, our annual debt service obligations would be $29.4 million. Based on the amount of debt
outstanding and the interest rate at December 31, 2008, a hypothetical 1% increase in interest rates would increase our annual interest expense by approximately $5.7 million. If interest
rates were to increase significantly, our ability to borrow additional funds may be reduced, our interest expense would significantly increase and the risks related to our substantial debt would
intensify.

The agreements governing our debt restrict our ability to engage in certain business transactions.

The agreements governing the credit facilities restrict our ability to, among other things, engage in the following actions, subject to
limited exceptions:



Our
credit facilities also contain other covenants that are typical for credit facilities of this size, type and tenor, such as requirements that we meet specified maximum leverage and
minimum cash interest coverage ratios. Our ability to make additional borrowings under our credit facilities depends

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upon
satisfaction of these covenants. Our ability to comply with these covenants and requirements may be affected by events beyond our control.

Our
failure to comply with obligations under our credit facilities could result in an event of default under the facilities. A default, if not cured or waived, could prohibit us from
obtaining further loans under our credit facilities and permit the lenders thereunder to accelerate payment of their loans. If our debt is accelerated, we cannot be certain that we will have funds
available to pay the accelerated debt or that we will have the ability to refinance the accelerated debt on terms favorable to us or at all. If we could not repay or refinance the accelerated debt, we
could be insolvent and could seek to file for bankruptcy protection. Any such default, acceleration or insolvency would likely have a material adverse effect on the market value of our common stock.

We rely on intellectual property law and confidentiality agreements to protect our intellectual property. Our failure to protect our intellectual property rights could
adversely affect our future performance and growth.

Protection of our proprietary processes, methods and other technology is important to our business. Failure to protect our existing
intellectual property rights may result in the loss of valuable technologies. We rely on patent, trade secret, trademark and copyright law as well as judicial enforcement to protect such technologies.
A majority of our patents relate to the development of new products and processes for the processing and disposal of radioactive materials. Our intellectual property could be challenged, invalidated,
circumvented or rendered unenforceable.

We
also rely upon unpatented proprietary nuclear expertise, continuing technological innovation and other trade secrets to develop and maintain our competitive position. We generally
enter into confidentiality agreements with our employees and third parties to protect our intellectual property, but these agreements are limited in duration and could be breached, and therefore they
may not provide meaningful protection for our trade secrets or proprietary nuclear expertise. Adequate remedies may not be available in the event of an unauthorized use or disclosure of our trade
secrets and nuclear expertise. Others may obtain knowledge of our trade secrets through independent development or other access by legal means. The failure of our intellectual property or
confidentiality agreements to protect our processes, technology, trade secrets and proprietary nuclear expertise and methods could have an adverse effect on our business by jeopardizing our rights to
use critical intellectual property.

In
addition, effective intellectual property protection may be limited or unavailable in some foreign countries where we may pursue operations.

If our partners fail to perform their contractual obligations on a project or if we fail to coordinate effectively with our partners, we could be exposed to legal liability,
loss of reputation and reduced profit on the project.

We often perform projects jointly with contractual partners. For example, we enter into contracting consortia and other contractual
arrangements to bid and perform jointly on large projects. Success on these joint projects depends in part on whether our partners fulfill their contractual obligations satisfactorily. If any of our
partners fails to perform its contractual obligations satisfactorily, we may be required to make additional investments and provide additional services in order to compensate for that partner's
failure. If we are unable to adequately address our partner's performance issues, then our customer may exercise its right to terminate a joint project, exposing us to legal liability, loss of
reputation and reduced profit.

Our
collaborative arrangements also involve risks that participating parties may disagree on business decisions and strategies. These disagreements could result in delays, additional
costs and risks of litigation. Our inability to successfully maintain existing collaborative relationships or enter into new collaborative arrangements could have a material adverse effect on our
results of operations.

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We conduct a portion of our operations through joint venture entities, over which we may have limited control.

We currently have equity interests in joint ventures and may enter into additional joint ventures in the future. As with most joint
venture arrangements, differences in views among the joint venture participants may result in delayed decisions or disputes. We also cannot control the actions of our joint venture partners, and we
typically have joint and several liability with our joint venture partners under the applicable contracts for joint venture projects. These factors could potentially harm the business and operations
of a joint venture and, in turn, our business and operations.

Operating
through joint ventures in which we are minority holders results in us having limited control over many decisions made with respect to projects and internal controls relating to
projects. These joint ventures may not be subject to the same requirements regarding internal controls and internal control
over financial reporting that we follow. As a result, internal control problems may arise with respect to the joint ventures.

Our dependence on subcontractors and equipment manufacturers could adversely affect us.

We rely on subcontractors and equipment manufacturers to complete our projects. For example, when providing D&D services to a
government customer, we may rely on one or more subcontractors to conduct demolition work. To the extent that we cannot engage subcontractors or acquire equipment or materials to provide such
services, our ability to complete the project in a timely fashion or at a given profit margin may be impaired. Our LP&D segment also enters into contracts with various railroads for the
transportation of radioactive materials from project sites to our processing and disposal facilities. In the event that the railroads fail to deliver radioactive materials to our facilities on time,
we could be forced to delay recognizing LP&D revenues until the time of delivery.

In
addition, if a subcontractor or a manufacturer is unable to deliver its services, equipment or materials according to the negotiated terms for any reason, including the deterioration
of its financial condition, we may be required to purchase those services, equipment or materials from another source at a higher price. This may reduce our profitability or result in a loss on the
project for which the services, equipment or materials were needed.

Letters of credit and adequate bonding are necessary for us to win certain types of new work.

We are required to post, from time to time, standby letters of credit and surety bonds to support contractual obligations to customers
as well as other obligations. These letters of credit and bonds indemnify the customer if we fail to perform our obligations under the contract. For example, in connection with our agreement with
Exelon Corporation regarding the decommissioning of its Zion nuclear facility located in Zion, Illinois, we are required to deliver a $200 million letter of credit to Exelon relating to our
present and future obligations. If a letter of credit or bond is required for a particular project and we are unable to obtain it due to insufficient liquidity or other reasons, we will not be able to
pursue that project. We have a bonding facility but, as is typically the case, the issuance of bonds under that facility is at the surety's sole discretion. In addition, we have limited capacity under
our credit facilities for letters of credit. Moreover, due to events that affect the insurance and bonding and credit markets generally, bonding and letters of credit may be more difficult to obtain
in the future or may only be available at significant additional cost. There can be no assurance that letters of credit or bonds will continue to be available to us on reasonable terms. Our inability
to obtain adequate letters of credit and bonding and, as a result, to bid on new work could have a material adverse effect on our business, financial condition and results of operations. As of
December 31, 2008, we had $100.0 million in letters of credit which are issued under our synthetic letter of credit facility, $19.7 million in letters of credit which are issued
under the revolving portion of our credit facility and $2.6 million in surety bonds outstanding.

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Because we publish earnings guidance for our company, our common stock may be subject to increased volatility and we may be subject to lawsuits by investors.

Because we publish earnings guidance, we are subject to a number of risks. Based on the timing of winning key contracts, regulatory
decision making and other uncertainties relating to assumptions that management makes in calculating our expected financial results, actual results may vary from the guidance we provide investors. Our
stock price may decline following an announcement of disappointing earnings or earnings guidance or if we revise our earnings guidance downward as the estimates and assumptions we make in calculating
guidance become more certain. On October 14, 2008, we announced a reduction in our earnings guidance due, among other things, to the current economic downturn. Following that announcement, our
stock price declined by 44% on October 14, 2008.

Our
earnings guidance reflects our assumptions regarding future performance, including, among other things, the likelihood of securing and performing work under new contracts. If we fail
to secure and perform work under contracts in accordance with our assumptions, we may be unable to achieve our earnings guidance. Some companies that have made downward revisions to their earnings
guidance or
did not meet the guidance provided have been subject to lawsuits by investors. Such lawsuits may have merit and result in adverse settlements or judgments. Even if such lawsuits are dismissed or have
no merit, they may be costly and may divert management attention and other resources away from our business, which could harm our business and the price of our common stock.

If securities or industry analysts stop publishing research or reports about our business, if they change their recommendations regarding our stock adversely or if our
operating results do not meet their expectations, our stock price could decline.

The trading market for our common stock is influenced by the research and reports that industry or securities analysts publish about us
or our business. If one or more of these analysts cease coverage of our company or fail to publish reports on us regularly, we could lose visibility in the financial markets, which in turn could cause
our stock price or trading volume to decline. Moreover, if one or more of the analysts who cover our company downgrade our stock or if our operating results do not meet their expectations, our stock
price could decline.

As a public company, we are subject to additional financial and other reporting and corporate governance requirements that may be difficult for us to satisfy.

In connection with our initial public offering in November 2007, we became obligated to file with the SEC annual and quarterly
information and other reports that are specified in Section 13 of the Securities Exchange Act of 1934, as amended. We are also required to ensure that we have the ability to prepare financial
statements that are fully compliant with all SEC reporting requirements on a timely basis. We are also subject to other reporting and corporate governance requirements, including the requirements of
the NYSE and certain provisions of the Sarbanes-Oxley Act of 2002 and the regulations promulgated thereunder, which impose significant compliance obligations upon us. As a public company, we are
required to, among other things:



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These
changes require a significant commitment of additional resources. We may not be successful in implementing these requirements and implementing them could adversely affect our
business or operating results. In addition, if we fail to implement the requirements with respect to our internal accounting and audit functions, our ability to report our operating results on a
timely and accurate basis could be impaired.

If we or our independent registered public accounting firm identify a material weakness in our internal controls and such material weakness is not properly remediated, it
could result in material misstatements of our financial statements in future periods.

We or our independent registered public accounting firm may, in the future, identify a material weakness in our internal control over
financial reporting. A material weakness is defined by the standards issued by the Public Company Accounting Oversight Board as a significant deficiency, or combination of significant deficiencies,
that results in more than a remote likelihood that a material misstatement of the annual or interim financial statements will not be prevented or detected.

If
material weaknesses in our internal control over financial reporting are identified in the future, we may be unable to provide required financial information in a timely and reliable
manner, or otherwise comply with the standards applicable to us as a public company, and our management may not be able to report that our internal control over financial reporting is effective in
accordance with Section 404 of the Sarbanes-Oxley Act. There could also be a negative reaction in the markets due to a loss of investor confidence in us and the reliability of our financial
statements and, as a result, our business may be harmed and the price of our common stock may decline.

Item 1B.    Unresolved Staff Comments.

None.

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Item 2.    Properties.

At December 31, 2008, we owned 8 properties, leased 28 properties and operated 1 property pursuant to a long-term
lease with the State of South Carolina. The following table provides summary information of our owned and leased real property, inclusive of renewal options:

Property

Segment

Use

Space

Lease
ExpirationOwnedBarnwell, South Carolina

LP&D

Materials processing and packing


1,719 acres


N/ABarnwell, South Carolina

LP&D

Materials processing and packing


10 acreas


N/AClive, Utah

LP&D

Treatment and disposal facility


1,557 acres


N/AColumbia, South Carolina

Commercial Services

Maintenance facility


16 acres


N/AKingston, TennesseeGallaher Road

LP&D

Waste processing operations


79 acres


N/AMemphis, Tennessee

LP&D

Waste processing operations


13 acres


N/AOak Ridge, TennesseeManufacturing Sciences Corporation

LP&D

Metals manufacturing and fabrication


11 acres


N/AOak Ridge, TennesseeBear Creek

LP&D

Waste processing operations


45 acres


N/ALeasedAiken, South Carolina

Federal Services

General office space


1,625 sq ft.


06/30/11Albuquerque, New Mexico

Federal Services

General office space


6,000 sq ft.


10/31/09Alameda, CA

Federal Services and Commercial Services

General office space


300 sq ft.


MonthlyBrampton, Ontario

LP&D

General office space


14,202 sq ft.


02/28/10Brossard, Québec

LP&D

General office space


1,500 sq ft.


MonthlyCampbell, California

Federal Services and Commercial Services

General office space


5,570 sq ft.


11/15/12Columbia, South Carolina

Commercial Services

General office space


17,789 sq ft.


08/31/13Cumbria, United Kingdom

International

General office space


438 sq ft.


09/30/11Didcot Oxfordshire, United Kingdom

International

General office space


3,735 sq ft.


03/28/10Englewood, Colorado

Federal Services

Proposal center


10,683 sq ft.


09/30/12High Point, North Carolina

LP&D

General office space


288 sq ft.


MonthlyGermantown, Maryland

Federal Services

General office space


2,375 sq ft.


11/01/13Grand Junction, CO

Federal Services

General office space


550 sq ft.


02/28/11Idaho Falls, Idaho

Federal Services

General office space


7,035 sq ft.


04/30/10Laurel, Maryland

Federal Services and Commercial Services

General office space


41,364 sq ft.


12/31/09Los Alamos, New Mexico

Federal Services

General office space


6,471 sq ft.


03/01/13Moraga, California



General office space


300 sq ft.


MonthlyNew Milford, Connecticut

Commercial Services

General office space


9,000 sq ft.


09/30/09Oak Ridge, Tennessee

Federal Services

General office space


4,127 sq ft.


03/30/11Oak Ridge, Tennessee

Commercial Services

General office space


10,571 sq ft.


06/30/10Oak Ridge, TennesseeCommerce Park

Federal Services and Commercial Services

General office space


29,222 sq ft.


03/31/14Richland, WashingtonStevens Drive

Commercial Services

General office space


32,300 sq ft.


09/30/13Richland, Washington

Federal Services

General office space


6,200 sq. ft.


03/30/10Salt Lake City, Utah

All

Corporate offices


36,578 sq ft.


12/31/12Swindon, UK

International

General office space


7,600 sq ft.


10/13/13Toronto, Ontario

LP&D

General office space


400 sq ft.


10/31/09Washington, D.C.

Federal Services and Commercial Services

General office space


14,388 sq ft.


12/14/09Washington, D.C.

Federal Services and Commercial Services

General office space


5,035 sq ft.


09/30/17Operating RightsBarnwell, South Carolina

LP&D

Treatment and disposal facility


235 acres


04/05/75


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Item 3.   Legal Proceedings.

As previously reported, we have engaged in discussions with Sogin, SpA, the Italian state-owned utility company, to provide D&D and
radioactive materials management services in support of the clean-up of Sogin's nuclear facilities. Our pending license application with the Nuclear Regulatory Commission ("NRC") to import
material from Italy, to process it at our facility in Tennessee and to dispose of the residual material at our Clive facility in Utah has generated local and national expressions of opposition. We
believe our license application is consistent with all applicable laws and regulations and with past practices. Moreover, the Italian materialmetals, paper and clothingis the
same type of material that we handle routinely from the domestic nuclear industry.

The
NRC has issued numerous licenses over the past ten years allowing the importation of LLRW to be processed and ultimately disposed at our Clive facility. Under these licenses, our
Clive Facility has received Class A LLRW originating in Germany, Canada, France, Taiwan, and the United Kingdom.

The
States of Tennessee and Utah have confirmed to the NRC that the proposed Italian project is consistent with the licenses and permits issued by those states. However, the Governor of
the State of Utah announced on April 23, 2008 that he would send his representative to the May 8, 2008 meeting of the Northwest Interstate Compact on Low-Level Radioactive
Waste Management (the "Northwest Compact") to vote against any proposal that would allow us to receive international waste at our Clive facility.

On
May 5, 2008, we filed a declaratory judgment action in the U.S. District Court of Utah asking the court to declare that (i) the Northwest Compact does not have
regulatory authority over our Clive facility, which is a private commercial facility rather than a regional facility created by the Compact, (ii) the U.S. Constitution does not allow the
Northwest Compact to discriminate between identical domestic and foreign materials handled at our Clive facility, and (iii) any effort by the Northwest Compact to restrict our receipt of
foreign LLRW is pre-empted by federal statutes and regulations. The State of Utah and the Rocky Mountain Interstate Compact on Low-level Radioactive Waste have intervened as
defendants in the declaratory judgment action.

At
the Northwest Compact meeting on May 8, 2008, the representatives of the eight member States of the Northwest Compact, despite our commitment to restrict our receipt of
international waste to 5% of the remaining capacity at our Clive facility, unanimously adopted a clarifying resolution proposed by the Utah committee member, clarifying that the Northwest Compact has
never adopted a resolution permitting us to receive international waste at our Clive facility. We continue to believe that the Northwest Compact does not have regulatory authority over our Clive
facility, and that neither the U.S. Constitution nor Federal law permits the Northwest Compact, to prohibit us from receiving international waste at our Clive facility.

On
October 6, 2008, the NRC approved an order holding in abeyance its decision with respect to our pending import license application until the U. S. District Court of Utah issues
its ruling in the Company's declaratory judgment action.

We
intend to vigorously prosecute our declaratory judgment action, but we do not believe we will be able to process and dispose of any radioactive materials contemplated by the Italian
initiative during fiscal 2009.

Item 4.    Submission of Matters to a Vote of Security Holders.

No matters were submitted during the fourth quarter of the fiscal year covered by this report to a vote of security holders, through
the solicitation of proxies or otherwise.

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PART II

Item 5.    Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.

Our common stock began trading on the NYSE under the symbol "ES" on November 15, 2007.

Price Range of Common Stock

The price range per share of common stock presented below represents the highest and lowest sales prices for our common stock on the
NYSE since our initial public offering.

Highest

Lowest2007Fourth Quarter

$
28.45

$
21.822008First Quarter

$
27.85

$
16.90Second Quarter

$
27.42

$
20.68Third Quarter

$
23.64

$
8.50Fourth Quarter

$
10.93

$
3.35


Holders

As of February 24, 2009, there were 42 shareholders of record.

Dividends

We did not declare or pay cash dividends in 2007 subsequent to our initial public offering. During the year ended December 31,
2008, we paid four quarterly dividends of $0.025 per share. We currently intend to continue to pay such quarterly cash dividends during 2009. However, the declaration and payment of future dividends
to holders of our common stock will be at the discretion of our board of directors and will depend on many factors, including our results of operations, financial condition, liquidity requirements,
restrictions that may be imposed by applicable law and our contracts and other factors deemed relevant by our board of directors.

Securities Authorized for Issuance under Equity Compensation Plans

See Part III, Item 12 of this report for disclosure relating to our equity compensation plans. Such information will be
included in our Proxy Statement, which is incorporated herein by reference.

Purchases of Equity Securities by the Issuer and Affiliated Purchasers

None.

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Item 6.    Selected Financial Data.

The following table presents selected financial data for our business as of the dates and for the periods indicated. The financial data
as of December 31, 2004 and for the year ended December 31, 2004 and for the one month ended January 31, 2005 was derived from the audited consolidated financial statements and
the related notes of our predecessor company, Envirocare of Utah, Inc., or Envirocare. The financial data as of December 31, 2008, 2007, 2006 and 2005 and for the years ended
December 31, 2008, 2007 and 2006 and for the eleven months ended December 31, 2005 was derived from the audited consolidated financial statements of
EnergySolutions, LLC or EnergySolutions, Inc., subsequent to our conversion to a "C"
corporation in connection with our initial public offering. The financial data as of December 31, 2006, 2005 and 2004 and for the year ended December 31, 2004 and the eleven months ended
December 31, 2005, the one month ended January 31, 2005 has been derived from audited consolidated financial statements that are not included within this annual report on
Form 10-K. The financial data as of December 31, 2008 and 2007 and for the years ended December 31, 2008, 2007 and 2006 has been derived from audited consolidated
financial statements that are included within this annual report on Form 10-K. This selected financial data should be read in conjunction with the consolidated financial statements
and related notes included in Item 15 of this Form 10-K.

EnergySolutions

PredecessorYear Ended
December 31,
2008

Year Ended
December 31,
2007(1)

Year Ended
December 31,
2006(2)

Eleven Months
Ended
December 31,
2005(3)

One Month
Ended
January 31,
2005

Year Ended
December 31,
2004(in thousands of dollars, except for per share data)Statement of Operations Data:Revenues

$
1,791,631

$
1,092,613

$
427,103

$
348,192

$
21,914

$
226,684Gross profit(4)


247,193


196,527


191,236


213,842


14,532


140,911Income from operations(4)


117,763


74,579


89,974


166,247


13,565


111,450Net income (loss)


45,181


(8,899
)

26,863


117,985


13,578


111,580Net income (loss) per share data(5):Basic

$
0.51

$
(0.79
)Diluted


0.51


(0.79
)Number of shares used in per share calculations (in thousands):Basic


88,304


11,274Diluted


88,311


11,274Pro forma net income (loss) per share data (unaudited)(6):Basic




$
0.02

$
0.20Diluted





0.02


0.20Number of shares used in per share calculations (in thousands):Basic





76,748


75,150Diluted





77,156


75,150Other Data:Amortization of intangible assets(7)

$
28,250

$
24,147

$
16,589

$
10,917

$


$
Capital expenditures(8)


26,629


13,312


23,910


33,198


393


4,985Balance Sheet Data:Working capital(9)

$
92,550

$
69,739

$
32,136

$
25,793




$
29,402Cash and cash equivalents


48,448


36,366


4,641


34,798





10,175Total assets


1,550,712


1,624,950


1,157,205


580,009





104,967Total debt


566,757


606,967


764,167


547,707








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Selected Quarterly Financial Data (Unaudited)

2008 Quarters EndedMarch 31

June 30

September 30

December 31(in thousands of dollars, except for per share data)Statement of Operations Data:Revenues

$
501,753

$
460,345

$
419,453

$
410,080Gross profit


73,533


61,970


56,491


55,199Income from operations(1)


45,271


31,945


25,786


14,761Net income


19,293


12,595


10,902


2,391Net income per share data(2):Basic

$
0.22

$
0.14

$
0.12

$
0.03Diluted


0.22


0.14


0.12


0.03Number of shares used in per share calculations (in thousands):Basic


88,304


88,304


88,304


88,305Diluted


88,310


88,310


88,312


88,316




2007 Quarters EndedMarch 31

June 30

September 30

December 31(in thousands of dollars, except for per share data)Statement of Operations Data:Revenues

$
114,151

$
161,707

$
388,895

$
427,860Gross profit(1)


31,222


46,253


56,691


62,361Income from operations(1)


3,026


23,370


27,713


20,470Net income (loss)


(10,344
)

5,992


222


(4,769
)Net income (loss) per share data(2):Basic

$


$


$


$
(0.11
)Diluted











(0.11
)Number of shares used in per share calculations (in thousands):Basic











44,730Diluted











44,730Pro forma net income (loss) per share data(3):Basic

$
(0.11
)
$
0.06

$
0.03

$
0.03Diluted


(0.11
)

0.06


0.03


0.03Number of shares used in per share calculations (in thousands):Basic


75,150


75,150


75,150


81,488Diluted


75,150


75,150


75,150


81,897


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Item 7.    Management's Discussion and Analysis of Financial Condition and Results of Operation.

The following discussion and analysis of the financial condition and results of our operations should be read
together with the consolidated financial statements and the related notes of EnergySolutions included elsewhere in this Form 10-K. This discussion contains forward-looking
statements, based on current expectations and related to future events and our future financial performance, that involve risks and uncertainties. Our actual results may differ materially from those
anticipated in these forward-looking statements as a result of many factors, including those set forth under "Risk Factors."

Overview

We are a leading provider of specialized, technology-based nuclear services to government and commercial customers. Our customers rely
on our expertise to address their needs throughout the lifecycle of their nuclear operations. Our broad range of nuclear services includes engineering, operation of nuclear reactors,
in-plant support services, spent nuclear fuel management, D&D, logistics, transportation, processing and disposal. We derive almost 100% of our revenues from the provision of nuclear
services.

We
provide our services through four segments: Federal Services, Commercial Services, LP&D and International. Our Federal Services segment derives revenues from U.S. government
customers for the M&O or clean-up of facilities with radioactive materials. Our U.S. government customers are primarily individual offices, departments and administrations within the DOE
and DOD. Our Commercial Services segment provides a broad range of on-site services, including D&D, to commercial customers. Our commercial customers include power and utility companies,
pharmaceutical companies, research laboratories, universities, industrial facilities and other commercial entities with nuclear materials, as well as state agencies in the United States.
Our LP&D segment provides a broad range of logistics, transportation, processing and disposal services to government and commercial customers. This segment also operates our facilities for the
safe processing and disposal of radioactive materials, including a facility in Clive, Utah, four facilities in Tennessee and two facilities in Barnwell, South Carolina. In cases where a project
involves the provision of both specialized nuclear services and processing and disposal services, our Federal Services or Commercial Services segment, depending on the type of customer, and
our LP&D segment will coordinate to provide integrated services. Prior to our acquisitions of RSMC in 2007 and Safeguard in 2006, we derived less than 1% of our revenues from our international
operations. Accordingly, through the first quarter of 2007, we reported results from

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our
international operations in our Commercial Services segment. Beginning with the second quarter of 2007, we began reporting results from our operations outside North America in a new International
segment in connection with our acquisition of RSMC.

Components of Revenues and Expenses

Revenues and Costs of Revenues

Federal Services segment

We generate revenues in our Federal Services segment primarily from M&O and clean-up services on DOE and DOD sites that
have radioactive materials.
Under "Tier 1" contracts, we typically provide services as an integrated member of a prime contract team. Under a "Tier 2" contract, we provide services to Tier 1 contractors as a
subcontractor. Tier 1 contracts often include an award fee in excess of incurred costs and may also include an incentive fee for meeting contractual targets, milestones or performance factors.
These award fees often are not associated with significant additional expenditures.

Historically,
the majority of our Federal Services segment revenues have been generated from either Tier 1 cost-reimbursable contracts with award (typically expressed
as a percentage of cost) or incentive (typically success-based) fees or Tier 2 contracts that can be cost-reimbursable, fixed-price or unit-rate contracts. When we have
provided services as an integrated member of a Tier 1 prime contract team, we have typically entered into a contract with the other members of the team pursuant to which we share the award or
incentive fees under the customer contract. The revenue characteristics of these contracts are as follows:



Revenues
in our Federal Services segment can fluctuate significantly from period to period because of differences in the timing and size of contract awards in any given period, whether
or not we are required to consolidate revenues under a joint venture agreement, the completion or expiration of large contracts and delays in Congressional appropriations for contracts we have been
awarded.

We
typically generate revenues in our Federal Services segment pursuant to long-term contracts. The process of bidding for government contracts is extremely competitive and
time-consuming.

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Discussions
relating to a potential government contract often begin one or two years before an official request for proposal, or RFP, is announced. An additional one or two years may pass between the
government's announcement of an RFP and its award of a contract. Third party consulting and bid preparation expenses associated with bidding for a Tier 1 contract typically range from $500,000
to $1.5 million and are recognized as incurred in selling, general and administrative expenses. These are in addition to our internal expenses and corporate overhead. Once awarded a contract,
an additional several months may pass before we begin to recognize revenues in connection with that contract.

Costs
of revenues in our Federal Services segment primarily consist of compensation and benefits to employees, outsourcing costs for subcontractor services, costs of goods purchased for
use in projects and travel expenses.

Commercial Services segment

We generate revenues in our Commercial Services segment through fixed-price, unit-rate and cost-reimbursable
contracts with power and utility companies that operate nuclear power plants and, to a lesser extent, with pharmaceutical companies, research laboratories, universities, industrial facilities and
other commercial entities that have nuclear-related operations. Most of the revenues in our Commercial Services segment currently derive from contracts with a term of less than one year.

Revenues
in our Commercial Services segment can fluctuate significantly from period to period because of differences in customer requirements, which depend upon the operating schedules
of nuclear reactors, emergency response operations and other clean-up events. The operating schedules of nuclear reactors are affected by, among other things, seasonality in the demand for
electricity and reactor refueling and maintenance. Power and utility companies typically schedule refueling and maintenance to coincide with periods of reduced power demand periods in the spring and
fall. Therefore, our revenues are typically higher during these periods due to the increased demand for
our on-site services, such as spent fuel services. Our revenues also fluctuate from period to period as our commercial power and utility customers commence or terminate project operations.
Revenues from emergency response operations and other clean-ups may also cause fluctuations in our results due to the unanticipated nature and, often, significant size of these projects.

Revenues
in our Commercial Services segment also depend on the decisions of our customers to incur expenditures for third party nuclear services. For example, they may choose to store
radioactive materials on site, rather than transporting materials for commercial processing and disposal at a third-party facility, such as our Clive facility. Similarly, customers may defer entering
into contracts for the D&D of nuclear plants that have been shut down until such time as they have additional dedicated funds.

Costs
of revenues in our Commercial Services segment primarily consist of compensation and benefits to employees, outsourcing costs for subcontractor services, costs of goods purchased
for use in projects and travel expenses.

Results
of our operations for services provided to our customers in Canada and Mexico currently relate to services provided to our utility customers and are included in our Commercial
Services segment with the exception of Monserco, which is included in LP&D.

LP&D segment

We generate revenues in our LP&D segment primarily through unit-rate contracts for the transportation, processing
and disposal of radioactive materials. In general, the unit-rate contracts entered into by our LP&D segment use a standardized set of purchase order-type contracts
containing standard pricing and other terms. By using standardized contracts, we are able to expedite individual project contract negotiations with customers through means other than a formal bidding
process. For

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example,
our life-of-plant contracts provide nuclear power and utility company customers with LLRW and MLLW processing and disposal services for the remaining lives of their
nuclear power plants, as well as the D&D waste disposal services after the plants are shut down. These contracts generally provide that we will process and dispose of substantially all of the LLRW and
MLLW generated by those plants for a fixed, pre-negotiated price per cubic foot, depending on the type of radioactive material being disposed, and often provide for periodic price
adjustments. Although a life-of-plant contract may be terminated before decommissioning is complete, we typically expect the duration of these contracts to be approximately
30 years.

Revenues
in our LP&D segment can fluctuate significantly depending on the timing of our customers' decommissioning activities. We often receive high volumes of radioactive
materials in a relatively short time period when a customer's site or facility is being decommissioned.

Costs
of revenues in our LP&D segment primarily consist of compensation and benefits to employees, outsourcing costs for subcontractor services, such as railroads transporting
radioactive materials from a customer's site to one of our facilities for processing and disposal, costs of goods purchased for use in our facilities, licenses, permits, taxes on processed radioactive
materials, maintenance of facilities, equipment costs and depreciation costs. Most of our fixed assets are in our LP&D segment. As a result, we recognize the majority of our depreciation costs
in this segment.

International segment

We generate revenues in our International segment primarily through Tier 1 contracts with the NDA. As a Tier 1
contractor, we are reimbursed for allowable incurred costs. In addition, we receive cost efficiency fees (a percentage of budgeted costs minus actual costs for work performed) and project
delivery-based incentive fees. We typically recognize as revenues the full amount of reimbursed allowable costs incurred plus the amount of fees earned, and we record as expense the amount of our
operating costs, including all labor, benefits and travel expenses and costs of our subcontractors.

We
only recognize fees as revenue when the amount to be received is fixed or determinable. Our contracts with the NDA allow for a portion of the fees to be paid monthly on account during
the year. The total amount paid on account at the year end cannot exceed a combined 60% of the total base incentive fee available and 80% of the efficiency fee earned. For the first six months of the
contract year, which ends March 31, we receive monthly on account payments of fees equivalent to 5% of the total available fees for the contract year, although the monthly amount of the base
incentive fee may be increased to reflect actual fees earned in the period if mutually agreed. The contract requires a joint review with the NDA of performance at the end of the sixth month and the
ninth month of the contract year. The purpose of the review is to establish a forecast of fees expected to be earned in the year, against which future scheduled monthly fee payments are assessed, and
potentially adjusted, to ensure that the total fees paid on account by the end of the contract year will not exceed the contractual limits. In April, following the end of the contract year, we expect
to finalize any earned but unpaid incentive and efficiency fees due from the NDA and receive a corresponding final fee payment. Given our contractual fee mechanism, a greater portion of efficiency
fees are recognized in March, which is the final month of the contract year. As a result, we expect first-quarter revenues in our International segment to exceed revenues in that segment during any
other quarter of the year.

The
NDA contracts are based on an annual funding cycle and incentive plan. Consequently, revenues can vary from year to year depending on the level of annual funding, the nature of
performance-based incentives negotiated and efficiency fee mechanisms in place.

Cost
of revenues in our International segment primarily consist of compensation and benefits to employees, travel expenses, outsourcing costs for subcontractor services and costs of
goods purchased for use in projects.

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The
International segment also includes the results of Safeguard's project activities and other projects performed outside of North America.

Selling, General and Administrative Expenses

Selling, general and administrative, or SG&A, expenses include expenses that are not directly associated with performing nuclear
services for our customers. These expenses consist primarily of compensation and related benefits for management and administrative personnel, preparing contract bids, office expenses, advisory fees,
professional fees, strategic growth initiatives, such as research and development, and administrative overhead.

We
segregate our SG&A expenses into two categories for reporting purposes. Segment SG&A reflects costs specifically associated with each of our business segments, such as costs for
segment leadership compensation and expenses, specific business development activities, and other costs associated with a specific segment. Corporate SG&A reflects costs associated with supporting the
entire company including executive management and administrative functions such as accounting, treasury, legal, human resources and information technology, and other costs required to support the
company. Corporate SG&A also includes the advisory fees we have paid to affiliates of Lindsay Goldberg & Bessemer L.P., Peterson Partners, Inc. and Creamer
Investments, Inc., all members of ENV Holdings, LLC, under various advisory services agreements. See "Certain Relationships and Related Party Transactions." These agreements were
terminated in connection with the completion of our initial public offering on November 20, 2007.

Interest Expense

Interest expense includes both cash and accrued interest expense and amortization of deferred financing costs and fees and interest
paid on outstanding letters of credit.

Other Income, Net

Other income, net includes interest income, mark-to-market gains and losses on our derivative contracts,
transactional foreign currency gains and losses and our proportional share of income from joint ventures in which we have a non-controlling interest.

Outlook

We expect the following factors to affect our results of operations in future periods. In addition to these factors, please refer to
"Risk Factors" for additional information on what could cause our actual results to differ from our expectations.



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Results of Operations

The following table shows certain items from our income statements for the years ended December 31, 2008, 2007 and 2006. During
2006, we acquired BNGA and Duratek, resulting in the creation of our Federal Services and Commercial Services segments, which primarily reflect operating results associated with the contracts that
existed at the time that we acquired these businesses. Beginning with the second quarter of 2007, we also began to report the results of a new International segment due to our acquisition of RSMC on
June 26, 2007.

Year Ended December 31,2008

2007

2006(in thousands of dollars)Revenues:Federal Services Segment

$
271,820

$
151,355

$
79,941Commercial Services Segment


107,198


137,378


54,137LP&D Segment


246,810


262,801


293,025International Segment


1,165,803


541,079


Total revenues


1,791,631


1,092,613


427,103Cost of revenues:Federal Services Segment


232,623


108,972


55,121Commercial Services Segment


73,918


109,566


39,579LP&D Segment


149,731


154,038


141,167International Segment


1,088,166


523,510


Total cost of revenues


1,544,438


896,086


235,867Gross profit:Federal Services Segment


39,197


42,383


24,820Commercial Services Segment


33,280


27,812


14,558LP&D Segment


97,079


108,763


151,858International Segment


77,637


17,569


Total gross profit


247,193


196,527


191,236Segment selling, general and administrative expenses:Federal Services Segment


9,614


11,306


4,186Commercial Services Segment


7,455


7,730


7,466LP&D Segment


9,186


8,452


7,607International Segment


20,968


14,639


Total segment selling, general and administrative expenses


47,223


42,127


19,259Segment operating income:Federal Services Segment


29,583


31,077


20,634Commercial Services Segment


25,825


20,082


7,092LP&D Segment


87,893


100,311


144,251International Segment


56,669


2,930


Total segment operating income


199,970


154,400


171,977Corporate selling, general and administrative expenses


82,207


79,821


82,003Total income from operations


117,763


74,579


89,974Interest expense


(44,595
)

(75,432
)

(68,566
)Other income (expenses), net


(5,556
)

3,364


3,113Income (loss) before income taxes


67,612


2,511


24,521Minority interest


1,333


92


Income tax expense (benefit)


21,098


11,318


(2,342
)Net income (loss)

$
45,181

$
(8,899
)
$
26,863


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Year Ended December 31, 2008 Compared to Year Ended December 31, 2007

Revenues

Revenues increased $699.0 million, or 64.0%, to $1.8 billion for the year ended December 31, 2008 from
$1.1 billion for the year ended December 31, 2007. This increase is primarily the result of our acquisition of RSMC in June 2007, which contributed a full year of revenue in 2008 and
increased revenues by $630.1 million, and the consolidation of our Isotek, LLC and UDS, LLC joint venture interests, which collectively increased revenues by
$113.8 million. These
increases are partially offset by decreased revenues in our Commercial Services and LP&D segment operations of $30.2 million and $16.0 million, respectively.

Revenues
in our Federal Services segment increased $120.4 million, or 79.6%, to $271.8 million for the year ended December 31, 2008 from $151.4 million for
the year ended December 31, 2007. This increase is primarily attributable to increased revenues earned during the year ended December 31, 2008 compared to the year ended
December 31, 2007 from the consolidation of two of our joint venture interests, Isotek, LLC and UDS, LLC, of $113.8 million. We were also awarded a contract by the DOE to
cleanup the Atlas mill tailings near Moab, Utah which contributed additional revenue of $21.4 million. This increase was partially offset by decreased revenues of $9.1 million and
$7.6 million from work we performed at the Savannah River site and as a subcontractor on two contracts at the Hanford site, respectively.

Revenues
in our Commercial Services segment decreased $30.2 million, or 22.0%, to $107.2 million for the year ended December 31, 2008 from $137.4 million for
the year ended December 31, 2007. This is primarily the result of decreased revenues from our engineering and technology and utility services projects of $21.5 million and
$18.2 million, respectively, due to completion of several projects. These decreases are offset by increased revenues of our commercial decommissioning operations and liquid waste processing of
$5.3 million and $3.5 million, respectively. Contracts in our Commercial Services segment typically have durations of 12 months or less. As a result, timing of contract awards
contributes significantly to the fluctuation of revenues.

Revenues
in our LP&D segment decreased $16.0 million, or 6.1%, to $246.8 million for the year ended December 31, 2008 from $262.8 million for the year
ended December 31, 2007. This decrease is mostly due to decreased revenues at our Clive, Utah and Bear Creek, Tennessee facilities of $16.7 million and $3.5 million, respectively,
as a result of decreased volumes of waste processed and disposed at these facilities. These decreases are partially offset by our acquisition of Monserco in December 2007 which contributed
$3.1 million to revenue during the year ended December 31, 2008 and increases in our transportation services revenues of $2.4 million, mostly due to increased shipments and fuel
surcharges.

Revenues
in our International segment increased $624.7 million, or 115.5%, to $1.2 billion for the year ended December 31, 2008 from $541.1 million for the
year ended December 31, 2007. Our revenues, prior to considering the effects of fluctuations in pound sterling exchange rates, increased $672.0 million. However, this increase was offset
by a $47.2 million decrease due to a decline in pound sterling exchange rates during the year ended December 31, 2008 compared to the same period in 2007. During the year ended
December 31, 2008, the acquisition of RSMC in June 2007 contributed a full year of revenue in 2008 increasing revenues $630.1 million compared to the same period in 2007. This increase
is offset, in part, by a decrease in our Safeguard operations of $3.7 million.

Cost of revenues

Cost of revenues increased $648.3 million, or 72.3%, to $1.5 billion for the year ended December 31, 2008 from
$896.1 million for the year ended December 31, 2007. This increase was primarily the result of a full year of operations in 2008 of RSMC, which increased cost of revenues by

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$569.5 million,
the consolidation of our Isotek, LLC and UDS, LLC joint venture interests, which collectively increased cost of revenues by $111.1 million and increased
costs incurred for the clean up of the Atlas mill tailings near Moab, Utah of $18.4 million. These increases are partially offset by decreased cost of revenues in our Commercial Services
and LP&D segment operations of $35.6 million and $4.3 million, respectively, due to the completion of several projects and lower volumes of waste being processed.

Cost
of revenues in our Federal Services segment increased $123.6 million, or 113.4%, to $232.6 million for the year ended December 31, 2008 from
$109.0 million for the year ended December 31, 2007. This increase is primarily attributable to increased costs recognized during the year ended December 31, 2008 compared to
December 31, 2007 as a result of the consolidation of two of our joint venture interests, Isotek, LLC and UDS, LLC, of $ 111.1 million and the clean up of the Atlas mill
tailings near Moab, Utah of $18.4 million. This increase was partially offset by decreased cost of revenues of $4.2 million and $3.0 million from work we performed at the Savannah
River site and as a subcontractor on two contracts at the Hanford site, respectively.

Cost
of revenues in our Commercial Services segment decreased $35.6 million, or 32.5%, to $73.9 million for the year ended December 31, 2008 from
$109.6 million for the year ended December 31, 2007. This decrease is primarily attributable to decreased costs of engineering and technology and utility services projects of
$22.0 million and $16.8 million, respectively, due to completion of several projects. This decrease is offset, in part, by increased costs in our commercial decommissioning operations of
$2.3 million due to increased volumes. Contracts in our Commercial Services segment typically have durations of 12 months or less. As a result, timing of contract awards contributes
significantly to the fluctuation of costs.

Cost
of revenues in our LP&D segment decreased $4.3 million, or 2.8%, to $149.7 million for the year ended December 31, 2008 from $154.0 million for
the year ended December 31, 2007. This decrease is primarily attributable to decreased equipment maintenance, demurrage costs and labor expenses due to decreased volumes of waste processed and
disposed of at our Clive, Utah and Bear Creek, Tennessee facilities of $6.2 million and $0.6 million, respectively. This decrease is offset, in part, by our acquisition of Monserco in
December 2007, which contributed $2.8 million to cost of revenues during the year ended December 31, 2008.

Cost
of revenues in our International segment increased $564.7 million, or 107.9%, to $1.1 billion for the year ended December 31, 2008 from $523.5 million
for the year ended December 31, 2007. Our cost of revenues, prior to considering the effects of fluctuations in pound sterling exchange rates, increased $610.2 million. However, this
increase was offset by a $45.6 million decrease due to a decline in pound sterling exchange rates during the year ended December 31, 2008 compared to the same period in 2007. During the
year ended December 31, 2008, the acquisition of RSMC in June 2007 contributed a full year of operations in 2008 increasing cost of revenues $569.5 million compared to the same period in
2007. This increase is offset, in part, by a decrease in our Safeguard operations of $1.6 million.

Cost
of revenues as a percentage of total revenues increased to 86.2% for the year ended December 31, 2008 from 82.0% for the year ended December 31, 2007. The acquisition
of RSMC, for which cost of revenues as a percentage of revenues were 93.3% for the year ended December 31, 2008, had a significant impact on our revenue mix when compared to our historical
operations. As a result, a greater portion of our revenues in 2008 had significantly lower contribution margins.

Gross profit

Gross profit increased $50.7 million, or 25.8%, to $247.2 million for the year ended December 31, 2008 from
$196.5 million for the year ended December 31, 2007. Our gross margin decreased to 13.8% in the 2008 period from 18.0% in the corresponding 2007 period. The increase in gross profit and
the

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corresponding
reduction in gross margin are primarily the result of our acquisition of RSMC, which significantly changed our revenue mix and contribution margin.

Gross
profit in our Federal Services segment decreased $3.2 million, or 7.5%, to $39.2 million for the year ended December 31, 2008 from $42.4 million for the
year ended December 31, 2007. This decrease is primarily attributable to decreased gross profit of $4.9 million and $4.6 million from work we performed at the Savannah River Site
and as a subcontractor on two contracts at the Hanford site, respectively. These decreases are partially offset by increased gross profit on the Moab project and Isotek operations of
$3.0 million and $2.3 million, respectively.

Gross
profit in our Commercial Services segment increased $5.5 million, or 19.8%, to $33.3 million for the year ended December 31, 2008 from $27.8 million for
the year ended December 31, 2007. The increase is primarily attributable to increased gross profit from our liquid waste processing, commercial decommissioning and fuel pool operations of
$3.1 million, $2.9 million and $1.1 million, respectively, mostly due to increased volumes and performance of large decontamination and decommissioning
projects with higher margins. These increases are offset, in part, by a decrease in large component projects.

Gross
profit in our LP&D segment decreased $11.7 million, or 10.8%, to $97.1 million for the year ended December 31, 2008 from $108.8 million for the
year ended December 31, 2007. This decrease is primarily attributable to decreased gross profit at our Clive, Utah and Bear Creek, Tennessee facilities of $10.5 million and
$2.9 million, respectively, as a result of decreased volumes of waste processed and disposed at these facilities.

Gross
profit in our International segment increased $60.0 million, or 340.9%, to $77.6 million for the year ended December 31, 2008 from $17.6 million for the
year ended December 31, 2007. Our gross profit, prior to considering the effects of fluctuations in pound sterling exchange rates, increased $61.7 million. However, this increase was
partially offset by a $1.7 million decrease due to a decline in pound sterling exchange rates during the year ended December 31, 2008 compared to the same period in 2007. During the year
ended December 31, 2008, the acquisition of RSMC in June 2007 contributed a full year of gross profit increasing gross profit $60.6 million compared to the same period in 2007. Gross
profit margin in our International segment was 6.7% for the year ended December 31, 2008 compared to 3.3% for the year ended December 31, 2007. The increase in gross profit margin is due
to increased efficiency fees recognized during 2008 from our contract with the NDA. Most of the efficiency fees are recognized in the first calendar quarter of each year, which is the last quarter of
the contract fiscal year. During 2007, the efficiency fees were recognized prior to our acquisition of RSMC.

Segment selling, general and administrative expenses

Segment selling, general and administrative expenses in our Federal Services segment decreased $1.7 million to
$9.6 million for the year ended December 31, 2008 from $11.3 million for the year ended December 31, 2007. The decrease is primarily due to decreased bid and proposal
consulting costs of $1.8 million. During the year ended December 31, 2007, we incurred costs to bid on two large government contracts, including the contract for the management of all
high level waste/tanks systems at Hanford as part of the Washington River Protection Solutions LLC team, which we won on May 29, 2008.

Segment
selling, general and administrative expenses in our Commercial Services segment decreased $0.3 million to $7.5 million for the year ended December 31, 2008
from $7.7 million for the year ended December 31, 2007. The decrease is primarily attributable to lower business development costs of $1.3 million mostly related to our license
stewardship contract with Exelon Generation Company, LLC. This decrease is offset, in part, by increased stock based compensation and consulting costs of $0.9 million.

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Segment
selling, general and administrative expenses in our LP&D segment increased $0.7 million to $9.2 million for the year ended December 31, 2008 from
$8.5 million for the year ended December 31, 2007 mostly due to increased labor costs related business development activities of $2.3 million offset by decreases in incentives,
insurance, consulting and other administrative costs of $1.6 million.

Segment
selling, general and administrative expenses in our International segment increased $6.4 million to $21.0 million for the year ended December 31, 2008 from
$14.6 million for the year ended December 31, 2007. The increase is primarily due to amortization expense of $4.6 million associated with intangible assets of RSMC, which we
acquired in June 2007, bid and proposal expenses relating to potential contracts in the United Kingdom and other administrative expenses of our UK operations of $1.8 million.

Total
segment selling, general and administrative expenses as a percentage of revenues decreased to 2.6% for the year ended December 31, 2008 from 3.9% for the same period for
2007 primarily due to increased revenues primarily related to our International segment without a corresponding percentage increase in selling, general and administrative expenses.

Corporate selling, general and administrative expenses

Corporate selling, general and administrative expenses increased $2.4 million to $82.2 million for the year ended
December 31, 2008 from $79.8 million for the year ended December 31, 2007. This increase is primarily due to management compensation expense of $10.0 million that was paid
at the direction of and fully reimbursed by ENV Holdings, stock-based compensation expense of $3.7 million as a result of the options issued in connection with our initial public offering, fees
related to our secondary public offering of $1.8 million and increased professional fees of $1.2 million related to Sarbanes-Oxley compliance. These increases are offset by decreased
compensation expense of $6.9 million related to the termination of provisions in certain management employment agreements, decreased management advisory fees of $2.5 million paid to our
equity sponsors which were terminated in connection with our initial public offering, decreased information systems and technology costs of $2.1 million, and decreased consulting costs of
$2.1 million. As a percentage of revenue, corporate selling, general and administrative expenses decreased to 4.6% for the year ended December 31, 2008 from 7.3% for the same period for
2007. The decrease in expenses as a percentage of revenues is primarily due to the significant increase in revenues primarily related to our International segment as compared to the smaller increase
in corporate selling, general and administrative expenses.

Interest expense

Interest expense decreased $30.8 million, or 40.8%, to $44.6 million for the year ended December 31, 2008 from
$75.4 million for the year ended December 31, 2007. The decrease is primarily attributable to a decline in our average borrowings outstanding as a result of repaying
$108.2 million of debt in connection with our initial public offering in November 2007 and repaying $40.2 million of debt during 2008. In addition, interest rates related to our credit
facilities declined in 2008 due to the decrease in LIBOR.

Other income (expense), net

Other expense, net, increased $9.0 million, or 264.7%, to a net other expense of $5.6 million for the year ended
December 31, 2008 from a net other income of $3.4 million for the year ended December 31, 2007. The increase is mostly attributable to increased remeasurement losses on our US
dollar denominated notes receivable with our UK subsidiary of $14.7 million, increased other foreign currency transactional losses of $2.2 million and increased losses on our interest
rate derivative contracts of $1.7 million. These losses are offset, in part, by increased gains on our foreign currency

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derivative
contracts of $8.0 million and an increase of $1.8 million in our proportional share of income from our joint ventures in which we have a non-controlling interest.

Income taxes

We recognized income tax expense of $21.1 million for the year ended December 31, 2008 based on an estimated annual
effective tax rate on our consolidated operations of 31.2%, which is lower than the statutory rate of 35% mostly due to the effect of research and development credits in the UK. Prior to our
reorganization on November 20, 2007, EnergySolutions, LLC operated as a limited liability company and was treated as a disregarded entity
owned by a partnership for federal income tax purposes. As such, during the year ended December 31, 2007, we recognized an income tax expense of $11.3 million, primarily due to income
tax expense recognized of approximately $9.9 million relating to our reorganization from a limited liability company to a "C" corporation and foreign, federal and state income taxes for our
taxable subsidiaries that we acquired in 2006 and 2007.

Year Ended December 31, 2007 Compared to Year Ended December 31, 2006

Revenues

Revenues increased $665.5 million, or 155.8%, to $1.1 billion for the year ended December 31, 2007 from
$427.1 million for the year ended December 31, 2006. This increase was the result of our acquisition of Duratek on June 7, 2006, which contributed $345.5 million to
revenues in the year ended December 31, 2007 compared to $137.2 million for the year ended December 31, 2006 and our acquisition of RSMC, which contributed $531.3 million
to revenues for the post-acquisition period of June 27, 2007 through December 31, 2007. The acquisitions of Safeguard, Parallax and NUKEM collectively contributed
$30.4 million to revenues during 2007 from their respective dates of acquisition. These increases were partially offset by decreased revenues of $89.7 million due to lower volumes of
waste received at our facility in Clive, Utah.

Primarily
as a result of the inclusion of a full year of Duratek results in 2007, revenues in our Federal Services segment and our Commercial Services segment increased to
$151.4 million and $137.4 million, respectively, for the year ended December 31, 2007 from $79.9 million and $54.1 million, respectively, for the year ended
December 31, 2006. As a result of our acquisitions of RSMC and Safeguard, revenues in our International segment were $541.1 million for the year ended December 31, 2007. During
the year ended December 31, 2006, our international operations were reported in our Commercial Services segment because they constituted less than 1% of our total revenues.

LP&D
segment revenues decreased $30.2 million, or 10.3%, to $262.8 million for the year ended December 31, 2007 from $293.0 million for the year ended
December 31, 2006. We processed lower volumes of waste at our facility in Clive, Utah during the year ended December 31, 2007 due to the completion of several DOE closure projects during
2006. The decrease was partially offset by an increase in revenues of $55.1 million during the year ended December 31, 2007 as compared to the same period of 2006 resulting from our
Duratek acquisition. The Duratek acquisition included the facilities in Barnwell, South Carolina and three processing and disposal facilities in Tennessee.

Cost of revenues

Cost of revenues increased $660.2 million, or 279.9%, to $896.1 million for the year ended December 31, 2007 from
$235.9 million for the year ended December 31, 2006. This increase was the result of our acquisition of Duratek, which contributed $263.5 million to cost of revenues in the year
ended December 31, 2007 compared to $101.1 million for the year ended December 31, 2006 and our acquisition of RSMC, which contributed $513.5 million to cost of revenues
for the post-acquisition period of June 27, 2007 through December 31, 2007. The acquisitions of Safeguard, Parallax and

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NUKEM
collectively contributed $26.0 million to cost of revenues during 2007 from their respective dates of acquisition. These increases in cost of revenues were partially offset by a decrease
of $26.8 million in our historical LP&D operations, which was primarily the result of reduced expenses associated with processing lower volumes of waste at our facility in Clive, Utah
due to the completion of several projects during 2006.

Primarily
as a result of our acquisition of Duratek, cost of revenues in our Federal Services segment and our Commercial Services segment increased to $109.0 million and
$109.6 million, respectively, for the year ended December 31, 2007 from $55.1 million and $39.6 million, respectively, for the year ended December 31, 2006. As a
result of our acquisitions of RSMC and Safeguard, cost of revenues in our International segment was $523.5 million for the year ended December 31, 2007.

LP&D
segment cost of revenues increased by $12.8 million, or 9.1%, to $154.0 million for the year ended December 31, 2007 from $141.2 million for the year
ended December 31, 2006. This increase was the result of increased expenses resulting from our acquisition of Duratek, which contributed $70.6 million to cost of revenues for the year
ended December 31, 2007 compared to $27.3 million for the year ended December 31, 2006. This increase was partially offset by a decrease of $26.8 million in our
historical LP&D operations associated with the completion of several DOE closure projects during 2006.

Cost
of revenues as a percentage of total revenues increased to 82.0% for the year ended December 31, 2007, from 55.2% for the year ended December 31, 2006. The
acquisitions of Duratek and RSMC significantly changed our revenue mix when compared to our historical operations. As a result, a greater portion of our revenues have significantly lower contribution
margins.

Cost
of revenues as a percentage of revenues in our LP&D segment, which includes our historical operations, increased to 58.6% for the year ended December 31, 2007 from
48.2% for the same period for 2006. A significant amount of the costs at our Clive, Utah facility are fixed; therefore, the decrease in our revenues of $89.7 million at our Clive, Utah facility
had a significant adverse impact on our
margins. In addition, cost of revenues as a percentage of revenues relating to operations from our Duratek acquisition are greater than that of our historical operations, thus contributing to the
increase in cost of revenues as a percentage of revenues for this segment.

Our
Federal Services, Commercial Services and International segments, which primarily include operations of Duratek and RSMC from their acquisition dates, collectively contributed cost
of revenues as a percentage of revenues of 89.4% for the year ended December 31, 2007 compared to 70.6% for the same period for 2006. This increase is primarily the result of the acquisition of
RSMC, where cost of revenues as a percentage of revenues were 96.6% for the year ended December 31, 2007.

Gross profit

Gross profit increased $5.3 million, or 2.8%, to $196.5 million for the year ended December 31, 2007 from
$191.2 million for the year ended December 31, 2006. Gross profit increased primarily due to the acquisition of Duratek, which contributed $29.6 million and $25.9 million
to gross profit in our Federal Services and Commercial Services segments, respectively, for the year ended December 31, 2007 compared to $6.8 million and $13.7 million,
respectively for the year ended December 31, 2006. This increase in gross profit was partially offset by a decrease in gross profit in our LP&D segment resulting from lower volumes of
waste at our facility in Clive, Utah during the year ended December 31, 2007 due to the completion of several significant DOE closure projects during 2006. Our gross margin decreased to 18.0%
in the 2007 period from 44.8%, in the corresponding 2006 period due largely to change in revenue mix combined with lower margins in our LP&D segment.

Primarily
as a result of our acquisition of Duratek, gross profit in our Federal Services segment and our Commercial Services segment increased to $42.4 million and
$27.8 million, respectively, for the

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year
ended December 31, 2007 compared to $24.8 million and $14.6 million, respectively, for the year ended December 31, 2006. As a result of our acquisitions of Safeguard
and RSMC, gross profit in our International segment was $17.6 million for the year ended December 31, 2007.

LP&D
segment gross profit decreased $43.1 million, or 28.4%, to $108.8 million for the year ended December 31, 2007 from $151.9 million for the year ended
December 31, 2006. LP&D segment gross profit margin decreased to 41.4% during the year ended December 31, 2007 from 51.8% during the year ended December 31, 2006. Gross
profit and gross profit margin decreased primarily due to decreased revenues as a result of the completion of several significant DOE closure projects in our historical LP&D segment during 2006
and lower gross profit margins in the LP&D operations we acquired from Duratek as compared to our historical operations.

Segment selling, general and administrative expenses

Segment selling, general and administrative expenses in our Federal Services and Commercial Services segments increased
$7.1 million and $264,000, respectively, to $11.3 million and $7.7 million, respectively, for the year ended December 31, 2007 from $4.2 million and
$7.5 million, respectively, for the year ended December 31, 2006. This is primarily the result of increased expenses due to the activity of Duratek, which was acquired in June 2006.

Segment
selling, general and administrative expenses in our LP&D segment increased $0.9 million to $8.5 million for the year ended December 31, 2007 from
$7.6 million for the year ended December 31, 2006. The increase was primarily the result of the activity of Duratek, which was acquired in June 2006.

Segment
selling general and administrative expenses in our International segment were $14.6 million for the year ended December 31, 2007 primarily due to bid and proposal
expenses relating to potential contracts in the United Kingdom, the operations of Safeguard, which we acquired in December 2006, and the operations and amortization expense associated with
finite-lived intangible assets of RSMC, which we acquired in June 2007.

Total
segment selling, general and administrative expenses as a percentage of revenue decreased to 3.9% for the year ended December 31, 2007 from 4.5% for the same period for 2006
primarily due to increased revenues.

Corporate selling, general and administrative expenses

Corporate selling, general and administrative expenses decreased $2.2 million, or 2.7%, to $79.8 million for the year
ended December 31, 2007 from $82.0 million for the year ended December 31, 2006. As a percentage of revenue, corporate selling, general and administrative expenses decreased to
7.3% for the year ended December 31, 2007 from 19.2% for the same period for 2006. This decrease was primarily due to non-cash equity compensation expenses incurred during the year
ended December 31, 2006 as a result of accelerated vesting of profits interests in connection with our acquisition of Duratek in the earlier period. This decrease is partially offset by
increased accounting, treasury, human resources, information systems and other administrative expenses as a result of our acquisition of Duratek and a $6.9 million expense for the termination
of provisions in employment agreements related to excess performance bonus payments. These provisions were terminated in connection with our initial public offering.

Interest expense

Interest expense increased $6.8 million, or 9.9%, to $75.4 million for the year ended December 31, 2007 from
$68.6 million for the year ended December 31, 2006. The increase is primarily attributable to increased borrowings related to the acquisitions of Duratek and RSMC and the
write-off of

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unamortized
debt financing fees of $4.2 million as a result of repayment of our debt using proceeds from our initial public offering. These increases are offset by the recognition of a call
premium of $3.2 million and a write-off of debt financing fees and loan discounts of $8.9 million which occurred in June 2006 in connection with the restructuring of our
long-term debt.

Other income (expense), net

Other income, net, increased $252,000, or 8.1%, to $3.4 million for the year ended December 31, 2007 from
$3.1 million for the year ended December 31, 2006. This amount primarily reflects increases in interest income and our proportional share of income from three joint ventures in which we
have a non-controlling interest. This increase is offset by losses on our derivative contracts of $1.2 million.

Income taxes

We recognized income tax expense of $11.3 million for the year ended December 31, 2007 primarily due to income tax
expense recognized of approximately $9.9 million relating to our reorganization from a limited liability company to a "C" corporation. Prior to our reorganization on November 20, 2007,
EnergySolutions, LLC operated as a limited liability company and was treated as a disregarded entity owned by a partnership for federal income
tax purposes. SFAS No. 109,Accounting for Income Taxes, requires that the tax effect of recognizing deferred tax items upon a change in tax
status be included in current year operations. In addition, income tax expense for 2007 includes foreign, federal and state income taxes for our taxable subsidiaries that we acquired in 2006 and 2007.
We recognized income tax benefit of $2.3 million for the year ended December 31, 2006 attributable to net taxable loss from BNGA and Duratek since their acquisitions on
February 28, 2006 and June 7, 2006, respectively.

Liquidity and Capital Resources

We finance our operations primarily through cash provided by operations. As of December 31, 2008, our principal sources of
liquidity consisted of $48.4 million of cash and cash equivalents and $55.3 million of availability under the $75.0 million revolving portion of our credit facilities, which is
net of $19.7 million of outstanding letters of credit. We also have a synthetic letter of credit facility of $100.0 million, of which $100.0 million of letters of credit were
issued as of December 31, 2008.

During
the year ended December 31, 2008, our cash and cash equivalents increased $12.0 million, to $48.4 million. This compares to a decrease in cash and cash
equivalents of $31.7 million for the year ended December 31, 2007. During the year ended December 31, 2008, we had net cash inflows from operating activities of
$103.1 million. This was offset by net cash outflows from investing activities of $27.3 million, primarily related to purchases of property, plant and equipment. Our cash outflows from
our financing activities were $52.6 million, primarily related repayment of debt and payments of stockholder dividends and debt financing fees offset by proceeds from the settlement of our
derivative contracts.

During
the year ended December 31, 2007, our cash and cash equivalents increased $31.7 million, to $36.4 million. This compares to a decrease in cash and cash
equivalents of $30.2 million for the year ended December 31, 2006. During the year ended December 31, 2007, we had net cash inflows from operating activities of
$152.8 million and cash inflows from financing activities of $91.9 million, primarily due to proceeds from our initial public offering offset by the repayment of debt, dividends paid and
increased debt financing fees. This was offset by net cash outflows from investing activities of $211.8 million related primarily to our acquisitions of RSMC, Parallax, NUKEM and Monserco and
purchases of property, plant and equipment.

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Our principal need for liquidity has been, and will continue to be, for working capital, to pay down debt and for capital expenditures. We also expect to use cash
flow from operations to pay quarterly dividends. However, the declaration and payment of future dividends to holders of our common stock will be at the discretion of our board of directors and will
depend on many factors, including our results of operations, financial condition, liquidity requirements, restrictions that may be imposed by applicable law and our contracts and other factors deemed
relevant by our board of directors. To the extent we maintain an annual dividend of $0.10 per share, our annual cash requirements for this dividend would be $8.8 million, based on the number of
shares currently outstanding. We believe that our cash flow from operations, available cash and cash equivalents and available borrowings under the revolving portion of our credit facilities will be
sufficient to meet our future liquidity needs, including the payment of such dividend, through at least the next twelve months.

We
have accumulated benefit obligations related to our pension plans of $2.4 billion. See Note 19 to our audited consolidated financial statements included elsewhere in
this Form 10-K for a more detailed discussion. Approximately 99% of the accumulated benefit obligation relates to the Magnox North and Magnox South pension plans (the "Magnox
Plans"). The Magnox Plans are funded by contributions from employees and the NDA pursuant to a contractual arrangement. As a result, we are reimbursed for contributions made to the Magnox Plans under
the terms of these contracts. Thus, we have no potential net funding requirements relative to the accumulated benefit obligation. The plan we are required to fund related to our RSMC employees is
currently funded by employee contributions until the year 2010 at the earliest. Therefore, we do not expect there to be any implications to our liquidity within the next 12 months resulting
from potential incremental cash payments to maintain funding requirements.

Although
we have no specific current plans to do so, if we decide to pursue one or more significant strategic acquisitions, we may incur additional debt or sell additional equity to
finance the purchase of those businesses.

Historical Cash Flows

Cash flow from operating activities

We generated $103.1 million of cash from operating activities during the year ended December 31, 2008. Cash from
operating activities in 2008 included net income of $45.2 million and significant non-cash expenses including depreciation and amortization expense of $46.4 million and
foreign currency transaction losses of $16.2 million. Cash from operating activities was also provided by a reduction in accounts receivable of $101.3 million primarily due to timing of
collections on work performed on our contracts with the NDA. Cash from operating activities was used to reduce accounts payable and accrued liabilities by $76.6 million. The reduction in
accounts payable and accrued liabilities was primarily due to timing of payments to vendors of our Magnox contracts in the UK. In addition, cash from operating activities of $12.4 million was
used for costs associated with our planned license stewardship project for Exelon's Zion nuclear facility that have been deferred until closing of the transaction.

We
generated $152.8 million of cash from operating activities during the year ended December 31, 2007. Cash from operating activities in 2007 included net loss of
$8.9 million and significant non-cash expenses including depreciation and amortization expense of $43.2 million. Cash from operating activities was also provided by
$38.1 million of restricted cash that became unrestricted as a result of an insurance policy put in place as collateral for certain decommissioning liabilities. Cash from operating activities
was also provided as a result of increased collections on contract receivables of $19.9 million, a reduction in prepaid expenses and other assets of $15.8 million and reduced payments of
accounts payable of $28.2 million.

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Cash flow from investing activities

We used $27.3 million of cash for investing activities during the year ended December 31, 2008. Of this amount, we used
$26.6 million of cash for capital expenditures primarily to purchase equipment required for the Atlas mill tailings contract, equipment at our various facilities, computer hardware and software
licenses.

We
used $211.8 million of cash for investing activities during the year ended December 31, 2007. We used $199.1 million for the acquisitions of RSMC, Parallax NUKEM
and Monserco and $13.3 million for capital expenditures primarily to purchase equipment at our various facilities and computer hardware.

Cash flow from financing activities

We used $52.6 million of cash for financing activities during the year ended December 31, 2008 primarily to repay
$40.2 million of long-term debt, to pay dividends of $8.8 million to our shareholders and to pay debt financing fees of $6.4 million. We received net
$5.2 million as settlement of our interest rate and foreign currency derivative contracts.

We
generated $91.9 million of cash from financing activities during the year ended December 31, 2007. We received proceeds of $271.1 million from the issuance of our
common stock, net of issuance costs, and $200 million from borrowings of long-term debt. We used cash to repay long-term debt of $354.2 million, to pay debt
financing fees of $11.8 million, and to pay distributions of $8.9 million.

Capital Expenditures

We had capital expenditures of $26.6 million, $13.3 million and $23.9 million in the years ended
December 31, 2008, 2007 and 2006, respectively. We completed several significant capital improvements 2008 and 2006, including the equipment required for the Atlas mill tailings contract during
2008 and the installation of a new shredder, rail handling loop and rotary dump at our Clive facility in 2006. We expect purchases of capital expenditures for the year ending December 31, 2009
will be approximately $26.0 million, relating primarily to the implementation of an enterprise resource planning system (Oracle EBS R12) and equipment to be used at our decommissioning sites
and at our facilities, which is in compliance with the debt covenants of our credit agreement. We
anticipate the sources of funds for our anticipated capital expenditures will come from cash flows provided by our operating activities.

Credit Facilities

We have entered into credit facilities with Citicorp North America, Inc., or CNAI, as administrative agent and collateral agent.
The credit facilities consist of a $75.0 million revolving credit facility, which matures on June 7, 2011; $770.0 million first lien term loan facilities, which mature on
June 7, 2013; and a $100.0 million synthetic letter of credit facility, which matures on June 7, 2013.

The
obligations under the credit facilities are unconditional and irrevocably guaranteed by each of our existing and subsequently acquired or organized domestic subsidiaries. In
addition, the credit facilities and such guarantees are secured on a first- and second-priority basis by security interests (subject to permitted liens as defined in the credit agreements governing
the credit facilities) in substantially all tangible and intangible assets owned by us and each of our domestic subsidiaries, subject to certain exceptions, including limiting pledges of voting stock
of foreign subsidiaries to 65% of voting stock of first-tier foreign subsidiaries.

Borrowings
under the credit facilities bear interest at a rate equal to (1) in the case of the first lien term loans, (i) the greater of the rate of interest announced by
CNAI, from time to time, as its prime rate in effect at its principal office in the city of New York, and the federal funds rate plus 0.50% per annum (the "base rate"), plus 0.75% (or 0.50% when the
leverage ratio (as defined in the

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credit
agreements) as of the most recently completed fiscal quarter is less than 2.0 to 1.0) or (ii) for any portion of the term loans as to which we have elected to pay interest on a
Eurodollar basis, LIBOR plus 2.25% (or 2.00% when the leverage ratio (as defined in the credit agreements) as of the most recently completed fiscal quarter is less than 2.0 to 1.0), (2) in the
case of the revolving loans, (i) the base rate plus 0.75% or (ii) for any portion of the revolving loans as to which we have elected to pay interest on a Eurodollar basis, LIBOR plus
2.25% (3) in the case of synthetic letters of credit under the first lien credit facilities, 2.25% (or 2.00% when the leverage ratio (as defined in the related credit agreement) as of the most
recently completed fiscal quarter is less than 2.0 to 1.0).

Commencing
September 30, 2006 and at the end of each calendar quarter for the next 26 quarters, the first lien term loans under the credit facilities amortize in quarterly
installments of $1.9 million, adjusted for optional prepayments made, provided that the final installment shall be equal to the amount outstanding in respect of the term loans.

We
are generally also required to prepay borrowings under the credit facilities with (1) 100% of the net proceeds we receive from non-ordinary course asset sales or as
a result of a casualty or condemnation, subject to reinvestment provisions, (2) 100% of the net proceeds we receive from the issuance of debt obligations other than specified debt obligations
and (3) the excess, if any, of 50% (or, if our leverage ratio is less than 3.0 and greater than 1.0, 25%) of excess cash flow (as defined in the credit agreements) reduced by the aggregate
amount of term loans optionally prepaid during the applicable fiscal year. Under the credit facilities, we are not required to prepay borrowings with excess cash flow if our leverage ratio is less
than or equal to 1.0. As of December 31, 2008, we were required to make a mandatory prepayment of approximately $1.5 million based on our excess cash flow.

As
of December 31, 2008, the weighted average interest rate under our credit facilities was 4.14%. At this rate and assuming an outstanding balance of $566.8 million as of
December 31, 2008, our annual debt service obligations would be $29.4 million, consisting of $23.5 million of interest and $5.9 million of scheduled principal payments.
However, due to optional prepayments made through December 31, 2008, only $1.5 million of our scheduled principal payments are currently due within the next year.

The
credit facilities require us to maintain certain financial ratios, including maximum leverage ratios (based upon the ratios of consolidated funded debt and first lien indebtedness to
consolidated operating cash flow) and a minimum cash interest coverage ratio (based upon the ratio of consolidated operating cash flow to consolidated cash interest expense), which are tested
quarterly. Based on the formulas set forth in the credit agreements as December 31, 2008, we are required to maintain a maximum leverage ratio and a first lien leverage ratio of 4.50 and 4.00,
respectively, and minimum cash interest coverage ratio of 2.50. Failure to comply with these financial ratio covenants would result in a default under our credit facilities and, absent a waiver or an
amendment from the lenders, preclude us from making further borrowings under our credit facilities and permit the lenders to accelerate all outstanding borrowings under the credit facilities. As of
December 31, 2008, our total leverage, first lien leverage and interest coverage ratios were 3.20, 3.20 and 4.30, respectively. As such, we have determined that we are in compliance with these
financial covenants.

The
credit facilities also contain a number of affirmative and restrictive covenants including limitations on mergers, consolidations and dissolutions; sales of assets; investments and
acquisitions; indebtedness; liens; affiliate transactions; and dividends and restricted payments. Under the credit facilities, we are permitted maximum annual capital expenditures of up to
$30.0 million under the first lien credit facilities plus the lesser of (1) a one year carry-forward of the unused amount from the previous fiscal year and (2) 50% of the amount
permitted for capital expenditures in the prior fiscal year. Our permitted maximum annual capital expenditures for 2009 is $45.0 million. The credit facilities contain events of default for
non-payment of principal and interest when due, a cross-default provision with respect to other indebtedness having an aggregate principal amount of at least $5.0 million and an

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event
of default that would be triggered by a change of control, as defined in the credit facilities. As of December 31, 2008, we were in compliance with all of our covenants and other
obligations under the credit facilities.

Amendment Agreements

On December 11, 2007, we, through our subsidiary ZionSolutions, entered into an agreement with Exelon (the "Zion Agreement") to
dismantle Exelon's Zion nuclear facility located in Zion, Illinois ("Zion Station"), which ceased operation in 1998.

Pursuant
to the Zion Agreement, Exelon has agreed to transfer to ZionSolutions substantially all of the assets (other than land) associated with Zion Station, including assets held in
nuclear decommissioning trusts. In consideration for Exelon's transfer of those assets, ZionSolutions has agreed to assume decommissioning and other liabilities associated with the Zion Station.
ZionSolutions also agreed to take possession and control of the land associated with the Zion Station pursuant to a lease agreement to be executed at the closing. ZionSolutions will be obligated to
complete the required decommissioning work according to an established schedule and to construct a dry cask storage facility on the land for spent nuclear fuel currently held in spent fuel pools at
the Zion Station.

The
parties agreed to enter into various other agreements to ensure the performance of the obligations of ZionSolutions under its contracts to complete the required decommissioning and
other work. In particular, we have agreed to execute a Credit Support Agreement pursuant to which we will deliver a letter of credit in the face amount of $200.0 million, which will be held by
Exelon. The occurrence of specified events of default would allow Exelon to draw upon the letter of credit.

In
anticipation of the closing of this transaction, on July 16, 2008, we and our subsidiary, Duratek, entered into Amendment Agreements with our lenders under the current credit
facilities. The Amendment Agreements provide that the existing credit agreements shall be amended and restated in their entirety upon satisfaction of certain conditions including the closing of the
transaction with Exelon.

The
amended and restated credit facilities were sought (a) to allow us to provide for a new letter of credit facility in the aggregate principal amount of $200.0 million
(the "Zion letter of credit facility") pursuant to the Zion Agreement and (b) to return the existing synthetic letters of credit facility deposits and make term letter of credit facility loans
in the aggregate principal amount of $100.0 million for which we have agreed to maintain restricted cash equal to the amount of the facility. The new term letter of credit facility and the
restricted cash amount will be reflected on our consolidated balance sheet.

The
Amendment Agreements provide that the amended and restated credit facilities will include letter of credit fees of 2.50% with respect to letters of credit issued under each of the
revolving loan facility and the Zion letter of credit facility. In addition, the Amendment Agreements provide that the
amended and restated credit facilities will provide for interest rates on loans as follows: (i) with respect to any term loan, (x) LIBOR plus 2.50% (or LIBOR plus 2.00% when the leverage
ratio is less than 2.0 to 1.0) or (y) the base rate plus 1.25% (or the base rate plus 1.00% when the leverage ratio is less than 2.0 to 1.0), (ii) with respect to any revolving loan,
(x) LIBOR plus 2.50% or (y) the base rate plus 1.25%, and (iii) with respect to any term letter of credit facility loan, LIBOR plus 2.50% (or LIBOR plus 2.00% when the leverage
ratio is less than 2.0 to 1.0).

The
Amendment Agreements provide that the amended and restated credit facilities are subject to the satisfaction of certain conditions precedent to closing, including those related to
approval for the transactions contemplated by the Zion Agreement. During the year ended December 31, 2008, we have paid fees of approximately $6.4 million to the lenders to obtain the
Amendment Agreements, which are being amortized over the remaining term of the credit facilities. In addition, once we have closed the Zion agreement and the Zion letter of credit is issued, we
anticipate paying the providers of the Zion letter of credit facility approximately $7.5 million, which will be amortized over one year, which is the term of the Zion letter of credit facility.

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Contractual Obligations and Other Commitments

As of December 31, 2008, our contractual obligations and other commitments were as follows:

Payments Due by PeriodTotal

2009

2010-2011

2012 - 2013

2014
and beyond(in thousands of dollars)Long-term debt obligations(1)

$
566,757

$
2,954

$
11,898

$
551,905

$
Capital lease obligations


2,006


1,501


505





Operating lease obligations


38,062


10,605


12,612


9,355


5,490Other contractual obligations


17,500


2,500


5,000


5,000


5,000Total

$
624,325

$
17,560

$
30,015

$
566,260

$
10,490


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Off Balance Sheet Arrangements

We have routine operating leases, primarily related to real estate and rail equipment, and investments in joint ventures at
December 31, 2008.

As
of December 31, 2008 we had outstanding floating-rate term loans of $566.8 million. Under our credit facilities, we are required to maintain one or more
interest rate swap agreements for the aggregate notional amount of at least 33% of the outstanding aggregate principal amount of the term loans. Accordingly, we entered into a swap agreement effective
December 18, 2008. As of December 31, 2008, the swap agreement had a notional amount of $200.0 million and a fair value liability of approximately $261,000.

We
are required to post, from time to time, standby letters of credit and surety bonds to support contractual obligations to customers, self-insurance programs, closure and
post-closure financial assurance and other obligations. As of December 31, 2008 we had $100.0 million in letters of credit issued under our synthetic letters of credit
facilities and $19.7 million in letters of credit issued under our revolving credit facilities. As of December 31, 2008 we had $2.6 million in surety bonds outstanding. With
respect to the surety bonds, we have entered into certain indemnification agreements with the providers of the surety bonds, which would require funding by us only if we fail to perform under the
contracts being insured and the surety bond issuer was obligated to make payment to the insured parties.

Our
processing and disposal facilities operate under licenses and permits that require financial assurance for closure and post-closure costs. We provide for these
requirements through a combination of restricted cash, cash deposits, letters of credit and insurance policies. As of December 31, 2008 the closure and post-closure state regulatory
requirements for our facilities were $150.8 million, which amount is not determined on the same basis as the asset retirement obligation, or ARO, calculated under SFAS No. 143, Accounting for Asset Retirement
Obligations.

Critical Accounting Policies

This management's discussion and analysis of financial condition and results of operations is based upon our consolidated financial
statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires us to make estimates and
assumptions about matters that are uncertain. These estimates and

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assumptions
are often based on judgments that we believe to be reasonable under the circumstances, but all such estimates and assumptions are inherently uncertain and unpredictable. Actual results may
differ from those estimates and assumptions, and it is possible that other professionals, applying their own judgment to the same facts and circumstances, could develop and support alternative
estimates and assumptions that would result in material changes to our operating results and financial condition.

Critical
accounting policies are those that are both important to the presentation of our financial condition and results of operations and require management's most difficult, complex
or subjective estimates and assumptions. Our critical accounting policies are discussed below.

Revenue Recognition

We record revenue when all of the following conditions exist:



Federal, Commercial and International Contracts

Our services are provided under cost-reimbursable award or incentive fee, fixed-price and unit-rate contracts.
The following describes our policies for these contract types:



Accounting
for revenues earned under our contracts may require assessments that include an estimate of the amount that has been earned on the contract and are usually based on the
volumes that have been processed or disposed, milestones reached or the time that has elapsed under the contract. Each of our contracts is unique with regard to scope, schedule and delivery
methodology. Accordingly, each contract is reviewed to determine the most reliable measure of completion for revenue recognition purposes. Input measures such as costs incurred to total contract costs
are used only when there are no quantifiable output measures available and represent a reasonable basis for determining the relative status of the project given that, on many contracts, costs are the
basis for determining the overall contract value and timing.

Certain
of our fixed-price contracts are for services that are non-linear in nature, require complex, non-repetitive tasks or involve a
non-time-based scope of work. In these contracts, the earnings process

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is
not fulfilled upon the achievement of milestones, but rather over the life of the contract. Evaluation of the obligations and customer requirements on these contracts does not produce objective,
quantifiable output measures that reflect the earnings process for revenue recognition. Therefore, in these situations, we use a cost-to-cost approach to determine revenues.

A
cost-to-cost approach accurately reflects our obligations and performance on these contracts, as well as meeting the customers' expectations of service being
performed. Therefore, we believe that input measures used to measure progress toward completion on certain fixed-price projects provide a reasonable surrogate as compared to using output measures.

For
the years ended December 31, 2008, 2007 and 2006, revenues calculated using a cost-to-cost approach were $75.4 million, $68.6 million and
$36.3 million, respectively.

Revisions
to revenues, cost and profit estimates, or measurements of the extent of progress toward completion are changes in accounting estimates accounted for in the period of change
(cumulative catch-up method). Contracts typically provide for periodic billings on a monthly basis or based on contract milestones. Costs and estimated earnings in excess of billings on
uncompleted contracts represents amounts recognized as revenue that have not been billed. Unearned revenues represent amounts billed and collected for which revenues have not been recognized.

We
record contract claims and pending change orders, including requests for equitable adjustments, or REAs, when collection of revenues is reasonably assured, which generally is when
accepted in writing by the customer. The cost to perform the work related to these claims and pending change orders,
including REAs, is included in our financial statements in the period that they are incurred and are included in our estimates of contract profitability.

A
provision for estimated losses on individual contracts is recognized in the period in which the losses are identified and includes all estimated direct costs to complete such contracts
(excluding future general and administrative costs expected to be allocated to the contracts). Monthly assessments are performed on our estimates and changes are made based on the latest information
available.

LP&D Contracts

Our LP&D services are provided primarily under unit-rate contracts. Revenues are recognized as units of materials
are processed or disposed based on the unit prices provided in the contracts.

D&D Liabilities

We have responsibility for the cost to decontaminate and decommission our facilities and related equipment, as well as the equipment
used at customer sites in the Commercial Services segment. Such costs will generally be paid upon closure of such facilities or disposal of such equipment. We are also responsible for the cost of
monitoring our Clive, Utah facility, over the post-closure period.

SFAS
No. 143,Accounting for Asset Retirement Obligations, requires us to record the fair value of an ARO as a liability in the
period in which we incur a legal obligation associated with the retirement of tangible long-lived assets that result from the acquisition, construction, development or normal use of the
asset. We are also required to record a corresponding asset that we depreciate over the life of the asset. After the initial measurement of the ARO, the ARO is adjusted at the end of each period to
reflect the passage of time and changes in the estimated future cash flows underlying the obligation.

The
cost basis for our landfill assets and related obligation include landfill liner material and installation, excavation for airspace, landfill leachate collection systems,
environmental groundwater and air monitoring equipment, directly related engineering and design costs and other capital infrastructure costs. Also included in the cost basis of our landfill assets and
related obligation are estimates of future

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costs
associated with final landfill capping, closure and post-closure monitoring activities. These costs are described below:



The
cost basis for our D&D assets and related obligation include costs to decontaminate, disassemble and dispose of equipment and facilities. We develop our estimates of these
obligations using input from our operations personnel, engineers and accountants. Our estimates are based on our interpretation of current requirements and proposed regulatory changes and are intended
to approximate fair value
under the provisions of SFAS No. 143. We use historical experience, professional engineering judgment and quoted and actual prices paid for similar work to determine the fair value of these
obligations. We recognize these obligations at market prices whether we plan to contract with third parties or perform the work ourselves.

Costs
for the D&D of our facilities and equipment will generally be paid upon the closure of these facilities or the disposal of this equipment. We are obligated under our license
granted by the State of South Carolina and the Atlantic Interstate Low-Level Radioactive Waste Compact Implementation Act for costs associated with the ultimate closure of the Barnwell
Low-Level Radioactive Waste Disposal Facility in South Carolina and our buildings and equipment located at the Barnwell site (Barnwell closure). Under the terms of the Atlantic Waste
Compact Act and our license with the State of South Carolina, we are required to maintain a trust fund to cover the Barnwell closure obligation, which limits our obligation to the amount of the trust
fund.

We
are required to make significant estimates in the determination of our AROs and the related assets. Pursuant to the requirements of SFAS No. 143, our cost estimates for final
capping, closure and post-closure activities and other D&D activities are intended to approximate fair value and are based on our interpretation of the current regulatory requirements and
proposed or anticipated regulatory changes. Where applicable, these cost estimates are based on the amount a third party would charge to perform such activities even when we expect to perform these
activities internally. Because final landfill capping, closure and post-closure obligations and decontamination and decommissioning obligations are measured using present value techniques,
changes in the estimated timing of the related activities would have an effect on these liabilities, related assets and resulting operations.

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Changes
in inflation rates or the estimated costs, timing or extent of the required future capping, closure, post-closure and other D&D activities typically result in both:
(i) a current adjustment to the recorded liability and asset and (ii) a change in the liability and asset amounts to be recorded prospectively over the remaining life of the asset in
accordance with our depreciation policy. A hypothetical 1% increase in the inflation rate would have increased our D&D obligation by $2.6 million. A hypothetical 10% increase in our cost
estimate would have increased our D&D obligation by $3.5 million.

We
update our D&D and closure and post-closure cost estimates either annually or more frequently if changes in the underlying conditions occur. These estimates are based on
current technology, regulations and burial rates. Changes in these factors could have a material impact on our estimates.

Recoverability of Long-Lived Assets, Including Goodwill

Goodwill represents the excess of costs over the fair value of net assets of businesses acquired. Goodwill is tested at the reporting
unit level at least annually for impairment and is reviewed for impairment more frequently if events and circumstances indicate that the asset might be impaired. SFAS No. 142, Goodwill and Other Intangible Assets,requires a two-step impairment test. In the first step, we determine the fair value of the reporting
unit using a discounted cash flow valuation model and compare the fair value to the reporting unit's carrying value. If the fair value of the reporting unit exceeds its carrying value, goodwill of the
reporting unit is considered not impaired and no further testing is required. If the fair value does not exceed the carrying value, the second step of the goodwill impairment test is performed to
measure the amount of impairment loss, if any. In the second step of the goodwill impairment test, the implied fair value of the reporting unit's goodwill is compared to the carrying value. The
implied fair value of the reporting unit's goodwill is determined as if the reporting unit had been acquired in a business combination. If the carrying value of the reporting unit's goodwill exceeds
the implied value, an impairment loss is recognized in an amount equal to the excess.

We
estimate future cash flows at the reporting unit level using a discounted cash flow methodology by assessing each major existing contract and projecting the earnings that will be
recognized in future periods. Estimates are also made for earnings from new contracts that are anticipated based on our evaluation of future business prospects. The valuation of goodwill could be
affected if actual results differ substantially from our estimates. Circumstances that could affect the valuation of goodwill include a significant change in our business climate, decisions by our
customers to terminate our existing contracts and decisions by our customers to award to our competitors new contracts that we anticipated would be awarded to us.

Intangible
assets acquired in a business combination are measured at fair value at the date of acquisition. We assess the useful lives of other intangible assets to determine whether
events or circumstances warrant a revision to the remaining period of amortization. If the estimate of an intangible asset's remaining useful life is changed, the remaining carrying amount of the
intangible asset is amortized prospectively over the revised remaining useful life. Intangible assets with estimable useful lives are amortized over their respective estimated useful lives and
reviewed for impairment whenever events or circumstances indicate that the carrying value of such assets may not be recoverable.

Since
our annual impairment test, which was completed in the second quarter of 2008, we have updated our forecasts to reflect the impacts of the global economic down turn and have
determined that goodwill is not impaired as of December 31, 2008. However, further changes in our forecasts or decreases in the value of our common stock could cause book values of certain
operating segments to exceed their fair values, which may result in goodwill impairment charges in future periods. As of December 31, 2008 and 2007, respectively, we had $528.3 million
and $526.0 million of goodwill and

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$357.1 million
and $383.8 million of intangible assets with estimable useful lives on our consolidated balance sheet. We do not have any intangible assets with indefinite useful lives.

Intangible
assets subject to amortization consist of customer relationships, licenses and permits, technology and non-compete agreements. Customer relationships, which
include the fair value of acquired customer contracts, were evaluated for each operating segment using a discounted cash flow methodology and are amortized on a straight-line basis over a
term of 2 to 12 years. Estimated future cash flows for each operating segment were derived based on detailed budgets and projections prepared by management. Licenses and permits were evaluated
for each licensed facility using a replacement cost methodology. Also, due to the unique characteristics of the Envirocare permits we also included an opportunity cost reflecting an estimate of
earnings that would be lost if we had to replace the licenses and permits as opposed to having acquired them. Licenses and permits are either amortized over the definite terms of the related
agreements or over the remaining useful lives of the related intangible asset, typically 20 to 25 years. Estimates of replacement cost were determined by management taking into consideration
the cost of labor and other costs needed to meet regulatory requirements to obtain and maintain the license or permit. Estimates of opportunity cost were determined by management after considering
estimated cash flows for the business generated with the licenses and permits offset by contribution asset charges for other assets of the business that also contribute to cash flow generation.
Technology and non-compete agreements were evaluated using a discounted cash flow methodology. Intangible technology assets are amortized on a straight-line basis over a term
of 9 to 10 years and non-compete agreements are amortized over the terms of the contracts. Estimated future cash flows for each technology and non-compete agreement were
derived based on detailed budgets and projections prepared by management.

Long-lived
assets such as property, plant and equipment are reviewed for impairment whenever events or changes in circumstances indicate the carrying amount of an asset may
not be recoverable. Recoverability of assets to be held and used is measured by comparing the carrying amount of the asset to the estimated undiscounted future cash flows expected to be generated by
the asset. If the carrying amount of an asset exceeds its estimated future cash flows, an impairment charge is recognized by the amount of excess carrying value over fair value.

Equity-Based Compensation Expense

Pursuant to SFAS No. 123(R),Share-Based Payment(FAS 123(R)), we account
for equity-based compensation payments, including grants of employee stock options, based on the fair values of the equity instruments issued. Fair value of equity instruments issued in connection
with our initial public offering were determined based on an option pricing model which takes into account various assumptions that are subjective. Key assumptions used in the valuation included the
expected term of the equity award taking into account both the contractual term of the award, the effects of employees' expected exercise and post-vesting termination behavior, expected
volatility, expected dividends and the risk-free interest rate for the expected term of the award.

In
2006 and 2005, certain members of senior management were granted profit interest units in ENV Holdings LLC, in consideration for services rendered to us. These units entitle
the holders to distributions from ENV Holdings. Certain units vested immediately upon grant and others vest over periods up to three years. These profit interest units are not convertible into common
stock of EnergySolutions, Inc. or any other equity security of EnergySolutions, Inc.
However, because these grants of profit interest units were made for services rendered to us, we recorded compensation expenses in connection with these grants.

The
grant date fair value of these units was determined using both a market approach and an income or discounted cash flow approach. As part of the market approach, we used both
comparable public companies (market multiples approach) and comparable transactions in order to estimate

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enterprise
value. The income or discounted cash flow approach used management's assumptions for growth in our revenues and expenses to estimate enterprise value. The resulting enterprise values as
calculated under each approach were then averaged using an equal weighting to arrive at the final enterprise value. This value was then allocated to each class of profit interest units based on each
class's priority of distributions.

We
recorded compensation expense of $648,000, $2.7 million and $21.4 million for the years ended December 31, 2008, 2007 and 2006, which represents the vested
portion of the fair value of these units. We anticipate that the equity-based compensation expense related to the vesting of these units will be approximately $308,000 in 2009. In addition, we have
options outstanding to purchase an aggregate of 5,625,430 shares and 37,985 unvested restricted shares as of December 31, 2008. Under the measurement principles of FAS 123(R), we
estimate that we will recognize compensation expense related to the issuance of these awards of $9.4 million, $9.3 million and $8.2 million in 2009, 2010 and 2011, respectively.
Our estimate of fair value for the stock options was made using the Black-Scholes model based upon the closing stock price on the date of grant, volatility of 35%, risk-free interest rate
of 2.0% to 3.9% per year, expected life of 2.5 years to 3.75 years,
and a dividend yield of 0.40% to 1.00%. We determined the volatility rate by reference to volatility rates used by certain of our public industry peers since we do not have an established trading
history of our common stock. We determined the expected life by using the short-cut method, as permitted by SEC Staff Accounting Bulletin No.107.

Income Taxes

Our effective tax rate in 2008 was 31.2%, which is lower than the blended statutory rate primarily due to the effect of research and
development credits in the UK. We anticipate that our effective tax rate in 2009, exclusive of any unusual items, will be approximately 33% to 36%. We account for income taxes in accordance with SFAS
No. 109,Accounting for Income Taxes, and other, applicable authoritative pronouncements. Judgment is required in determining our provision for
income taxes. In the normal course of business, we may engage in numerous transactions every day for which the ultimate tax outcome (including the period in which the transaction will ultimately be
included in taxable income or deducted as an expense) is uncertain. Additionally, the tax returns we file are subject to audit and investigation by the Internal Revenue Service, most states in the
United States and by various government agencies representing jurisdictions outside the United States.

In
July 2006, the Financial Accounting Standards Board ("FASB") issued FASB Interpretation No. ("FIN") 48,Accounting for Uncertainty in Income
Taxesan interpretation of FASB Statement No. 109, which clarifies the accounting for uncertainty in tax positions. FIN 48 requires that we recognize
in our financial statements the impact of a tax position, if that position is more likely than not of being sustained on audit, based on the technical merits of the position. The provisions of
FIN 48 were effective for us on January 1, 2007, with any cumulative effect of the change in accounting principle recorded as an adjustment to opening retained earnings. The adoption of
FIN 48 did not have a material impact on our financial condition or results of operations.

There
were no federal income tax audits in progress or concluded during 2008. We have been notified that the Internal Revenue Service will be auditing the income tax returns of Duratek
for the tax periods ended December 31, 2004 and 2005 and June 6, 2006 and the income tax returns of Savannah River Corporation, a subsidiary of BNGA, for the tax periods ended
March 31, 2006, December 31, 2006 and November 15, 2007. The examinations are scheduled to begin in the first quarter of 2009.

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Disclosure of Impact of Recently Issued Accounting Standards

Disclosures about Derivative Instruments and Hedging Activities

In March 2008, the FASB issued SFAS No. 161,Disclosures about Derivative Instruments and Hedging
Activities. SFAS No. 161 changes the disclosure requirements for derivative instruments and hedging activities. Entities are required to provide enhanced disclosures
about (a) how and why an entity uses derivative instruments, (b) how derivative instruments and related hedged items are accounted for under SFAS No. 133 and its related
interpretations, and (c) how derivative instruments and related hedged items affect an entity's financial position, financial performance, and cash flows. SFAS No. 161 is effective for
financial statements for fiscal years beginning on or after November 15, 2008, with early adoption encouraged. While SFAS No. 161 will have no impact on our financial condition, results
of operations and cash flows, management is currently evaluating the changes in disclosure requirements.

Business Combinations

In December 2007, the FASB issued SFAS No. 141(R),Business Combinations. SFAS
No. 141(R) replaces SFAS No. 141,Business Combinations, but retains the requirement that the purchase method of accounting for
acquisitions be used for all business combinations. SFAS No. 141(R) expands on the disclosures previously required by SFAS No. 141, better defines the acquirer and the acquisition date
in a business combination, and establishes principles for recognizing and measuring the assets acquired (including goodwill), the liabilities assumed and any noncontrolling interests in the acquired
business. SFAS No. 141(R) also requires an acquirer to record an adjustment to income tax expense for changes in valuation allowances or uncertain tax positions related to acquired businesses.
SFAS No. 141(R) is effective for all business combinations with an acquisition date in the first annual period following December 15, 2008; early adoption is not permitted. We will adopt
this statement as of January 1, 2009. Management is currently evaluating the impact SFAS No. 141(R) will have on our financial condition, results of operations and cash flows; however,
in general, this standard will only impact the accounting for future acquisitions.

Noncontrolling Interest in Consolidated Financial Statements

In December 2007, the FASB issued SFAS No. 160,Noncontrolling Interests in Consolidated Financial
Statementsan amendment of ARB No. 51. SFAS No. 160 requires that noncontrolling (or minority) interests in subsidiaries be reported in the equity
section of a company's balance sheet, rather than in a mezzanine section of the balance sheet between liabilities and equity. SFAS No. 160 also changes the manner in which the net income of a
subsidiary is reported and disclosed in the controlling company's income statement. SFAS No. 160 also establishes guidelines for accounting for changes in ownership percentages and for
deconsolidation. SFAS No. 160 is effective for financial statements for fiscal years beginning on or after December 1, 2008 and interim periods within those years. Management is still
evaluating the impact of the adoption of SFAS No. 160 on our consolidated joint ventures but we do not expect it to have a material impact on our financial position, results of operations or
cash flows.

Fair Value Measurements

In September 2006, the FASB issued SFAS No. 157,Fair Value Measurements. This
standard clarifies the principle that fair value should be based on the assumptions that market participants would use when pricing an asset or liability. Additionally, it establishes a fair value
hierarchy that prioritizes the information used to develop those assumptions. SFAS No. 157 is effective for financial statements issued for fiscal years beginning after November 14,
2007. In February 2008, the FASB issued FASB Staff Position ("FSP") FAS 157-2,Partial Deferral of the Effective Date of Statement
157, which delays

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the
effective date for all nonfinancial assets and nonfinancial liabilities, except those that are recognized or disclosed at fair value in the financial statements on a recurring basis. The FSP
defers the effective date of SFAS No. 157 to fiscal years beginning after November 15, 2008. We do not expect the provisions of this statement to have a material impact on our financial
condition or results of operations.

Item 7A.    Qualitative and Quantitative Disclosures about Market Risk

Our primary market risk relates to changing interest rates. As of December 31, 2008, we had outstanding
floating-rate term loan debt of $566.8 million, of which $3.0 million is currently due within the next year. Under our credit facilities, we are required to maintain one or
more interest rate swap agreements for the aggregate notional amount of at least 33% of the outstanding aggregate principal amount of the term loans. As of December 31, 2008, our swap agreement
had a notional amount of $200.0 million and a fair value liability of approximately $261,000. For further information on the swap agreement, see Note 11 to our audited consolidated
financial statements included elsewhere in this Form 10-K.

A
hypothetical interest rate change of 1% on our credit facilities would have changed interest expense for the year ended December 31, 2008 by approximately $5.7 million.
In addition, a hypothetical interest rate change of 1% on our swap agreement would have changed the fair value of the interest swap at December 31, 2008 by approximately $3.6 million.
Changes in market interest rates would impact the fair value of our long-term obligations. As of December 31, 2008 we had outstanding borrowings under our credit facilities of
$566.8 million with an approximate fair value of $430.7 million.

Prior
to our acquisition of RSMC, our exposure to foreign currency fluctuations was immaterial. Through RSMC, we earn fee income denominated in British pounds sterling.

We
have foreign currency exposure related to our operations in the United Kingdom as well as other foreign locations. This foreign currency exposure arises primarily from the translation
or re-measurement of our foreign subsidiaries' financial statements into U.S. dollars. For example, a substantial portion of our annual sales and operating costs are denominated in pound
sterling and we have exposure related to sales and operating costs increasing or decreasing based on changes in currency exchange rates. If the U.S. dollar increases in value against these foreign
currencies, the value in U.S. dollars of the assets and liabilities originally recorded in these foreign currencies will decrease. Conversely, if the U.S. dollar decreases in value against these
foreign currencies, the value in U.S. dollars of the assets and liabilities originally recorded in these foreign currencies will increase. Thus, increases and decreases in the value of the U.S. dollar
relative to these foreign currencies have a direct impact on the value in U.S. dollars of our foreign currency denominated assets and liabilities, even if the value of these items has not changed in
their original currency. We attempt to mitigate the impact of this exchange rate risk by utilizing financial instruments, including derivative transactions pursuant to our policies. As such, a 10%
change in the U.S. dollar exchange rates in effect as of December 31, 2008, would cause a change in consolidated net assets of approximately $9.6 million and a change in gross profit of
approximately $7.6 million, primarily due to pound sterling-denominated exposures.

Item 8.    Financial Statements and Supplementary Data.

See pages F-1 through F-37 following the Exhibits List.

Item 9.    Changes in and Disagreements With Accountants on Accounting and Financial Disclosure.

None.

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Item 9A.    Controls and Procedures.

Evaluation of Disclosure Controls and Procedures

Based on their evaluation as of December 31, 2008, which is the end of the period covered by this Annual Report on
Form 10-K, our principal executive officer and principal financial officer have concluded that our disclosure controls and procedures (as defined in
Rules 13a-15(e) or 15d-15(e) of the Exchange Act) are effective, based upon an evaluation of those controls and procedures required by paragraph (b) of
Rule 13a-15 or Rule 15d-15 of the Exchange Act.

Management's Report on Internal Control Over Financial Reporting

Our management is responsible for establishing and maintaining effective internal control over financial reporting and for the
assessment of the effectiveness of internal control over financial reporting. The company's internal control over financial reporting is a process designed,
as defined in Rule 13a-15(f) under the Exchange Act, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of consolidated financial
statements for external purposes in accordance with generally accepted accounting principles in the U.S.

In
connection with the preparation of the company's annual consolidated financial statements, management of the company has undertaken an assessment of the effectiveness of the company's
internal control over financial reporting based on criteria established in Internal ControlIntegrated Framework issued by the Committee of Sponsoring Organizations of the Treadway
Commission ("the COSO Framework"). Management's assessment included evaluation of elements such as the design and operating effectiveness of key financial reporting controls, process documentation,
accounting practices, and our overall control environment. Based on this assessment, management has concluded that the company's internal control over financial reporting was effective as of
December 31, 2008. We reviewed the results of management's assessment with the Audit Committee of our Board of Directors.

There
were no changes to our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred
during our fourth fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Because
of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Projections of any evaluation of effectiveness to future periods
are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Our
independent registered public accounting firm, Ernst & Young LLP, independently assessed the effectiveness of our internal control over financial reporting.

Item 9B.    Other Information.

None.

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PART III

Item 10.    Directors, Executive Officers and Corporate Governance.

Executive Officers and Directors

The following table sets forth the names and ages of each person who is a director or executive officer of
EnergySolutions, Inc. Our directors serve one year terms. Our Chief Executive Officer serves at the pleasure of the Board of Directors and all
other executive officers serve at the pleasure of the Chief Executive Officer and the Board of Directors.

Name

Age

PositionR Steve Creamer


57

Chairman and Chief Executive OfficerJ. Barnie Beasley, Jr.


57

DirectorJordan W. Clements


52

DirectorE. Gail de Planque


64

DirectorJ.I. Everest, II


52

DirectorLance L. Hirt


41

DirectorRobert A. Whitman


55

DirectorDavid B. Winder


70

DirectorVal J. Christensen


56

PresidentRaul A. Deju


62

Chief Operating OfficerPhilip O. Strawbridge


54

Executive Vice President and Chief Financial Officer


R Steve Creamer.Mr. Creamer has been our Chief Executive Officer and a member of the Board of Directors since 2005 and
became Chairman of the
Board in November 2007. Mr. Creamer joined our predecessor, Envirocare of Utah, in 2005 as its Chief Executive Officer. Mr. Creamer began his career with the State of Utah as an engineer
with the Department of Transportation and then Environmental Quality. From 1976 to 1991, he was the President of Creamer and Noble Engineers, a consulting engineering firm. From 1990 to 1997, he was
the Chief Executive Officer and minority partner of ECDC Environmental, an industrial waste firm. In 1997, Mr. Creamer co-founded ISG Resources, Inc. after acquiring JTM
Industries from Laidlaw where he served as Chief Executive Officer until 2002. In 2002, Headwaters Incorporated acquired ISG, and Mr. Creamer became the Chief Operating Officer and board member
of Headwaters Incorporated. In 2003, Mr. Creamer co-founded Western Pacific Group, a small private equity fund focused on making long-term investments in a wide cross
section of companies. Mr. Creamer holds a B.S. degree in Civil & Environmental Engineering from Utah State University.

J. Barnie Beasley, Jr.Mr. Beasley has served on our Board of Directors since October 2008, when he retired as Chairman,
President and Chief
Executive Officer of Southern Nuclear Operating Company, having served as President and CEO since September 2004 and Chairman since June 2005. Mr. Beasley's career with Southern Nuclear
Operating Company began in 1998,where he served as a Vice President and later an Executive Vice President and Chief Nuclear Officer. Mr. Beasley graduated from the University of Georgia with a
BS degree in Engineering. He has held a Senior Reactor Operator's license from the U.S. Nuclear Regulatory Commission, and he currently holds a Professional Engineering License in the State of Georgia
as an Electrical Engineer. He is a member of both the Georgia Society and the National Society of Professional Engineers. Mr. Beasley is also a member of the National Nuclear Accrediting Board
which is responsible for accrediting nuclear power plant training programs. He previously served on the Board of Directors and several committees for the Nuclear Energy Institute ("NEI"), including
the Executive Committee and the Organization and Compensation Committee of the Board of Directors. Additionally, he served on the Board of Directors and Audit Committee for the Foundation for Nuclear
Studies, a Washington, DC based organization

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that
seeks to promote sound national policy on the use and development of nuclear technologies. Mr. Beasley also previously served on the Board of Directors for the Southeastern Electric
Exchange, on the Board of Directors of Junior Achievement of Greater Birmingham, and on the Advisory Board of INROADS/Birmingham, a program that prepares talented minority youth for corporate and
community leadership. Mr. Beasley currently serves as Chairman of the University of Georgia Engineering Advisory Board.

Jordan W. Clements.Mr. Clements has served on our Board of Directors since 2005. Mr. Clements has been the managing
partner of
Peterson Partners, a Salt Lake City-based private investment firm with over 30 principal investments, since its inception in 1995. Prior to co-founding Peterson Partners,
Mr. Clements was a partner at Carr McClellan, a San Francisco Bay Area law firm, where he practiced corporate and business law, for approximately 13 years. His practice focused on
building emerging companies in a broad range of industries. He has served on more than a dozen boards of directors of high growth businesses. Mr. Clements received a B.A. in English and a J.D.
from Brigham Young University.

E. Gail de Planque.Dr. de Planque has served on our Board of Directors since our initial public offering in November 2007.
Dr. de
Planque has been President of Strategy Matters, Inc. since March 2000 and a director of Energy Strategists Consultancy Limited since May 1999, each of which provides consulting services to the
energy and nuclear industries. Dr. de Planque has more than 40 years of experience in nuclear physics, regulation and the nuclear industry, and is a Fellow of the American Association
for the Advancement of Science, a Fellow and past President of the American Nuclear Society and a member of the National Academy of Engineering. She also has served as a Commissioner with the Nuclear
Regulatory Commission and a Director of the Department of Energy's Environmental Measurements Laboratory. Dr. de Planque is a Director of BHP Billiton PLC, BHP Billiton Limited and a
member of the Board of Trustees of Northeast Utilities. Dr. de Planque was formerly a Director of BNFL Plc, BNG America, Inc., TXU Corp., and Landauer, Inc. Dr. de
Planque received an A.B. cum laude in Mathematics from Immaculata University, an M.S. in Physics from the New Jersey Institute of Technology and a Ph.D. in Environmental Health Science from New York
University.

J.I. Everest, II.Mr. Everest has been a member of our Board of Directors since July 2007. From July 2007 through February
2009,
Mr. Everest held the office of Vice Chairman. Prior thereto, Mr. Everest served as our Executive Vice President and Chief Financial Officer from 2005 until August 2007. He joined our
predecessor, Envirocare of Utah, in 2005 as Chief Financial Officer. From 1989 to 1997, Mr. Everest was the Director of Finance and Corporate Development at USPCI, a Union Pacific Corporation
hazardous waste company. He became Vice President, Finance at ECDC in 1992 after its acquisition by USPCI and Laidlaw Environmental. In 1997, Mr. Everest, Mr. Creamer and Dr. Deju
founded ISG Resources, Inc. after acquiring JTM Industries from Laidlaw. In 2002, Headwaters Incorporated acquired ISG and Mr. Everest became its Vice President of Corporate Development
and Treasurer. In 2003 Mr. Everest and Mr. Creamer founded Western Pacific Group, a small private equity fund focused on making long-term investments in a wide cross section
of companies and real estate. Mr. Everest holds a B.B.A. from Southern Methodist University and an M.B.A. from the University of Texas.

Lance L. Hirt.Mr. Hirt has served on our Board of Directors since 2005 and served as Chairman of the Board until November
2007.
Mr. Hirt is a partner at Lindsay Goldberg, a private equity firm with 22 principal investments, primarily in manufacturing, financial service and healthcare companies. Prior to joining Lindsay
Goldberg in 2003, Mr. Hirt was a Managing Director at Morgan Stanley where he spent nine years in the mergers and acquisitions department advising a broad range of general industrial clients.
Mr. Hirt began his career as a management consultant at Touche Ross & Co. and subsequently practiced law at Sullivan & Cromwell LLP in New York. Mr. Hirt
graduated from Yeshiva

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College
with a B.A. in Economics and received his M.B.A. and J.D. from Harvard University. He currently serves as a Director of Brock Holdings, LLC, Brightstar Corp., PL Olefins LLC, PL
Propylene LLC, RECON Holdings I LLC and Scandza AS.

Robert A. Whitman.Mr. Whitman has served on our Board of Directors since July 2008. Mr. Whitman has been a director
of Franklin
Covey Co. since May 1997 and has served as Chairman of its Board of Directors since June 1999 and its Chairman and Chief Executive Officer since January 2000. Mr. Whitman served as a
director of Covey Leadership Center from 1994 to 1997. Prior to joining the Franklin Covey Co., Mr. Whitman served as President and Co-Chief Executive Officer of The
Hampstead Group from 1992 to 2000. Mr. Whitman received his B.A. in Finance from the University of Utah and his M.B.A. from Harvard Business School.

David B. Winder.Mr. Winder has served on our Board of Directors since our initial public offering in November 2007.
Mr. Winder was a
certified public accountant with KPMG LLP, as an employee from 1963 to 1972 and as a partner from 1972 until his retirement in 1997. Since his retirement from KPMG, Mr. Winder was
Executive Director, Department of Community and Economic Development for the State of Utah from March 1997 to April 2002 and Special Assistant to the Governor of the State of Utah from April 2002 to
March 2004, where he was responsible for various projects following the Olympic Games in Salt Lake City. Since November 2002, Mr. Winder also has been a consultant to various
for-profit and not-for-profit organizations. Mr. Winder is currently a director and chair of the audit committee of GE Capital Financial, Inc. and
Alsco, Inc., president of the board of directors of the Utah Retirement Systems and Public Employees Health Program, and past president and current chair of the Utah chapter of the National
Association of Corporate Directors ("NACD"). Mr. Winder received his A.B. in Social Sciences from Stanford University with highest honors.

Val J. Christensen.Mr. Christensen was appointed President of the Company by the Board of Directors in December 2008. From
May 2006 through
December 2008, Mr. Christensen served as an Executive Vice
President and our General Counsel and Secretary. From 1989 to 2006, Mr. Christensen served in various executive positions at FranklinCovey Co., eventually as Executive Vice President,
General Counsel and Secretary as well as being a director. Prior to that, he was a partner at the law firm LeBoeuf, Lamb, Leiby & MacRae, where he handled commercial litigation and general
business matters in the firm's Salt Lake City office from 1986 to 1989. Mr. Christensen is a director of Dynatronics, Inc. He received a B.A and J.D. from Brigham Young University.

Raul A. Deju.Dr. Deju was appointed Chief Operating Officer of the Company by the Board of Directors in December 2008. From
October 2006
through December 2008, Dr. Deju served as our President and Chief Administrative Officer. Before joining EnergySolutions, Dr. Deju served
between 2004 and 2006 as one of the founders and CEO of DMA, Inc. a consulting and investments company. From 1997 to 2002, Dr. Deju served as one of the founders, President and Chief
Operating Officer of ISG Resources from 1997 to 2002, which was merged with Headwaters Incorporated, and stayed as President of Headwaters' Resources Group from 2002 to 2004. Prior thereto, he served
as Western Regional President of Chemical Waste Management, Inc. and in senior executive positions at International Technology, Inc. (now Shaw Group) and at URS, Inc.
Dr. Deju started his professional career with Gulf Oil Co. principally involved with its Uranium Mining subsidiary and later on at the DOE's Hanford Site. Dr. Deju served in
Advisory Committee Roles with the U.S. Secretary of Commerce and the U.S. EPA Administrator. Dr. Deju received both his B.S. and his Ph.D. from the New Mexico Institute of Mining and
Technology. Dr. Deju has served on the faculty of the University of California, the University of Pittsburgh, St. Mary's College and J. F. Kennedy University's M.B.A. Program and served
as Chair of the Bi-national US-Mexico Environmental Committee during the North American Free Trade Agreement's formative process. Dr. Deju was recognized as one of the
25

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Most
Influential Latinos in the San Francisco Bay Area and has received Congressional, State and City of San Francisco recognitions.

Philip O. Strawbridge.Mr. Strawbridge has been an Executive Vice President and our Chief Financial Officer since August
2007. Previously he
was the President of our International Group from March 2006 to August 2007. Prior to that, Mr. Strawbridge was the President and CEO of BNG America from October 1999, which was acquired by
EnergySolutionsin March 2006. From September 1995 through September 1999, Mr. Strawbridge was the Chief Financial and Administrative Officer of
OHM Corporation and IT Corporation. From 1986 to September 1995, Mr. Strawbridge held various executive positions at Fluor Corporation including the Vice President, Government and Power Group.
Mr. Strawbridge also held various executive positions with the U.S. General Services Administration from 1978 to 1985. Mr. Strawbridge began his career as a United States Marine and
received his B.S. and J.D. from the University of Missouri.

Board of Directors

Our business and affairs are managed under the direction of our board of directors. Our bylaws provide that our board of directors will
consist of between seven and fifteen directors. The bylaws were amended by the board of directors on February 25, 2009 to change this provision from the previous requirement that we have
between nine and fifteen directors. The board is currently composed of eight directors, four of whom are independent directors under the applicable rules of the NYSE. Our status as a "controlled
company" ceased effective upon the close of our secondary offering in July 2008. As a result, by July 2009, a majority of the board is required to be independent directors in compliance with the
applicable rules of the NYSE. The directors have discretion to increase or decrease the size of the board.

Committees of the Board of Directors

Our board of directors has the authority to appoint committees to perform certain management and administration functions.

Audit Committee

We have an audit committee that has responsibility for, among other things:



Mr. Winder,
Dr. de Planque and Mr. Whitman, each an independent director, serve on the audit committee, with Mr. Winder serving as the committee's chair and
"financial expert," as that term is defined by the applicable SEC and NYSE rules. The audit committee has the power to investigate any matter brought to its attention within the scope of its duties
and to retain counsel for this purpose where appropriate.

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Compensation Committee

We have a compensation committee that has responsibility for, among other things:



Messrs. Whitman,
Beasley and Hirt serve on the compensation committee, with Mr. Whitman serving as the chair of the compensation committee. Mr. Whitman and
Mr. Beasley are independent directors. Pursuant to the rules of the NYSE, our Compensation Committee is required to be comprised solely of independent directors within one year from the date
the Company ceased to be "controlled" (July 2008). On or before July 2009, Mr. Hirt will be replaced on the Compensation Committee by an independent director so that the Compensation Committee
will be comprised solely of independent directors in compliance with the rules of the NYSE.

Nominating and Corporate Governance Committee

We have a nominating and corporate governance committee that has responsibility for, among other things:



Dr. de
Planque and Messrs. Everest and Winder serve on the nominating and corporate governance committee, with Dr. de Planque serving as the chair of the nominating
and corporate governance committee. Dr. de Planque and Mr. Winder are independent directors. Pursuant to the rules of the NYSE, our Nominating and Corporate Governance Committee is
required to be comprised solely of independent directors within one year from the date the Company ceased to be "controlled" (July 2008). On or before July 2009, Mr. Everest will be replaced on
the Nominating and Corporate Governance Committee by an independent director so that the Nominating and Corporate Governance Committee will be comprised solely of independent directors in compliance
with the rules of the NYSE.

Corporate Responsibilities Committee

We have a corporate responsibilities committee that has responsibility for, among other things:



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Messrs. Clements,
Beasley, Everest and Winder serve on the corporate responsibilities committee, with Mr. Clements serving as the committee's chair.

Compensation Committee Interlocks and Insider Participation

None of our executive officers will serve as a member of our compensation committee, and none of them have served, or will be permitted
to serve, on the compensation committee, or other committee serving a similar function, of any entity of which an executive officer is expected to serve as a member of our compensation committee.

Director Compensation

Directors who are employees of EnergySolutions, Inc. or its subsidiaries or
affiliated with Lindsay Goldberg will receive no compensation for service as members of either the board of directors or board committees. All other directors are paid:



We
will reimburse all directors for reasonable expenses incurred to attend meetings of our board of directors or committees.

Code of Ethics

Our board of directors has adopted a code of ethics that establishes the standards of ethical conduct applicable to all of our
directors, officers, employees, consultants and contractors. The code of ethics addresses, among other things, competition and fair dealing, conflicts of interest, financial matters and external
reporting, company funds and assets, confidentiality and corporate opportunity requirements and the process for reporting violations of the code of ethics, employee misconduct, conflicts of interest
or other violations. Our code of ethics is publicly available on our website atwww.energysolutions.com. Any waiver of our code of ethics with respect
to our chief executive officer, chief financial officer, controller or persons performing similar functions may only be authorized by our audit committee and will be disclosed as required by
applicable law.

Item 11.    Executive Compensation.

Information required by this item is included in "Compensation Discussion and Analysis" in the Proxy Statement, which is incorporated
herein by reference.

Item 12.    Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.

Information required by this item is included in "Security Ownership of Certain Beneficial Owners and Management and Related
Stockholder Matters" in the Proxy Statement, which is incorporated herein by reference.

Item 13.    Certain Relationships and Related Transactions and Director Independence.

Information required by this item is included in "Certain Relationships and Related Transactions, and Director Independent" in the
Proxy Statement, which is incorporated herein by reference.

88

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Table of Contents

Item 14.    Principal Accounting Fees and Services.

Information required by this item is included in "Principal Accounting Fees and Services" in the Proxy Statement, which is incorporated
herein by reference.

PART IV

Item 15.    Exhibits, Financial Statement Schedules.

Documents filed as part of this report include:



89

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Table of Contents

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this
report to be signed on its behalf by the undersigned, thereunto duly authorized, this 27th day of February, 2009.

ENERGYSOLUTIONS, INC.By:

/s/ PHILIP O. STRAWBRIDGE Philip O. Strawbridge Executive Vice President and
Chief Financial Officer


90

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Table of Contents

Power of Attorney

KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints R Steve Creamer and Philip
O. Strawbridge, jointly and severally, his or her attorneys-in-fact, each with the power of substitution, for him in any and all capacities, to sign any amendments to this
Annual Report on Form 10-K, and to file the same, with exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, hereby ratifying
and confirming all that each of said attorneys-in-fact, or his substitute or substitutes, may do or cause to be done by virtue hereof.

Pursuant
to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on
the dates indicated:

Name

Title

Date/s/ R STEVE CREAMER R STEVE CREAMER

Chairman and Chief Executive Officer (Principal Executive Officer)

February 27, 2009/s/ PHILIP O. STRAWBRIDGE PHILIP O. STRAWBRIDGE

Executive Vice President and Chief Financial Officer (Principal Financial and Principal Accounting Officer)

February 27, 2009/s/ J. BARNIE BEASLEY, JR J. BARNIE BEASLEY, JR

Director

February 27, 2009/s/ JORDAN W. CLEMENTS JORDAN W. CLEMENTS

Director

February 27, 2009/s/ E. GAIL DE PLANQUE E. GAIL de PLANQUE

Director

February 27, 2009/s/ JEAN I. EVEREST, II JEAN I. EVEREST, II

Director

February 27, 2009/s/ LANCE L. HIRT LANCE L. HIRT

Director

February 27, 2009/s/ ROBERT A. WHITMAN ROBERT A. WHITMAN

Director

February 27, 2009/s/ DAVID B. WINDER DAVID B. WINDER

Director

February 27, 2009


91

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Table of Contents

EXHIBIT INDEX

Incorporated by ReferenceExhibit
Number

Exhibit Description

Form

Filing Date/
Period End Date2.1

Agreement and Plan of Merger, dated as of February 6, 2006, by and among EnergySolutions, LLC, Dragon Merger Corporation and Duratek, Inc.


S-1/A


5/14/20072.2

Agreement for the Sale and Purchase of the Whole of the Issued Share Capital of Reactor Sites Management Company Limited, dated as of June 6, 2007, by and among British Nuclear Fuels plc, EnergySolutionsEU Limited and EnergySolutions, LLC.


S-1/A


9/11/20073.1

Certificate of Incorporation of EnergySolutions, Inc.


S-1/A


10/30/20073.2

Bylaws of EnergySolutions, Inc.


S-1/A


10/30/20074.1

Specimen Common Stock certificate.


S-1/A


10/30/20074.2

Form of Deposit Agreement, among EnergySolutions, Inc., Computershare Trust Company, N.A., as the depositary, Computershare Shareholder Services, Inc., as the
depositary's service company, and the holders from time to time of the depositary receipts evidencing the depositary shares.


S-1/A


11/13/200710.1

Second Amended and Restated Credit Agreement, dated as of June 7, 2006, among EnergySolutions, LLC, as borrower, ENV Holdings LLC, as guarantor, the lenders from time to time party hereto and Citicorp
North America, Inc.


S-1/A


9/11/200710.2

First Amendment to Second Amended and Restated Credit Agreement, dated as of June 19, 2006, among EnergySolutions, LLC, as borrower, ENV Holdings LLC, as guarantor, the lenders from time to time party
hereto and Citicorp North America, Inc.


S-1/A


9/11/200710.3

Second Amendment to Second Amended and Restated Credit Agreement, dated as of February 9, 2007, among EnergySolutions, LLC, as borrower, ENV Holdings LLC, as guarantor, the lenders from time to time
party hereto and Citicorp North America, Inc.


S-1/A


9/11/200710.4

Third Amendment to Second Amended and Restated Credit Agreement, dated as of June 26, 2007, among EnergySolutions, LLC, as borrower, ENV Holdings LLC, as guarantor, the lenders from time to time party
hereto and Citicorp North America, Inc.


S-1/A


9/11/200710.4.1

Fourth Amendment to Second Amended and Restated Credit Agreement, dated as of November 1, 2007, among EnergySolutions, LLC, as borrower, ENV Holdings LLC, as guarantor, the lenders from time to time
party hereto and Citicorp North America, Inc.


S-1/A


11/13/2007


92

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Table of Contents

Incorporated by ReferenceExhibit
Number

Exhibit Description

Form

Filing Date/
Period End Date10.5

Credit Agreement, dated as of June 7, 2006, among Dragon Merger Corporation and Duratek, Inc., as borrower, the lenders from time to time party hereto and Citicorp North America, Inc.


S-1/A


9/11/200710.6

First Amendment to Credit Agreement, dated as of June 19, 2007, among Dragon Merger Corporation and Duratek, Inc., as borrower, the lenders from time to time party hereto and Citicorp North America,
 Inc.


S-1/A


9/11/200710.7

Second Amendment to Credit Agreement, dated as of February 9, 2007, among Dragon Merger Corporation and Duratek, Inc., as borrower, the lenders from time to time party hereto and Citicorp North America,
 Inc.


S-1/A


9/11/200710.8

Third Amendment to Credit Agreement, dated as of June 26, 2007, among Dragon Merger Corporation and Duratek, Inc., as borrower, the lenders from time to time party hereto and Citicorp North America,
 Inc.


S-1/A


9/11/200710.8.1

Fourth Amendment to Credit Agreement, dated as of November 1, 2007, among Dragon Merger Corporation and Duratek, Inc., as borrower, the lenders from time to time party hereto and Citicorp North America,
 Inc.


S-1/A


11/13/200710.8.2

Amendment Agreement, dated as of July 16, 2008, among EnergySolutions, LLC, EnergySolutions, Inc., Citigroup Global Markets Inc., Citicorp North America, Inc., Credit Suisse Securities
(USA) LLC, Credit Suisse, J.P. Morgan Securities Inc., JP Morgan Chase Bank, N.A. and certain other financial institutions named therein


8-K


7/22/200810.8.3

Amendment Agreement, dated as of July 16, 2008, among Duratek, Inc., Citigroup Global Markets Inc., Citicorp North America, Inc. and certain other financial institutions named therein


8-K


7/22/200810.9

Second Lien Credit Agreement, dated as of June 26, 2007, among EnergySolutions, LLC, as borrower, ENV Holdings LLC, as guarantor, the lenders from time to time party hereto and Citicorp North America,
 Inc.


S-1/A


9/11/200710.10*

Amended and Restated Executive Employment and Non-Competition Agreement, dated as of January 9, 2007, between EnergySolutions, LLC and R Steve Creamer


S-1/A


10/30/200710.10.1*

First Amendment to Amended and Restated Executive Employment and Non-Competition Agreement, effective as of March 3, 2008, by and between EnergySolutions, LLC, ENV Holdings LLC, and R Steve
Creamer.


10-K/A


4/29/2008


93

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Table of Contents

Incorporated by ReferenceExhibit
Number

Exhibit Description

Form

Filing Date/
Period End Date10.11*

Amended and Restated Executive Employment and Non-Competition Agreement, dated as of January 9, 2007, between EnergySolutions, LLC and J.I. Everest II.


S-1/A


10/30/200710.11.1*

First Amendment to Amended and Restated Executive Employment and Non-Competition Agreement, dated as of March 3, 2008, by and between EnergySolutions, LLC, ENV Holdings LLC, and Jean I. "Chip" Everest
II


10-K/A


4/29/200810.12*

Executive Employment and Non-Competition Agreement, dated as of October 9, 2006, between EnergySolutions, LLC and Raul Deju


S-1/A


10/30/200710.12.1*

First Amendment to Executive Employment and Non-Competition Agreement, dated as of November 12, 2007, between EnergySolutions, LLC, ENV Holdings LLC and Raul Deju


S-1/A


11/13/200710.12.2*

Second Amendment to Executive Employment and Non-Competition Agreement, dated as of March 3, 2008, by and between EnergySolutions, LLC, ENV Holdings LLC and Raul Deju


10-K/A


4/29/200810.13*

Executive Employment and Non-Competition Agreement, dated as of June 26, 2006, between EnergySolutions, LLC and Val John Christensen


S-1/A


10/30/200710.14*

First Amendment to Executive Employment and Non-Competition Agreement, dated as of March 19, 2007, between EnergySolutions, LLC, ENV Holdings LLC and Val John Christensen


S-1/A


10/30/200710.14.1*

Second Amendment to Executive Employment and Non-Competition Agreement, dated as of October 30, 2007, between EnergySolutions, LLC, ENV Holdings LLC and Val John Christensen


S-1/A


10/31/200710.14.2*

Third Amendment to Executive Employment and Non-Competition Agreement, dated as of March 3, 2008, by and between EnergySolutions, LLC, ENV Holdings LLC and Val John Christensen


10-K/A


4/29/200810.15*

Executive Employment and Non-Competition Agreement, dated as of November 14, 2006, between EnergySolutions, LLC, ENV Holdings LLC and Alan Parker


S-1/A


10/30/200710.15.1*

First Amendment to Executive Employment and Non-Competition Agreement, dated as of October 30, 2007, between EnergySolutions, LLC, ENV Holdings LLC and Alan Parker


S-1/A


10/31/2007


94

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Table of Contents

Incorporated by ReferenceExhibit
Number

Exhibit Description

Form

Filing Date/
Period End Date10.15.2*

Second Amendment to Executive Employment and Non-Competition Agreement, dated as of March 3, 2008, by and between EnergySolutions, LLC, ENV Holdings LLC and Alan Parker


10-K/A


4/29/200810.16*

Executive Employment and Non-Competition Agreement, dated as of March 23, 2006, between EnergySolutions, LLC and Philip Strawbridge


S-1/A


10/30/200710.16.1*

First Amendment to Executive Employment and Non-Competition Agreement, dated as of October 17, 2007, between EnergySolutions, LLC, ENV Holdings LLC and Philip Strawbridge


S-1/A


10/30/200710.16.2*

Second Amendment to Executive Employment and Non-Competition Agreement, dated as of October 30, 2007, between EnergySolutions, LLC, ENV Holdings LLC and Philip O. Strawbridge


S-1/A


10/31/200710.16.3*

Third Amendment to Executive Employment and Non-Competition Agreement, dated as of March 3, 2008, by and between EnergySolutions, LLC, ENV Holdings LLC and Philip O. Strawbridge


10-K/A


4/29/200810.17

Operating Agreement of Envirocare of Utah, LLC, entered into by ENV Holdings LLC, dated January 31, 2005


S-1/A


9/11/200710.18

Amendment No. 1 to the Operating Agreement of EnergySolutions, LLC entered into by ENV Holdings LLC, dated September 14, 2007


S-1/A


10/30/200710.19*

Form of EnergySolutions, Inc. 2007 Equity Incentive Plan


S-1/A


10/30/200710.19.1*

Form of EnergySolutions, Inc. Restricted Stock Award Agreement


S-1/A


11/13/200710.19.2*

Form of EnergySolutions, Inc. Non-Qualified Stock Option Award Agreement


S-1/A


11/13/200710.19.3*

Form of Non-Qualified Stock Option Award Agreement between EnergySolutions, Inc. and Philip Strawbridge


S-1/A


11/13/200710.20*

Form of Registration Rights Agreement, between EnergySolutions, Inc. and ENV Holdings LLC


S-1/A


10/30/200710.21

Form of Director Indemnification Agreement


S-1/A


10/30/200710.22*

Executive Bonus Plan


S-1


7/7/200810.23

Form of Director Compensation Term Sheet**21.1

Subsidiaries of the registrant**23.1

Consent of Independent Registered Public Accounting Firm**24.1

Power of Attorney (Included on the Signature Page of this Annual Report on Form 10-K)


95

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Table of Contents

Incorporated by ReferenceExhibit
Number

Exhibit Description

Form

Filing Date/
Period End Date31.1

Rule 13a-14(a) / 15d-14(a) Certification of Chief Executive Officer**31.2

Rule 13a-14(a) / 15d-14(a) Certification of Chief Financial Officer**32.1

Section 1350 Certifications of Chief Executive Officer And Chief Financial Officer***


---

The
registrant has omitted certain schedules in accordance with Item 601(b)(2) of Regulation S-K. The registrant will furnish the omitted schedules to the Commission upon
request.

96

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Table of Contents

EnergySolutions, Inc.    Index to Consolidated Financial Statements

Contents



Reports of Ernst & Young, LLP, Independent Registered Public Accounting Firm

F-2Consolidated Financial StatementsConsolidated Balance Sheets

F-4Consolidated Statements of Operations and Comprehensive Income (Loss)

F-5Consolidated Statements of Changes in Stockholders'/Member's Equity
(Deficit)

F-6Consolidated Statements of Cash Flows

F-7Notes to Consolidated Financial Statements

F-8


F-1

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Table of Contents

Report of Ernst & Young LLP, Independent Registered Public Accounting Firm  On Internal Control Over Financial Reporting

The
Board of Directors and Stockholders of
EnergySolutions, Inc.

We
have audited EnergySolutions, Inc.'s internal control over financial reporting as of December 31, 2008, based on criteria
established in Internal ControlIntegrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (the "COSO criteria").
EnergySolutions, Inc.'s management is responsible for maintaining effective internal control over financial reporting, and for its assessment of
the effectiveness of internal control over financial reporting included in the accompanying Management's Annual Report on Internal Control Over Financial Reporting. Our responsibility is to express an
opinion on the Company's internal control over financial reporting based on our audit.

We
conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control
over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and
performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

A
company's internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of
financial statements for external purposes in accordance with generally accepted accounting principles. A company's internal control over financial reporting includes those policies and procedures
that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide
reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and
expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely
detection of unauthorized acquisition, use or disposition of the company's assets that could have a material effect on the financial statements.

Because
of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future
periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In
our opinion, EnergySolutions, Inc. maintained, in all material respects, effective internal control over financial reporting as
of December 31, 2008, based on the COSO criteria.

We
also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of
EnergySolutions, Inc. as of December 31, 2008 and 2007, and the related consolidated statements of operations and comprehensive income
(loss), changes in stockholders'/member's equity (deficit), and cash flows for each of the three years in the period ended December 31, 2008 and our report dated February 26, 2009
expressed an unqualified opinion thereon.



Salt
Lake City, Utah
February 26, 2009

F-2

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Table of Contents

Report of Ernst & Young LLP, Independent Registered Public Accounting Firm

The
Board of Directors and Stockholders of
EnergySolutions, Inc.

We
have audited the accompanying consolidated balance sheets of EnergySolutions, Inc. as of December 31, 2008 and 2007, and
the related consolidated statements of operations and comprehensive income (loss), changes in stockholders'/member's equity (deficit), and cash flows for each of the three years in the period ended
December 31, 2008. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.

We
conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our opinion.

In
our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of
EnergySolutions, Inc. at December 31, 2008 and 2007, and the consolidated results of its operations and its cash flows for each of the
three years in the period ended December 31, 2008, in conformity with U.S. generally accepted accounting principles.

We
also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States),
EnergySolutions, Inc.'s internal control over financial reporting as of December 31, 2008, based on criteria established in Internal
Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated February 26, 2009 expressed an unqualified opinion thereon.



Salt
Lake City, Utah
February 26, 2009

F-3

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Table of Contents

EnergySolutions, Inc.        Consolidated Balance Sheets        December 31, 2008 and 2007
    (in thousands of dollars)

December 31,
2008

December 31,
2007AssetsCurrent assets:Cash and cash equivalents

$
48,448

$
36,366Restricted cash





3,995Accounts receivable, net of allowance for doubtful accounts


213,037


366,083Costs and estimated earnings in excess of billings on uncompleted contracts


59,545


41,243Income tax receivable


5,537


26,163Inventories


11,218


10,851Prepaid expenses


19,109


8,170Other current assets


34,363


12,811Total current assets


391,257


505,682Property, plant and equipment, net


114,021


110,688Goodwill


528,254


526,040Other intangible assets, net


357,100


383,812Restricted cash and decontamination and decommissioning deposits


31,712


30,559Other noncurrent assets


128,368


68,169Total assets

$
1,550,712

$
1,624,950Liabilities and Stockholders' EquityCurrent liabilities:Current portion of long-term debt

$
2,954

$
1,557Accounts payable


89,513


155,663Accrued expenses and other current liabilities


171,070


233,588Deferred income taxes


2,067


1,402Unearned revenues


33,103


43,733Total current liabilities


298,707


435,943Long-term debt, less current portion


563,803


605,410Pension liability


104,897


44,540Facility and equipment decontamination and decommissioning liabilities


65,904


69,543Deferred income taxes


41,385


53,504Other noncurrent liabilities


7,197


10,619Total liabilities


1,081,893


1,219,559Minority interests


1,033


68Commitments and contingenciesStockholders' equity:Preferred stock, $0.01 par value, 100,000,000 shares authorized; no shares issued and outstanding





Common stock, $0.01 par value, 1,000,000,000 shares authorized; 88,305,674 and 88,303,500 shares issued and outstanding in 2008 and 2007,
respectively


883


883Additional paid-in capital


482,042


471,075Accumulated other comprehensive income (loss)


4,895


(1,429
)Capital deficiency


(20,034
)

(65,206
)Total stockholders' equity


467,786


405,323Total liabilities and stockholders' equity

$
1,550,712

$
1,624,950


See accompanying notes to consolidated financial statements.

F-4

---





Table of Contents

EnergySolutions, Inc.        Consolidated Statements of Operations and Comprehensive Income (Loss)        Years Ended December 31, 2008, 2007 and 2006        (in thousands of dollars)

Year Ended December 31,2008

2007

2006Revenues

$
1,791,631

$
1,092,613

$
427,103Cost of revenues


1,544,438


896,086


235,867Gross profit


247,193


196,527


191,236Selling, general and administrative expenses


129,430


121,948


101,262Income from operations


117,763


74,579


89,974Interest expense


(44,595
)

(75,432
)

(68,566
)Other income (expenses), net


(5,556
)

3,364


3,113Income before income taxes and minority interests


67,612


2,511


24,521Minority interests


1,333


92


Income tax expense


21,098


11,318


(2,342
)Net income (loss)

$
45,181

$
(8,899
)
$
26,863Net income (loss) per sharesee note 13:Basic

$
0.51

$
(0.79
)Diluted

$
0.51

$
(0.79
)Shares used to calculate net income (loss) per share:Basic


88,303,779


11,274,422Diluted


88,311,231


11,274,422Pro forma net income per sharesee note 13:Basic




$
0.02

$
0.20Diluted




$
0.02

$
0.20Shares used to calculate pro forma net income per share:Basic





76,747,573


75,150,000Diluted





77,155,949


75,150,000Cash dividends declared per common share

$
0.10

$


$
Comprehensive income (loss):Net income (loss)

$
45,181

$
(8,899
)
$
26,863Foreign currency translation adjustment


7,447


(182
)

(49
)Change in unrecognized actuarial loss


(1,123
)

(1,198
)

Comprehensive income (loss)

$
51,505

$
(10,279
)
$
26,814


See
accompanying notes to consolidated financial statements.

F-5

---





Table of Contents

EnergySolutions, Inc.        Consolidated Statements of Changes in Stockholders'/Member's Equity (Deficit)
    Years Ended December 31, 2008, 2007 and 2006        (in thousands of dollars)

Accumulated
Other
Comprehensive
Income
(Loss)Common Stock

Stockholders'
Additional
Paid-in
CapitalMember's
Paid-in
Capital

Capital
Deficiency

Total
Stockholders'
Equity (Deficit)Shares

AmountBalance at December 31, 2005




$


$


$


$


$
(69,529
)
$
(69,529
)Net income

















26,863


26,863Capital contribution











175,000








175,000Equity-based compensation











21,419








21,419Distributions to member

















(4,724
)

(4,724
)Foreign currency translation














(49
)




(49
)Balance at December 31, 2006











196,419


(49
)

(47,390
)

148,980Net loss

















(8,899
)

(8,899
)Equity-based compensation








1,839


2,512








4,351Distributions to member

















(8,917
)

(8,917
)Issuance of common stock:Shares issued for redemption of member's equity


75,150,000


752


198,179


(198,931
)







Shares issued for cash, net of issuance costs


13,153,500


131


271,011











271,142Shares issued to charitable organizations


2,000





46











46Change in unrecognized actuarial loss














(1,198
)




(1,198
)Foreign currency translation














(182
)




(182
)Balance at December 31, 2007


88,305,500


883


471,075





(1,429
)

(65,206
)

405,323Net income

















45,181


45,181Capital contribution








10,000











10,000Equity-based compensation








9,844











9,844Dividend distributions








(8,831
)







(9
)

(8,840
)Reversal of shares issued to charitable organization


(2,000
)




(46
)










(46
)Vesting of restricted stock


2,174

















Change in unrecognized actuarial loss














(1,123
)




(1,123
)Foreign currency translation














7,447





7,447Balance at December 31, 2008


88,305,674

$
883

$
482,042

$


$
4,895

$
(20,034
)
$
467,786


See accompanying notes to consolidated financial statements.

F-6

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Table of Contents

EnergySolutions, Inc.        Consolidated Statements of Cash Flows        Years Ended
December 31, 2008, 2007 and 2006        (in thousands of dollars)

Year Ended December 31,2008

2007

2006Cash flows from operating activitiesNet income (loss)

$
45,181

$
(8,899
)
$
26,863Adjustments to reconcile net income (loss) to net cash provided by operating activities:Minority interests


1,333


92


Depreciation and amortization


46,424


43,230


28,628Equity-based compensation expense


9,844


4,351


21,419Foreign currency transaction loss


16,234





Deferred income taxes


(8,739
)

8,657


(124
)Write-off of debt financing fees and debt discount





4,242


8,889Amortization of debt financing fees and debt discount


3,552


3,472


1,738Loss on disposal of property, plant and equipment


1,262


832


108Unrealized loss on derivative contracts


782


600


363Changes in operating assets and liabilities:Accounts receivable


101,327


19,907


8,717Costs and estimated earnings in excess of billings on uncompleted contracts


(18,198
)

18,231


7,264Income tax receivable


20,626


(13,145
)

(10,192
)Inventories


(649
)

556


5,166Prepaid expenses and other current assets


(32,102
)

15,769


509Accounts payable


(38,727
)

28,202


2,558Accrued expenses and other current liabilities


(37,894
)

(12,289
)

(30,696
)Unearned revenues


(10,492
)

(6,191
)

7,922Facility and equipment decontamination and decommissioning liabilities


1,608


1,366


2,183Restricted cash and decontamination and decommissioning deposits


2,110


38,099


(9,182
)Other noncurrent assets


(88,116
)

(1,819
)

(1,137
)Other noncurrent liabilities


87,743


7,533


(1,240
)Net cash provided by operating activities


103,109


152,796


69,756Cash flows from investing activitiesPurchases of businesses, net of cash acquired





(199,105
)

(447,912
)Purchases of property, plant and equipment


(26,629
)

(13,312
)

(23,910
)Purchases of intangible assets


(680
)




Proceeds from disposition of property, plant and equipment


33


579


58Net cash used in investing activities


(27,276
)

(211,838
)

(471,764
)Cash flows from financing activitiesRepayments of long-term debt


(40,210
)

(354,200
)

(558,833
)Borrowings of long-term debt





200,000


770,000Net borrowings (repayments) under revolving credit facility





(3,000
)

3,000Dividends/distributions to stockholders/member


(8,831
)

(8,917
)

(4,724
)Distributions to minority interests partners


(850
)

Capital contributions








175,000Proceeds from issuance of common stock, net of issuance costs





271,142


Settlement of derivative contracts


5,232





Repayments of capital lease obligations


(1,533
)

(1,327
)

(328
)Debt financing fees


(6,434
)

(11,764
)

(12,264
)Net cash provided by (used in) financing activities


(52,626
)

91,934


371,851Effect of exchange rate on cash


(11,125
)

(1,167
)

Net increase (decrease) in cash and cash equivalents


12,082


31,725


(30,157
)Cash and cash equivalents, beginning of period


36,366


4,641


34,798Cash and cash equivalents, end of period

$
48,448

$
36,366

$
4,641


See accompanying notes to consolidated financial statements.

F-7

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Table of Contents

EnergySolutions, Inc.        Notes to Consolidated Financial Statements

(1) Description of Business

Envirocare of Utah, Inc. (predecessor) was formed in 1988 to operate a disposal facility for mixed waste, uranium mill tailings and Class A low-level
radioactive waste in Clive, Utah. In January 2005, the predecessor converted to a limited liability company, Envirocare of Utah, LLC ("Envirocare"). Immediately thereafter, the sole member of
Envirocare sold all of its member interest to ENV Holdings LLC ("ENV Holdings"). In 2006, we changed our name from Envirocare of Utah, LLC to
EnergySolutions, LLC ("we," "our," "EnergySolutions" or the "Company"). Since 2005, we have
expanded and diversified our operations through a series of strategic acquisitions, including the Decontamination and Decommissioning ("D&D") division of Scientech, LLC ("Scientech") in October
2005, BNG America, LLC ("BNGA") in February 2006, Duratek, Inc. ("Duratek") in June 2006, Safeguard International Solutions, Ltd. ("Safeguard") in December 2006,
Parallax, Inc. ("Parallax") in January 2007, Reactor Sites Management Company Limited ("RSMC") in June 2007, NUKEM Corporation ("NUKEM") in July 2007, and Monserco Limited ("Monserco") in
December 2007. The operations of such acquisitions are included in our results of operations from the date of acquisition.

We
provide our services through four segments: Federal Services ("FS"); Commercial Services ("CS"); Logistics, Processing and Disposal ("LP&D"), and International. Our Federal Services
segment derives revenues from U.S. government customers for the management and operation or clean-up of facilities with radioactive materials. Our U.S. government customers are primarily
individual offices, departments and administrations within the U.S. Department of Energy ("DOE") and U.S. Department of Defense ("DOD"). Our Commercial Services segment provides a broad range of
on-site services, including D&D, to commercial customers. Our commercial customers include power and utility companies, pharmaceutical companies, research laboratories, universities,
industrial facilities and other commercial entities with nuclear materials, as well as state agencies in the United States. Our LP&D segment provides a broad range of logistics, transportation,
processing and disposal services to government and commercial customers. This segment also operates our facilities for the safe processing and disposal of radioactive materials, including a facility
in Clive, Utah, four facilities in Tennessee and two facilities in Barnwell, South Carolina. Our
acquisition of RSMC in June 2007, as described more fully in Note 3, significantly expanded our international capabilities. Prior to our acquisitions of RSMC in 2007 and Safeguard in 2006, we
derived less than 1% of our revenues from our international operations. Accordingly, through the first quarter of 2007, we reported results from our international operations in our Commercial Services
segment. Beginning with the second quarter of 2007, we began reporting results from our operations outside North America in a new International segment in connection with our acquisition of RSMC. Our
International segment derives revenues primarily through contracts with the Nuclear Decommissioning Authority ("NDA") in the UK.

On
November 20, 2007, the date of the completion of our initial public offering, we completed our conversion to a corporate structure whereby
EnergySolutions, LLC converted to EnergySolutions, Inc. As a result, the member of
EnergySolutions, LLC contributed its membership equity interest for 75.2 million shares of $0.01 par value common stock of
EnergySolutions, Inc. EnergySolutions, Inc. is now organized and existing under the
General Corporation Law of the State of Delaware.

On
July 30, 2008, we completed a secondary public offering of 35 million shares of common stock offered by ENV Holdings, as selling stockholder. The underwriters of the
offering subsequently exercised their over-allotment option and purchased 5.25 million additional shares of our common stock from ENV Holdings. Following completion of these
transactions, ENV Holdings owned approximately 16.7% of our outstanding shares of common stock. We did not receive any proceeds

F-8

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Table of Contents

EnergySolutions, Inc.

Notes to Consolidated Financial Statements (Continued)

(1) Description of Business (Continued)

from
the sale of shares by ENV Holdings and recognized expenses of $1.8 million for the year ended December 31, 2008.

On
February 13, 2009, ENV Holdings LLC completed a distribution of all of our shares to its members on a pro rata basis for no consideration. As a result, ENV Holdings is
no longer the beneficial owner, directly or indirectly, of any shares of our common stock.

(2) Summary of Significant Accounting Policies

(a) Principles of Consolidation

The consolidated financial statements include the accounts of the Company, our wholly-owned subsidiaries and joint ventures in which we
have a controlling interest. Investments in joint ventures over which we exercise significant influence but in which we do not exercise control are accounted for under the equity method. All
significant intercompany balances and transactions have been eliminated in consolidation. On March 14, 2008 and November 1, 2007, we obtained a majority of voting interest in two of our
joint ventures and began to consolidate their operations as of the respective dates.

(b) Cash and Cash Equivalents

We consider all cash on deposit, money market accounts, and highly liquid debt instruments purchased with original maturities of three
months or less to be cash and cash equivalents. We maintain cash and cash equivalents in bank deposit and other investment accounts which, at times, may exceed federally insured limits.

Restricted
cash at December 31, 2007 consisted of $4.0 million of cash held relating to certain operations of RSMC which ceased prior to our acquisition. This cash is
repayable under contract to the NDA. A corresponding liability was included in accrued expenses and other current liabilities for $4.0 million as of December 31, 2007. During the year
ended December 31, 2008, the restricted funds were paid to the NDA.

(c) Accounts Receivable

Accounts receivable are recorded at the invoiced amount and generally do not bear interest. The carrying amount of accounts receivable,
net of the allowance for doubtful accounts, represents estimated net realizable value. The allowance for doubtful accounts is a valuation allowance that reflects management's best estimate of the
amounts that will not be collected. The allowance for doubtful accounts is estimated based on historical collection trends, type of customer, the age of outstanding receivables and existing economic
conditions. We generally do not require collateral for accounts receivable; however, we regularly review all accounts receivable balances and assess the collectibility of those balances. If events or
changes in circumstances indicate that specific receivable balances may be impaired, further consideration is given to the collectibility of those balances and the allowance is adjusted accordingly.
Account balances are written off against the allowance after all reasonable means of collection have been exhausted and recovery is considered remote. We have an allowance for doubtful accounts of
$1.4 million and $1.6 million as of December 31, 2008 and 2007, respectively.

F-9

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Table of Contents

EnergySolutions, Inc.

Notes to Consolidated Financial Statements (Continued)

(2) Summary of Significant Accounting Policies (Continued)

(d) Costs and Estimated Earnings in Excess of Billings on Uncompleted Contracts and Unearned Revenues

Costs and estimated earnings in excess of billings on uncompleted contracts represent amounts recognized as revenues that have not been
billed. Unearned revenues represent amounts billed and collected for which revenues have not been recognized. Contracts typically provide for the billing of costs incurred and estimated earnings on a
monthly basis or based on contract milestones. We recognize a rate reserve for an anticipated liability resulting from the difference between estimated billing rates and actual rates on certain
contracts with the federal government. This liability will be settled based upon the completion of audits of the actual rates by the applicable federal government audit agency. As of
December 31, 2008 and 2007, respectively, we have total net rate reserves of $4.1 million and $8.0 million.

Retainage
represents amounts that are billed or billable to our customers, but are retained by the customer until completion of the project or as otherwise specified in the contract. As
of December 31, 2008 and 2007, respectively, we have retainage balances of $10.3 million and $5.1 million, of which $7.4 million and $3.2 million are current and are
included in prepaid expense and other current assets in
the consolidated balance sheets. As of December 31, 2008 and 2007, respectively, $2.9 million and $1.9 million of retainage balances that are considered long term and are included
in other noncurrent assets in our consolidated balance sheets.

(e) Inventories

Inventories are stated at the lower of cost or market using the first-in, first-out method. Market is
determined on the basis of estimated realizable values.

(f) Property, Plant and Equipment

Property, plant and equipment are stated at cost. Equipment under capital leases is stated at the present value of minimum lease
payments. Property, plant and equipment acquired through the acquisition of a business are recorded at their estimated fair value at the date of acquisition.

Depreciation
on property, plant and equipment is calculated on the straight-line method over the estimated useful lives of the assets. Estimated useful lives of the assets
are as follows:

YearsBuildings, building improvements and land improvements


5 to 31Computer hardware and software


1 to 7Furniture and fixtures


5 to 7Machinery and equipment


5 to 10Trucks and vehicles


5 to 15


We
capitalize costs associated with the construction of disposal cells such as excavation, liner construction and drainage systems construction, as well as the asset retirement
obligation in accordance with Statement of Financial Accounting Standards ("SFAS") No. 143,Accounting for Asset Retirement Obligations. These
costs are depreciated over the capacity of the individual cells based on a per unit basis as landfill airspace is consumed.

F-10

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Table of Contents

EnergySolutions, Inc.

Notes to Consolidated Financial Statements (Continued)

(2) Summary of Significant Accounting Policies (Continued)

Equipment
held under capital leases and leasehold improvements are amortized on the straight-line method over the shorter of the lease term or estimated useful life of the
asset. Total depreciation and amortization of property, plant and equipment is $18.1 million, $19.1 million and $12.0 million for the years ended December 31, 2008, 2007
and 2006, respectively. Maintenance and repairs that do not extend the lives of the assets are expensed as incurred. We have capitalized $3.3 million of software costs during the year ended
December 31, 2008 relating to an enterprise resource planning software implementation in accordance with Statement of Position 98-1,Accounting for the Costs
of Computer Software Developed or Obtained for Internal Use.We will continue to capitalize costs as incurred related to the software implementation and will begin amortization
upon completion of the project, which is anticipated to occur during 2010.

(g) Impairment of Long-Lived Assets

Long-lived assets such as property, plant and equipment and purchased intangibles subject to amortization are reviewed for
impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of
the carrying amount of an asset to the estimated undiscounted future cash flows expected to be generated by the asset. If the carrying amount of an asset exceeds its estimated future cash flows, an
impairment charge is recognized for the excess of carrying amount over the fair value of the asset, primarily determined based on future discounted cash flows.

(h) Goodwill and Other Intangible Assets

Goodwill represents the excess of cost over the fair value of net assets of businesses acquired. Goodwill acquired in a purchase
business combination and determined to have an
indefinite useful life is not amortized, but instead is tested for impairment annually or when indicators of impairment exist. Intangible assets with estimable useful lives are amortized over their
respective estimated useful lives and reviewed for impairment whenever events or circumstances indicate that the carrying value of such assets may not be recoverable (see Note 6).

Goodwill
is tested at the reporting unit level at least annually for impairment and is reviewed for impairment more frequently if events and circumstances indicate that the asset might
be impaired. SFAS No. 142,Goodwill and Other Intangible Assets,requires a two-step impairment test. In the first step, we determine
the fair value of the reporting unit using a discounted cash flow valuation model and compare the fair value to the reporting unit's carrying value. If the fair value of the reporting unit exceeds its
carrying value, goodwill of the reporting unit is not considered to be impaired and no further testing is required. If the fair value does not exceed the carrying value, the second step of the
goodwill impairment test is performed to measure the amount of impairment loss, if any. In the second step of the goodwill impairment test, the implied fair value of the reporting unit's goodwill is
compared to the carrying value. The implied fair value of the reporting unit's goodwill is determined as if the reporting unit had been acquired in a business combination. If the carrying value of the
reporting unit's goodwill exceeds the implied value, an impairment loss is recognized in an amount equal to the excess.

(i) Facility and Equipment Decontamination and Decommissioning Liabilities

SFAS No. 143,Accounting for Asset Retirement Obligations,addresses financial
accounting and reporting for obligations associated with the retirement of tangible long-lived assets and the related

F-11

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Table of Contents

EnergySolutions, Inc.

Notes to Consolidated Financial Statements (Continued)

(2) Summary of Significant Accounting Policies (Continued)

asset
retirement costs. SFAS No. 143 requires that the fair value of a liability for an asset retirement obligation ("ARO") be capitalized as part of the carrying amount of the
long-lived asset when the obligation arises (typically when the asset is either placed in service or when the asset first becomes contaminated by radioactive materials).

We
are responsible for the costs relating to the final capping, closure, and post-closure monitoring activities of our Clive, Utah landfill, our final capping and closure
activities of our South Carolina landfill and the costs related to the decontamination and decommissioning of our facilities and equipment in Tennessee and at certain customer sites which qualify as
asset retirement obligations under SFAS No. 143. The recorded asset retirement obligation represents an estimate of the present value of the future obligation to be incurred associated with
these activities.

The
cost basis for our landfill assets and related obligation include landfill liner material and installation, excavation for airspace, landfill leachate collection systems,
environmental groundwater and air monitoring equipment, directly related engineering and design costs and other capital infrastructure costs. Also included in the cost basis of our landfill assets and
related obligation are estimates of future costs associated with final landfill capping, closure and post-closure monitoring activities. These costs are described
below:



The
cost basis for our decontamination and decommissioning assets and related obligation include costs to decontaminate, disassemble and dispose of equipment and facilities. We develop
our estimates of these obligations using input from our operations personnel, engineers and accountants. Our estimates are based on our interpretation of current requirements and proposed regulatory
changes and

F-12

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Table of Contents

EnergySolutions, Inc.

Notes to Consolidated Financial Statements (Continued)

(2) Summary of Significant Accounting Policies (Continued)

are
intended to approximate fair value under the provisions of SFAS No. 143. We use historical experience, professional engineering judgment and quoted and actual prices paid for similar work
to determine the fair value of these obligations. We recognize these obligations at market prices whether we plan to contract with third parties or perform the work ourselves.

Costs
for the decontamination and decommissioning of our facilities and equipment will generally be paid upon the closure of these facilities or the disposal of this equipment. We are
obligated under our license granted by the State of South Carolina and the Atlantic Interstate Low-Level Radioactive Waste Compact Implementation Act (the "Atlantic Waste Compact Act") for
costs associated with the ultimate closure of the Barnwell Low-Level Radioactive Waste Disposal Facility in South Carolina and our buildings and equipment located at the Barnwell site
(Barnwell Closure). Under the terms of the Atlantic Waste Compact Act and our license with the State of South Carolina, we are required to maintain a trust fund to cover the Barnwell Closure
obligation, which limits our obligation to the amount of the trust fund.

Pursuant
to the requirements of SFAS No. 143, our cost estimates for final capping, closure and post-closure activities and other decontamination and decommissioning
activities are intended to approximate fair value and are based on our interpretation of the current regulatory requirements and proposed or anticipated regulatory changes. Where applicable, these
cost estimates are based on the amount a third party would charge to perform such activities even when we expect to perform these activities internally. Because final landfill capping, closure and
post-closure obligations and decontamination and decommissioning obligations are measured using present value techniques, changes in the estimated timing of the related activities would
have an effect on these liabilities, related assets and resulting operations.

Additionally,
an estimate of fair value should also include the price that marketplace participants are able to receive for bearing the uncertainties inherent in these cash flows.
However, when using discounted cash flow techniques, reliable estimates of market premiums may not be obtainable. In the nuclear industry, there is generally not a market for selling the
responsibility for final capping, closure and post-closure obligations independent of selling the landfill in its entirety. Accordingly, we do not believe that it is possible to develop a
methodology to reliably estimate a market risk premium. We have excluded any such market risk premium from our determination of expected cash flows for landfill asset retirement obligations.

Changes
in inflation rates or the estimated costs, timing or extent of the required future capping, closure, post-closure and other decontamination and decommissioning
activities typically
result in both: (i) a current adjustment to the recorded liability and asset; and (ii) a change in the liability and asset amounts to be recorded prospectively over the remaining life of
the asset in accordance with our depreciation policy.

(j) Self-Insurance and Recoveries

We have retained a portion of the financial risk related to our employee health insurance plan. The exposure for unpaid claims and
associated expenses, including incurred but not reported losses, generally is estimated by considering pending claims and historical trends and data. The estimated liability associated with settling
unpaid claims is $1.3 million and $2.1 million as of December 31, 2008 and 2007, respectively, and is included in accrued expenses and other current liabilities. Estimated
insurance recoveries related to recorded liabilities are reflected as other current assets or other

F-13

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Table of Contents

EnergySolutions, Inc.

Notes to Consolidated Financial Statements (Continued)

(2) Summary of Significant Accounting Policies (Continued)

long-term
assets when management believes that the receipt of such amounts is probable. As of December 31, 2008 and 2007, we did not have any expected insurance recoveries.

(k) Derivative Financial Instruments

We have entered into derivative contracts to help offset our exposure to movements in interest rates in relation to our variable rate
debt and in foreign currency rates in relation to our US dollar denominated intercompany loan with our United Kingdom subsidiary. See Note 11 for further discussion of derivative financial
instruments.

As
required by SFAS No. 133,Accounting for Derivative Instruments and Hedging Activities,we record all derivatives at fair value
on the balance sheets as either an asset or a liability. We do not meet the hedge criteria for our existing derivatives; therefore, changes in the fair value of our derivatives are included in other
income.

(l) Share-Based Payment

SFAS No. 123(R),Share-Based Payment,establishes standards for the accounting
for transactions in which an entity (i) exchanges its equity instruments for goods or services, or (ii) incurs liabilities in exchange for goods or services that are based on the fair
value of the entity's equity instruments or that may be settled by the issuance of the equity instruments. SFAS No. 123(R) eliminates the ability to account for stock-based compensation using
APB No. 25 and requires that such transactions be recognized as compensation cost in the income statements over the instruments' vesting periods based on the instruments' fair values on the
measurement date, which is generally the date of the grant.

Share-based
compensation expense includes compensation expense for the share-based payments vested during the year, based on the grant date fair value estimated in accordance with the
provisions of SFAS 123(R). In our share-based compensation strategy we utilize a combination of stock options and restricted stock that vest over time based on service. For
time-based stock options and restricted stock, compensation expense is recognized over the vesting period from the vesting commencement date using the straight-line method.

We
use the Black-Scholes valuation model to value any share-based compensation under SFAS No. 123(R). Option valuation methods, including Black-Scholes, require the input of
assumptions including the risk-free interest rate, dividend rate, expected term and volatility rate. See Note 14 for further discussion regarding the assumptions used in our
valuation model.

(m) Revenues and Cost of Revenues

Revenue Recognition

We record revenues when all of the following conditions exist: (i) evidence of an agreement with our customer; (ii) work
has actually been performed; (iii) the amount of revenues is fixed or determinable and (iv) collection from our customer is reasonably assured. Provision for estimated contract losses is
recognized in full in the period in which the losses are identifiable and include all estimated direct costs to complete the contract (excludes future selling, general and administrative costs
expected to be allocated to the contract). Contract claims and change orders are
included in total estimated contract revenues when it is probable that the change order will result in a bona fide addition to contract value and can be reliably estimated. Costs incurred for bidding
and obtaining contracts are expensed as incurred.

F-14

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Table of Contents

EnergySolutions, Inc.

Notes to Consolidated Financial Statements (Continued)

(2) Summary of Significant Accounting Policies (Continued)

Federal and Commercial Contracts for Services

We have contracts to provide engineering and technical support services to the United States federal government and its agencies, the
United Kingdom Nuclear Decommissioning Authority and to commercial companies. Our services are provided under cost-reimbursable award or incentive-fee, fixed-price and
unit-rate contracts. The following describes our policies for these contract types:

Cost-reimbursable award or incentive-fee contractsWe are reimbursed for allowable costs in accordance
with Cost Accounting Standards ("CAS") or contractual provisions. If our costs exceed the contract ceiling or are not allowable under the provisions of the contract or CAS, we may not be able to
obtain reimbursement for such costs. We earn award and incentive fees in addition to cost reimbursements if we meet certain contract provisions, including schedule, budget, and safety milestones.
Monthly assessments are made to measure the amount of revenues earned in accordance with established contract provisions. We receive award and incentive fees on certain contracts, which are accrued
when estimable and collection is reasonably assured.

Fixed-price and unit-rate contractsWe receive a fixed amount of revenues irrespective of the actual costs we
incur. For fixed-price contracts, our revenues are recognized using the proportional performance method of accounting using appropriate output measures, where estimable, or on other measures such as
proportion of costs incurred to total estimated contract costs. For unit-rate contracts, our revenues are recognized as units are completed based on contractual unit rates.

Accounting
for revenues earned under our contracts may require assessments that include an estimate of the amount that has been earned on the contract and are usually based on the
volumes that have been processed or disposed, milestones reached or the time that has elapsed under the contract. Each of our contracts is unique with regard to scope, schedule and delivery
methodology. Accordingly, each contract is reviewed to determine the most reliable measure of completion for revenue recognition purposes. Input measures such as costs incurred to total contract costs
are used only when there are no quantifiable output measures available.

Certain
of our fixed price contracts are for services that are non-linear in nature, require complex, non-repetitive tasks or involve a
non-time-based scope of work. In these contracts, the earnings process is not fulfilled upon the achievement of milestones, but rather over the life of the contract. Evaluation
of the obligations and customer requirements on these contracts does not produce objective, quantifiable output measures that reflect the earnings process for revenue recognition. Therefore, in these
situations, we use a cost-to-cost approach to determine revenues. A cost-to-cost approach accurately reflects our obligations and performance on these
contracts, as well as meeting the customers' expectations of services being performed.
Therefore, we believe that input measures used to measure progress toward completion on certain fixed price projects provide a reasonable surrogate as compared to using output measures.

For
the years ended December 31, 2008, 2007 and 2006, revenues calculated using a cost-to-cost approach were $75.4 million, $68.6 million and
$36.3 million, respectively.

Revisions
to revenues, costs and profit estimates or measurements of the extent of progress toward completion are changes in accounting estimates accounted for in the period of change
(cumulative catch-up method). Contracts typically provide for billings on a monthly basis or based on contract milestones. Costs and estimated earnings in excess of billings on uncompleted
contracts represent

F-15

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Table of Contents

EnergySolutions, Inc.

Notes to Consolidated Financial Statements (Continued)

(2) Summary of Significant Accounting Policies (Continued)

amounts
recognized as revenues that have not yet been billed. Unearned revenues represent amounts billed and collected for which revenues have not yet been recognized.

Change Orders and Requests for Equitable Adjustment ("REAs")

We record contract claims and pending change orders, including REAs, when the work has been performed and collection of revenues is
reasonably assured, which generally is when they are accepted in writing by the customer. The costs to perform the work related to these claims and pending change orders, including REAs, are included
in the financial statements in the period that they are incurred and are included in our estimates of contract profitability.

LP&D Contracts

We generate revenues in our LP&D segment primarily through unit-rate contracts for the shipping, processing and
disposal of radioactive materials. A unit-rate contract is essentially a fixed-price contract with the only variable being units of work performed. These contracts generally provide that
we will process and dispose of substantially all of the low-level radioactive waste generated by our customers for a fixed, pre-negotiated price per cubic foot, depending on
the type of radioactive material being disposed.

(n) Advertising Costs

We expense advertising costs as incurred. Advertising costs are included in selling, general and administrative expenses. For the years
ended December 31, 2008, 2007 and 2006, we incurred $4.2 million, $4.2 million and $4.3 million, respectively, in advertising expenses.

(o) Income Taxes

Prior to our reorganization on November 20, 2007, EnergySolutions, LLC
operated as a limited liability company and was treated as a disregarded entity owned by a partnership for federal income tax purposes. Under applicable regulations, members of a limited liability
company treated as a partnership are responsible for their individual income tax liabilities related to the limited liability company's results of operations. Accordingly, prior to that time we had
not previously provided for federal income taxes related to our results of operations, except to the extent of operations in our subsidiaries that are corporations. Because we previously generated
taxable income, we included in distributions to our member amounts sufficient to facilitate the payment of tax liabilities arising from EnergySolutions,
LLC's income. EnergySolutions, Inc. is a "C" corporation and, as such, we are subject to federal and state corporate income taxes.

We
account for income taxes in accordance with SFAS No. 109,Accounting for Income Taxes, and other, applicable authoritative
pronouncements. Judgment is required in determining our provision for income taxes. In the normal course of business, we may engage in numerous transactions every day for which the ultimate tax
outcome (including the period in which the transaction will ultimately be included in taxable income or deducted as an expense) is uncertain. Additionally, the tax returns we file are subject to audit
and investigation by the Internal Revenue Service, most states in the United States and by various government agencies representing jurisdictions outside the United States.

F-16

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Table of Contents

EnergySolutions, Inc.

Notes to Consolidated Financial Statements (Continued)

(2) Summary of Significant Accounting Policies (Continued)

In
July 2006, the Financial Accounting Standards Board ("FASB") issued FASB Interpretation No. ("FIN") 48,Accounting for Uncertainty in Income
Taxesan interpretation of FASB Statement No. 109, which clarifies the accounting for uncertainty in tax positions. FIN 48 requires that companies
recognize in their financial statements, the impact of a tax position, if that position is more likely than not of being sustained on audit, based on the technical merits of the position. The
provisions of FIN 48 were effective for us on January 1, 2007, with any cumulative effect of change in accounting principle recorded as an adjustment to opening retained earnings. The
adoption of FIN 48 did not have a material effect on our financial condition or results of operations.

(p) New Accounting Pronouncements

Disclosures about Derivative Instruments and Hedging Activities

In March 2008, the FASB issued SFAS No. 161,Disclosures about Derivative Instruments and Hedging
Activities. SFAS No. 161 changes the disclosure requirements for derivative instruments and hedging activities. Entities are required to provide enhanced disclosures
about (a) how and why an entity uses derivative instruments, (b) how derivative instruments and related hedged items are accounted for under SFAS No. 133 and its related
interpretations, and (c) how derivative instruments and related hedged items affect an entity's financial position, financial performance, and cash flows. SFAS No. 161 is effective for
financial statements for fiscal years beginning on or after November 15, 2008, with early adoption encouraged. While SFAS No. 161 will have no impact on our financial condition, results
of operations and cash flows, management is currently evaluating the changes in disclosure requirements.

Business Combinations

In December 2007, the FASB issued SFAS No. 141(R),Business Combinations. SFAS
No. 141(R) replaces SFAS No. 141,Business Combinations, but retains the requirement that the purchase method of accounting for
acquisitions be used for all business combinations. SFAS No. 141(R) expands on the disclosures previously required by SFAS No. 141, better defines the acquirer and the acquisition date
in a business combination, and establishes principles for recognizing and measuring the assets acquired (including goodwill), the liabilities assumed and any noncontrolling interests in the acquired
business. SFAS No. 141(R) also requires an acquirer to record an adjustment to income tax expense for changes in valuation allowances or uncertain tax positions related to acquired businesses.
SFAS No. 141(R) is effective for all business combinations with an acquisition date in the first annual period following December 15, 2008; early adoption is not permitted. We will adopt
this statement as of January 1, 2009. Management is currently evaluating the impact SFAS No. 141(R) will have on our financial condition, results of operations and cash flows; however,
in general, this standard will only impact the accounting for future acquisitions.

Noncontrolling Interest in Consolidated Financial Statements

In December 2007, the FASB issued SFAS No. 160,Noncontrolling Interests in Consolidated Financial
Statementsan amendment of ARB No. 51.SFAS No. 160 requires that noncontrolling (or minority) interests in subsidiaries be reported in the equity
section of a company's balance sheet, rather than in a mezzanine section of the balance sheet between liabilities and equity. SFAS No. 160 also changes the manner in which the net income of a
subsidiary is reported and disclosed in the controlling

F-17

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Table of Contents

EnergySolutions, Inc.

Notes to Consolidated Financial Statements (Continued)

(2) Summary of Significant Accounting Policies (Continued)

company's
income statement. SFAS No. 160 also establishes guidelines for accounting for changes in ownership percentages and for deconsolidation. SFAS No. 160 is effective for financial
statements for fiscal years beginning on or after December 1, 2008 and interim periods within those years. Management is still evaluating the impact of the adoption of SFAS No. 160 on
our consolidated joint ventures but we do not expect it to have a material impact on our financial position, results of operations or cash flows.

Fair Value Measurements

In September 2006, the FASB issued SFAS No. 157,Fair Value Measurements. This
standard clarifies the principle that fair value should be based on the assumptions that market participants would use when pricing an asset or liability. Additionally, it establishes a fair value
hierarchy that prioritizes the information used to develop those assumptions. SFAS No. 157 is effective for financial statements issued for fiscal years beginning after November 14,
2007. In February 2008, the FASB issued FASB Staff Position ("FSP") FAS 157-2,Partial Deferral of the Effective Date of Statement
157, which delays the effective date for all nonfinancial assets and nonfinancial liabilities, except those that are recognized or disclosed at fair value in the financial
statements on a recurring basis. The FSP defers the effective date of SFAS No. 157 to fiscal years beginning after November 15, 2008. We do not expect the provisions of this statement to
have a material impact on our financial condition or results of operations.

(q) Use of Estimates

The preparation of the consolidated financial statements in conformity with accounting principles generally accepted in the United
States of America requires management to make estimates and judgments that affect the reported amounts of assets and liabilities and disclosures of contingencies at the date of the financial
statements and revenues and expenses recognized during the reporting period. Significant estimates and judgments made by management include: (i) proportion of completion on
long-term contracts, (ii) the costs to close and monitor our landfill and D&D facilities and equipment, (iii) recovery of long-lived assets, including goodwill,
(iv) costs for unpaid claims and associated expenses related to employee health insurance, (v) the determination of rate reserve provisions, (vi) provision for a valuation
allowance on deferred tax assets, (vii) contingencies and litigation and (viii) stock price volatility and expected forfeiture rates for stock option valuation. We base our estimates on
historical experience and on various other assumptions that are believed to be reasonable under the circumstances. Actual results could differ significantly from those estimates.

(r) Commitments and Contingencies

Liabilities for loss contingencies, including environmental remediation costs not within the scope of SFAS No. 143 arising from
claims, assessments, litigation, fines and penalties and other sources are recorded when it is probable that a liability has been incurred and the amount of the assessment and/or remediation can be
reasonably estimated. Recoveries for environmental remediation costs from third parties are recorded when agreed upon with a third party.

F-18

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Table of Contents

EnergySolutions, Inc.

Notes to Consolidated Financial Statements (Continued)

(2) Summary of Significant Accounting Policies (Continued)

(s) Reclassifications

Certain amounts for prior periods have been reclassified to conform to the current year presentation. Prior to 2008, we included letter
of credit interest in cost of revenues and selling, general and administrative expenses. During 2008, we reclassified these amounts from operating expenses to interest expense in the accompanying
consolidated statements of operations. Accordingly, gross profit and income from operations were increased by $2.3 million and $2.7 million,
respectively, for the year ended December 31, 2007 as a result of this reclassification. The reclassification had no impact on gross profit or income from operations for the year ended
December 31, 2006. There was no impact on pre-tax income or (loss) or net income for any of these periods as a result of this reclassification.

(t) Income (Loss) Per Share

Following our corporate reorganization, which occurred in connection with the completion of our initial public offering on
November 20, 2007, we began conducting our business through EnergySolutions, Inc., a newly formed corporation and holding company. Basic
net income (loss) per share is computed by dividing net income (loss) by the weighted-average number of common shares outstanding during the period. Diluted net income (loss) per share is computed by
dividing net income by the weighted-average number of common shares outstanding during the period and potentially dilutive common stock equivalents. Potential common stock equivalents that have been
issued by us relate to outstanding stock option awards and are determined using the treasury stock method.

Historical
net income (loss) per share was not presented for the year ended December 31, 2006 since we were structured as a limited liability company, had only one member and
there were no ownership interests that were convertible into common stock or a common stock equivalent.

(u) Unaudited Pro Forma Income (Loss) Per Share

The unaudited pro forma net income (loss) per share reflects the effects related to our reorganization from a limited liability company
to a "C" corporation, the issuance of our common stock in connection with our initial public offering and an assumed effective tax rate of 38%.

F-19

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Table of Contents

EnergySolutions, Inc.

Notes to Consolidated Financial Statements (Continued)

(3) Acquisitions

On December 21, 2007, we acquired all of the issued and outstanding shares of common stock of Monserco for approximately $2.9 million in cash, including transaction costs.
Monserco is a commercial supplier of radiation services in Canada, providing radioactive waste management and radiological services involving the use of radioactive materials. Goodwill recognized for
this acquisition as of December 31, 2008 was $2.6 million and was assigned to the LP&D segment. The results of operations for Monserco are included in our results of operations
from December 21, 2007.

On
July 9, 2007, we acquired all of the issued and outstanding shares of common stock of NUKEM for approximately $5.5 million in cash, including transaction costs. NUKEM is
a nuclear services company that provides technology-based solutions to the nuclear industry in North America, Spain and South Korea. Goodwill recognized for this acquisition as of December 31,
2008 was $1.1 million and was assigned to the CS segment. The results of operations for NUKEM are included in our results of operations from July 9, 2007.

On
June 26, 2007, we acquired all of the issued and outstanding shares of common stock of RSMC for approximately $184.8 million in cash, including transaction costs of
$1.9 million. RSMC, through its subsidiaries Magnox North Limited and Magnox South Limited, holds the contracts and licenses to operate and decommission 10 nuclear sites with 22 reactors in the
UK on behalf of the NDA, the government body responsible for the clean up and decommissioning of the UK nuclear sites. A significant portion of our workforce in the United Kingdom is unionized, and we
have annual agreements that cover most of the RSMC employees, which are negotiated in conjunction with the NDA. We recognized customer relationship intangible assets of approximately
$109.9 million and goodwill of approximately $53.4 million as of December 31, 2008. Intangible assets will be amortized over their estimated weighted average useful lives of
12 years. These intangible assets and goodwill were assigned to the International segment. The results of operations for RSMC are included in our results of operations from June 26,
2007.

On
January 17, 2007, we acquired all of the issued and outstanding shares of common stock of Parallax for approximately $15.3 million in cash, including transaction costs.
Parallax is a nuclear services firm, based in Maryland, with approximately 150 employees and offices in New Mexico, Ohio, Tennessee, Nevada and South Carolina. The acquisition includes Parallax's 49%
equity interest in LATA/Parallax Portsmouth, LLC, a New Mexico limited liability company. Goodwill recognized for this acquisition as of December 31, 2008 was $12.2 million and
was assigned to the FS segment. The results of operations for Parallax are included in our results of operations from January 17, 2007.

We
acquired these companies to achieve our objective to become a leading provider of specialized, technology-based nuclear services worldwide by capitalizing on significant
near- and long-term growth opportunities in the nuclear services industry. We paid a premium (i.e., goodwill) over the fair value of the net tangible and identified
intangible assets acquired for these acquisitions because each entity contributed toward the achievement of our objective. All acquisitions were accounted for using the purchase method of accounting
as required by SFAS No. 141,Business Combinations. The purchase method of accounting requires the allocation of the aggregate purchase price to
the assets acquired and liabilities assumed based upon their respective fair values. The results of operations for the companies are included in our results of operations from the dates of their
respective acquisitions forward.

The
determination of the final purchase price is subject to potential adjustments related to income taxes in accordance with the Emerging Issues Task Force Issue
No. 93-7,Uncertainties Related to Income

F-20

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Table of Contents

EnergySolutions, Inc.

Notes to Consolidated Financial Statements (Continued)

(3) Acquisitions (Continued)

Taxes in a Purchase Business Combination, which could impact the purchase price allocations discussed in the aforementioned paragraphs.

The
acquisition of RSMC was deemed to be material. The following table summarizes the fair value of the assets acquired and liabilities assumed and related deferred income taxes as of
the acquisition date.

RSMC(in thousands
of dollars)Assets acquired:Cash and cash equivalents

$
8,567Restricted cash, current


3,998Accounts receivable, net of allowance for doubtful accounts


292,940Prepaid expenses and other current assets


16,284Goodwill


48,937Other intangible assets


109,934Other assets


65,760Total assets acquired


546,420Liabilities assumed:Accounts payable


103,288Accrued expenses and other current liabilities


163,870Pension liability


62,762Deferred income taxes


31,681Total liabilities assumed


361,601Net assets acquired

$
184,819


The
following unaudited pro forma consolidated results of operations include the results of RSMC for the year ended December 31, 2007, assuming that the acquisition was completed
on January 1, 2007. The results of Parallax, Nukem and Monserco prior to the date of acquisition are not material.

2007(in thousands
of dollars)Revenues

$
1,804,626Net income


13,004Unaudited pro forma net income per share:Basic

$
1.15Diluted


1.11


The
pro forma data may not be indicative of the results that would have been obtained had these events actually occurred at the beginning of the period presented, nor does it intend to
be a projection of future results.

F-21

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Table of Contents

EnergySolutions, Inc.

Notes to Consolidated Financial Statements (Continued)

(4) Inventories

Inventories consist of the following as of December 31, 2008 and 2007:

December 31,
2008

December 31,
2007(in thousands of dollars)Parts and supplies

$
517

$
892Work in process


3,050


2,904Finished goods


7,651


7,055$
11,218

$
10,851


(5) Property, Plant and Equipment

Property, plant and equipment consist of the following as of December 31, 2008 and 2007:

December 31,
2008

December 31,
2007(in thousands of dollars)Land and land improvements

$
25,319

$
24,899Buildings and improvements


31,293


30,659Computer hardware and software


9,672


5,080Landfill


28,261


30,451Furniture and fixtures


3,960


3,853Machinery and equipment


61,942


51,030Trucks and vehicles


7,452


6,553Leasehold improvements


4,230


1,686Capital leases


4,913


4,957Construction in progress


10,520


8,235187,562


167,403Less accumulated depreciation and amortization


73,541


56,715$
114,021

$
110,688


(6) Goodwill and Other Intangible Assets

As of December 31, 2007, we had recorded $526.0 million of goodwill related to the acquisitions of Envirocare, Scientech, Duratek, BNGA, Safeguard, Parallax, RSMC, Nukem
and Monserco. During 2008, we recorded additional goodwill of $2.3 million related to certain income tax uncertainties in connection with the purchased entities. This goodwill was tested for
impairment as of March 31, 2008 and we concluded that no impairment had occurred. Due to possible indicators of impairment related to the decline in the overall global economic environment, we
performed an interim impairment test as of December 31, 2008 and concluded the fair value of each reporting unit exceeded its carrying value; thus, no impairment was recognized.

Other
intangible assets subject to amortization consist principally of amounts assigned to permits, customer relationships, non-compete agreements and technology. We do not
have intangible assets that

F-22

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Table of Contents

EnergySolutions, Inc.

Notes to Consolidated Financial Statements (Continued)

(6) Goodwill and Other Intangible Assets (Continued)

are
not subject to amortization. Other intangible assets as of December 31, 2008 and 2007 consist of the following:

As of December 31, 2008

As of December 31, 2007Useful
Life in
Years

Gross
Carrying
Amount

Accumulated
Amortization

Net Book
Value

Gross
Carrying
Amount

Accumulated
Amortization

Net Book
Value(in thousands of dollars)Permits


20 to 25

$
239,059

$
(36,995
)
$
202,064

$
238,200

$
(27,159
)
$
211,041Customer relationships and non-compete agreements


1 to 12


183,466


(38,979
)

144,487


183,466


(22,006
)

161,460Technology


9 to 10


14,479


(3,930
)

10,549


13,800


(2,489
)

11,311$
437,004

$
(79,904
)
$
357,100

$
435,466

$
(51,654
)
$
383,812


Aggregate amortization expense for amortizing intangible assets was $28.3 million, $24.1 million and $16.6 million for the
years ended December 31, 2008, 2007 and 2006, respectively. Estimated annual amortization expense for each of the next five years is as follows:

2009

2010

2011

2012

2013(in thousands of dollars)Estimated annual amortization expense

$
27,814

$
27,649

$
27,629

$
27,628

$
27,471


(7) Senior Credit Facilities

On June 7, 2006, we entered into a five-year, $75.0 million revolving credit facility, seven-year, $770.0 million term loan facilities and a
seven-year, $25.0 million synthetic letter of credit facility. The revolving credit facility includes a sublimit of $60.0 million for letters of credit, of which
$19.7 million were issued as of December 31, 2008. The credit agreements governing these facilities were amended on February 9, 2007 to increase the size of the synthetic letter
of credit facility from $25.0 million to $100.0 million, of which $100.0 million was issued as of December 31, 2008.

On
June 26, 2007, in conjunction with the RSMC acquisition, we entered into a second lien agreement on the term credit facility in the aggregate principal amount of
$200.0 million, which was repaid in November 2007 using the proceeds of our initial public offering. Accordingly, we wrote off the unamortized debt financing fees related to the second lien
term loan of $4.2 million during the fourth quarter of 2007.

Borrowings
under the credit facilities bear interest at a base rate (the greater of the Prime Rate or 0.5% higher than the Federal Funds Rate) plus an applicable margin or, at our
option, the London Interbank Offered Rates ("LIBOR"), adjusted for the Eurodollar reserve percentage, plus an applicable margin. The applicable margin for base rate and LIBOR loans is 2.25%. As of
December 31, 2008 and 2007, the interest rate of borrowings under the term loan facility was 4.14% and 7.1%, respectively.

According
to the terms of the credit agreements, at the end of each calendar quarter, we are required to repay the term loans in an amount equal to the product of the outstanding
principal balance on September 30, 2006 multiplied by 0.25%, adjusted for optional prepayments made. The outstanding balance on September 30, 2006 was $763.1 million. In addition
to the scheduled repayments outlined above, we may be required to make mandatory quarterly repayments, to be applied to the principal balance of the term loan, the amounts of which are dependent on
our excess

F-23

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Table of Contents

EnergySolutions, Inc.

Notes to Consolidated Financial Statements (Continued)

(7) Senior Credit Facilities (Continued)

cash
flow for the quarter and our leverage ratio as defined in the credit agreements. As of December 31, 2008, we have mandatory principal repayments based on our excess cash flow and scheduled
repayments of $3.0 million due within the next 12 months. The outstanding principal of the seven-year term loans must be repaid by June 7, 2013.

The
credit facilities require us to maintain certain financial ratios, including maximum leverage ratios (based upon the ratios of consolidated funded debt, first lien indebtedness to
consolidated operating cash flow) and a minimum cash interest coverage ratio (based upon the ratio of consolidated operating cash flow to consolidated cash interest expense), which are tested
quarterly. Based on the formulas set forth in the credit agreements as December 31, 2008, we are required to maintain a maximum leverage ratio and a first lien leverage ratio of 4.50 and 4.00,
respectively, and minimum cash interest coverage ratio of 2.50. Failure to comply with these financial ratio covenants would result in a default under our credit facilities and, absent a waiver or an
amendment from the lenders, preclude us from making further borrowings under our credit facilities and permit the lenders to accelerate all outstanding borrowings under the credit facilities. As of
December 31, 2008, our total leverage, first lien leverage and interest coverage ratios were 3.20, 3.20 and 4.30, respectively. The credit agreements also contain annual capital expenditure
limitations. For fiscal years 2008 and 2007, the credit agreements required us to limit capital expenditures to $45.0 million and $30.0 million, respectively. Capital expenditures for
the years ended December 31, 2008 and 2007 were $26.6 million and $13.3 million, respectively. As of December 31, 2008, we were in compliance with all of the covenants
under our credit agreements.

The
obligations under the credit facilities are secured by substantially all of our assets and guaranteed by each of our existing and subsequently acquired or organized domestic
subsidiaries.

During
the years ended December 31, 2008 and 2007, we made principal repayments totaling $40.2 million and $354.2 million, respectively, on the outstanding term
loans. Subsequent to December 31, 2008, we made an optional prepayment of $10.0 million. During the years ended December 31, 2008, 2007 and 2006, we made cash interest payments of
$41.3 million, $68.9 million and $64.2 million, respectively.

The
following table summarizes the aggregate maturities of our long-term debt as of December 31, 2008 (in thousands of dollars):

Year ending December 31,2009

$
2,9542010


5,9492011


5,9492012


5,9492013


545,956$
566,757


Amendment Agreements

On December 11, 2007, we, through our subsidiary ZionSolutions, entered into an agreement with Exelon (the "Zion Agreement") to
dismantle Exelon's Zion nuclear facility located in Zion, Illinois ("Zion Station"), which ceased operation in 1998.

F-24

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Table of Contents

EnergySolutions, Inc.

Notes to Consolidated Financial Statements (Continued)

(7) Senior Credit Facilities (Continued)

Upon
completion of the transaction, Exelon has agreed to transfer to ZionSolutions substantially all of the assets (other than land) associated with Zion Station, including assets held
in nuclear decommissioning trusts. In consideration for Exelon's transfer of those assets, ZionSolutions has agreed to assume decommissioning and other liabilities associated with the Zion Station.
ZionSolutions also agreed to take possession and control of the land associated with the Zion Station pursuant to a lease agreement to be executed at the closing. ZionSolutions will be obligated to
complete the required decommissioning work according to an established schedule and to construct a dry cask storage facility on the land for spent nuclear fuel currently held in spent fuel pools at
the Zion Station.

The
parties agreed to enter into various other agreements to ensure the performance of the obligations of ZionSolutions under its contracts to complete the required decommissioning and
other work. In particular, we have agreed to execute a Credit Support Agreement pursuant to which we will deliver a letter of credit in the face amount of $200.0 million, which will be held by
Exelon. The occurrence of specified events of default would allow Exelon to draw upon the letter of credit.

In
anticipation of the closing of this transaction, on July 16, 2008, we and our subsidiary, Duratek, entered into Amendment Agreements with our lenders under the current credit
facilities. The Amendment Agreements provide that the existing credit agreements shall be amended and restated in their entirety upon satisfaction of certain conditions including the closing of the
transaction with Exelon.

The
amended and restated credit facilities were sought (a) to allow us to provide for a new letter of credit facility in the aggregate principal amount of $200.0 million
(the "Zion letter of credit facility") pursuant to the Zion Agreement and (b) to return the existing synthetic letters of credit facility deposits and make term letter of credit facility loans
in the aggregate principal amount of $100.0 million for which we have agreed to maintain restricted cash equal to the amount of the facility. The new term letter of credit facility and the
restricted cash amount will be reflected on our consolidated balance sheet.

The
Amendment Agreements provide that the amended and restated credit facilities will include letter of credit fees of 2.50% with respect to letters of credit issued under each of the
revolving loan facility and the Zion letter of credit facility. In addition, the Amendment Agreements provide that the amended and restated credit facilities will provide for interest rates on loans
as follows: (i) with respect to any term loan, (x) LIBOR plus 2.50% (or LIBOR plus 2.00% when the leverage ratio is less than 2.0 to 1.0) or (y) the base rate plus 1.25% (or the
base rate plus 1.00% when the leverage ratio is less than 2.0 to 1.0), (ii) with respect to any revolving loan, (x) LIBOR plus 2.50% or (y) the base rate plus 1.25%, and
(iii) with respect to any term letter of credit facility loan, LIBOR plus 2.50% (or LIBOR plus 2.00% when the leverage ratio is less than 2.0 to 1.0).

The
Amendment Agreements provide that the amended and restated credit facilities are subject to the satisfaction of certain conditions precedent to closing, including those related to
approval for the transactions contemplated by the Zion Agreement. During the year ended December 31, 2008, we have paid fees of approximately $6.4 million to the lenders to obtain the
Amendment Agreements, which are being amortized over the remaining term of the credit facilities. In addition, once we have closed the Zion agreement and the Zion letter of credit is issued, we
anticipate paying the providers of the Zion letter of credit facility approximately $7.5 million, which will be amortized over one year, which is the term of the Zion letter of credit facility.

F-25

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Table of Contents

EnergySolutions, Inc.

Notes to Consolidated Financial Statements (Continued)

(8) Accrued Expenses and Other Current Liabilities

Accrued expenses and other current liabilities consist of the following as of December 31, 2008 and 2007:

December 31,
2008

December 31,
2007(in thousands of dollars)Accrued project costs

$
89,377

$
99,957Salaries and related expenses


44,918


35,165VAT and other sales taxes payable


1,219


32,528Vendor payables not yet invoiced


6,284


20,950Due to State of South Carolina


7,951


17,044Waste taxes and fees payable


4,378


6,990Transportation and demurrage


4,409


5,792Other accrued expenses


12,534


15,162$
171,070

$
233,588


(9) Facility and Equipment Decontamination and Decommissioning

Our facility and equipment decontamination and decommissioning liabilities consist of the following as of December 31, 2008 and 2007:

December 31, 2008

December 31, 2007(in thousands of dollars)Facilities and equipment AROClive, UT

$
24,134

$
26,102Facilities and equipment AROother


22,716


22,123Total facilities and equipment ARO


46,850


48,225Barnwell Closure


19,054


21,318$
65,904

$
69,543


Our
ARO obligation is based on a cost estimate for a third-party to perform the D&D work. In accordance with SFAS No. 143, this estimate is inflated, using an inflation rate, to
the expected time at which the D&D activity will occur, and then discounted back, using a discount rate, to the present value. The inflation rate and credit-adjusted risk-free discount
rate used to calculate the ARO estimate is as follows:

Inflation
Rate

Credit-Adjusted
Risk-Free
Discount RateDecember 31, 2008


4.26
%

4.57% - 8.82
%December 31, 2007


2.29
%

4.57% - 8.82
%


F-26

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Table of Contents

EnergySolutions, Inc.

Notes to Consolidated Financial Statements (Continued)

(9) Facility and Equipment Decontamination and Decommissioning (Continued)

Subsequent
to the initial measurement of the ARO, the ARO is adjusted at the end of each period to reflect the passage of time and changes in the estimated future cash flows underlying
the obligations. The following is a reconciliation of our facility and equipment ARO for 2008 and 2007:

2008

2007(in thousands
of dollars)Beginning balance

$
48,225

$
61,942Balance acquired from acquisitions





1,729Accretion expense


1,608


1,390Liabilities incurred during the year


299


1,305Liabilities settled during the year


(155
)

ARO estimate adjustments


(3,127
)

(18,141
)Balance at December 31

$
46,850

$
48,225


The
$3.1 million decrease in the 2008 ARO estimate is primarily due to an update of industry specific labor rates. The $18.1 million decrease in the 2007 ARO estimate is
primarily due to an increase in the estimated useful life for the Clive landfill partially offset by a reduction in the estimated disposal cost for contaminated waste.

We
are required to deposit cash relating to our D&D obligation in the form of a restricted cash account, a deposit in escrow or in a trust fund. Restricted cash and decontamination and
decommissioning deposits consists principally of: (i) funds held in trust for completion of various site clean-up projects and (ii) funds deposited in connection with
landfill closure, post-closure and remediation obligations relating to our Clive, Utah facility. Accordingly, we have noncurrent restricted cash of $2.1 million and $461,000 as of
December 31, 2008 and 2007, respectively, included in restricted cash and decontamination and decommissioning deposits in the accompanying balance sheets. In addition, we have purchased
insurance policies to fund our obligation to clean and remediate our Tennessee facilities and equipment. One of these policies requires us to place a cash deposit in escrow. The cash deposit in escrow
was $10.6 million and $8.8 million as of December 31, 2008 and 2007, respectively. We are also required to maintain a trust fund to cover the closure obligation for the Barnwell,
South Carolina facility. The trust fund balance as of December 31,
2008 and 2007 was $19.1 million and $21.3 million, respectively, included in restricted cash and decontamination and decommissioning deposits in the accompanying balance sheets.

Although
we are required to provide assurance to satisfy some of our D&D obligations in the form of insurance policies, restricted cash accounts, escrows or trust funds, these assurance
mechanisms do not affect the amount of our D&D liabilities as calculated under SFAS No. 143 because they do not extinguish our D&D liabilities.

(10) Minority Interests

Effective November 1, 2007, we obtained majority voting rights for one of our minority-owned joint ventures. Accordingly, we have reported its operations in our consolidated
financial statements from November 1, 2007. Additionally, effective March 14, 2008, we obtained majority voting rights for another one of our minority-owned joint ventures. Accordingly,
we have reported its operations in our consolidated financial statements from March 14, 2008. We record minority interest income which

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Table of Contents

EnergySolutions, Inc.

Notes to Consolidated Financial Statements (Continued)

(10) Minority Interests (Continued)

reflects
the portion of the earnings of operations which are applicable to other minority interest partners. Cash payments, representing the distributions of the investors' share of cash generated by
operations are recorded as a reduction in minority interests. Minority interest earnings included in our net income was $1.3 million for the year ended December 31, 2008. Minority
interest earnings included in our net loss was $92,000 for the year ended December 31, 2007. Distributions to minority interest shareholders were $850,000 for the year ended December 31,
2008.

(11) Derivative Financial Instruments

In accordance with the terms of our credit facilities, we entered into an interest rate swap agreement with an effective date of July 1, 2005, to partially mitigate our exposure
to fluctuations in interest rates relating to our outstanding variable rate debt. This interest rate swap agreement is not designated as an accounting hedge. The contract's notional amount was
$588.0 million at inception and declined each quarter over the life of the contract in proportion to our reduction in the outstanding balance of the related long-term debt under the
original credit agreement and, subsequently, the existing senior credit facilities. The contract terminated on October 1, 2008.

On
December 18, 2008, we entered into a new interest rate swap agreement with a notional amount of $200.0 million. The fair value of the contract was a liability of
$261,000 as of December 31, 2008, which is included in other noncurrent liabilities in the accompanying balance sheets. The fair value of the expired contract was a liability of $600,000 as of
December 31, 2007, which is included in other current liabilities in the accompanying balance sheets. We realized losses related to the expired contract in the amount of $2.8 million
during the year ended December 31, 2008. Realized and unrealized gains and losses resulting from adjustments to the fair value of the contracts are included in other income (expenses), net, and
resulted in a net loss of $2.5 million, $741,000 and a net gain of $644,000 for the years ended December 31, 2008, 2007 and 2006, respectively. We do not use interest rate derivatives
for trading or speculative purposes.

We
have foreign currency exposure related to our operations in the United Kingdom as well as other foreign locations. During the years ended December 31, 2008 and 2007, we
recognized losses of $16.1 million and gains of $840,000, respectively, in other income (expenses) net, in the accompanying consolidated statements of operations. We had no foreign currency
gains or losses for the year ended December 31, 2006. We have entered into derivative contracts to help offset our exposure to movements in foreign currency rates in relation to our US dollar
denominated intercompany loan with our United Kingdom subsidiary. This foreign currency derivative contract is not designated as an accounting hedge. As of December 31, 2008, the fair value of
the derivative was a liability of $521,000, which is included in other current liabilities in the accompanying balance sheets. We realized net gains of $8.1 million related to our foreign
currency derivative contracts for the year ended December 31, 2008. Realized and unrealized gains and losses resulting from adjustments to the fair value of the contracts are included in other
income (expenses), net and resulted in a net gain of $7.5 million and a net loss of $447,000 for
the years ended December 31, 2008 and 2007, respectively. We had no foreign currency derivative contracts for the year ended December 31, 2006.

(12) Fair Value Measurements

In September 2006, the FASB issued SFAS No. 157,Fair Value Measurements. This standard clarifies the principle that fair value
should be based on the assumptions that market participants would

F-28

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Table of Contents

EnergySolutions, Inc.

Notes to Consolidated Financial Statements (Continued)

(12) Fair Value Measurements (Continued)

use
when pricing an asset or liability. Additionally, it establishes a fair value hierarchy that prioritizes the information used to develop those assumptions. Level 1 inputs are quoted prices
(unadjusted) in active markets for identical assets or liabilities that a company has the ability to access at the measurement date. Level 2 inputs are inputs other than quoted prices included
within Level 1 that are observable for the asset or liability, either directly or indirectly. Level 3 inputs are unobservable inputs for the asset or liability. SFAS No. 157 is
effective for financial statements issued for fiscal years beginning after November 14, 2007. In February 2008, the FASB issued FASB Staff Position ("FSP") FAS 157-2, Partial Deferral of the Effective Date of
Statement 157, which delays the effective date for all nonfinancial assets and nonfinancial liabilities,
except those that are recognized or disclosed at fair value in the financial statements on a recurring basis. The FSP defers the effective date of SFAS No. 157 to fiscal years beginning after
November 15, 2008. In accordance with this staff position, we adopted the provisions of SFAS No. 157 that became effective at the beginning of fiscal year 2008 with respect to financial
assets and liabilities, which did not have an impact on our financial position, results of operations or cash flows. We will adopt the provisions of SFAS No. 157 for non-financial
assets and liabilities in the first quarter of 2009, which is not expected to have a material impact on our financial position, results of operations or cash flows.

The
carrying value of accounts receivable, inventories, prepaid assets, accounts payable, accrued expenses and unearned revenues approximate their fair value principally because of the
short-term nature of these assets and liabilities. As of December 31, 2008 and 2007 we had outstanding term loans of $566.8 million and $607.0 million with fair values
of approximately $430.7 million and $588.0 million, respectively.

As
of December 31, 2008, we had no assets or liabilities considered to be Level 1 or Level 3. The following table discloses the Level 2 fair value of our
interest rate and foreign currency derivative contracts outstanding at December 31, 2008 that are included in accrued expenses and other current liabilities and other noncurrent liabilities in
the accompanying balance sheets:

December 31, 2008(in thousands
of dollars)LiabilitiesFair value of derivative contractsshort term

$
521Fair value of derivative contractslong term


261


F-29

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Table of Contents

EnergySolutions, Inc.

Notes to Consolidated Financial Statements (Continued)

(13) Income (Loss) Per Share

The following table sets forth the calculations of basic and diluted net income (loss) per share:

2008
Historical

2007
Historical

2007
Unaudited
Pro forma(1)

2006
Unaudited
Pro forma(1)(in thousands of dollars, except per share information)Basic:Net income (loss)

$
45,181

$
(8,899
)
$
1,465

$
15,203Weighted average common shares


88,303,779


11,274,422


76,747,573


75,150,000Basic net income (loss) per share

$
0.51

$
(0.79
)
$
0.02

$
0.20Diluted:Net income (loss)

$
45,181

$
(8,899
)
$
1,465

$
15,203Weighted average common shares


88,303,779


11,274,422


76,747,573


75,150,000Potential common stock fromrestricted shares and stock options


7,452





408,376


Weighted average common sharesdiluted


88,311,231


11,274,422


77,155,949


75,150,000Diluted net income (loss) per share

$
0.51

$
(0.79
)
$
0.02

$
0.20


---

For the years ended December 31, 2008 and 2007, respectively, there were 5.6 million and 5.7 million potentially dilutive
securities excluded from the diluted net income (loss) per share calculation as they were anti-dilutive.

(14) Equity-Based Compensation

Profit Interests

In prior years, certain members of our management were granted profit interest units in ENV Holdings in consideration for services
rendered during the vesting period. These units do not represent ownership in ENV Holdings but rather these units entitle the holders to distributions from ENV Holdings if a distribution is paid.
There were several classes of units granted and each successive class carries a lower priority on distributions. Certain units vest immediately upon grant and others vest over periods up to three
years. We estimated the fair value at grant date of the units issued using both a market and an income approach and recorded compensation expense of $648,000, $2.7 million and
$21.4 million for the years ended December 31, 2008, 2007 and 2006,
respectively, which represents the portion of the fair value of these units that vested in those periods. At December 31, 2008 there was unrecognized compensation expense related to profit
interests of $308,000 which will be recognized in 2009.

F-30

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Table of Contents

EnergySolutions, Inc.

Notes to Consolidated Financial Statements (Continued)

(14) Equity-Based Compensation (Continued)

Stock Options

In connection with our initial public offering, we adopted the
EnergySolutions, Inc. 2007 Equity Incentive Plan (the "Plan"). The Plan authorizes our Board of Directors to grant stock options to directors,
officers, employees and consultants. The aggregate number of shares of common stock that may be issued pursuant to awards granted under the Plan is 10,440,000. We recorded non-cash
compensation expense related to our stock option plan of $9.1 million and $1.6 million during the year ended December 31, 2008 and 2007, respectively. At December 31, 2008,
there were 4,774,411 shares available for future issuance under our stock option plan.

The
fair value of each option award is estimated on the date of grant using the Black-Scholes option pricing model. The key assumptions used in the Black-Scholes model for options
granted during 2008 and 2007 were as follows:

2008

2007Expected life of option (years)


3.75


2.5 to 3.75Risk-free interest rate


2.0% to 3.1
%

3.8% to 3.9
%Expected volatility


35
%

35
%Expected dividend yield


0.40% to 1.00
%

0.43
%


The
expected life of the options represents the period of time that the options granted are expected to be outstanding. We are currently using the simplified method to calculate expected
holding periods as provided for under the SEC Staff Accounting Bulletin No. 107, which is based on the average of the 5-year term of the options and the weighted-average graded
vesting period. The risk-free rate is based on the U.S. Treasury rate for the expected life at the time of grant. Expected volatility is based on the average long-term implied
volatilities of peer companies as we have limited trading history beginning November 15, 2007 to present. Also, our expected forfeiture rate is based on rates experienced by peer companies as
we have limited historical experience and represents management's best estimate of forfeiture rates that we expect to occur.

F-31

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Table of Contents

EnergySolutions, Inc.

Notes to Consolidated Financial Statements (Continued)

(14) Equity-Based Compensation (Continued)

A
summary of stock option activity for the years ended December 31, 2008 and 2007 is presented below:

Options

Weighted
average
excercise price

Weighted
average
remaining
life (years)

Aggregate
intrinsic
value(in thousands of dollars)Outstanding, December 31, 2006




$





$
Granted


5,727,560


23.00


4.9


22,853Exercised











Forfeited or expired











Outstanding, December 31, 2007


5,727,560


23.00


4.9


22,853Granted


191,300


22.21


4.3


Exercised











Forfeited or expired


293,430


22.78


3.9


Outstanding, December 31, 2008


5,625,430

$
22.34


3.9

$
Options vested and expected to vest, December 31, 2008


5,326,974

$
22.34


3.9

$
Options exercisable, December 31, 2008


1,432,773

$
23.00


3.9

$



As
of December 31, 2008, we had $26.6 million of unrecognized compensation expense related to outstanding stock options, which will be recognized over a weighted-average
period of 2.9 years. The weighted average grant date fair value of options granted during 2008 and 2007 was $6.42 and $7.09, respectively. No options were exercised during 2008 or 2007.

Other Stock-Based Compensation

A summary of non-vested restricted stock activity for the years ended December 31, 2008 and 2007 is presented below:

Shares

Weighted average
grant-date
fair valueNon-vested shares, December 31, 2006




$
Granted


6,522


23.00Vested





Forfeited





Non-vested shares, December 31, 2007


6,522


23.00Granted


33,637


6.47Vested


2,174


23.00Forfeited





Non-vested shares, December 31, 2008


37,985

$
9.15


F-32

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Table of Contents

EnergySolutions, Inc.

Notes to Consolidated Financial Statements (Continued)

(14) Equity-Based Compensation (Continued)

As
of December 31, 2008, there was $0.3 million of unrecognized compensation cost related to non-vested restricted stock which is expected to be recognized over
a weighted-average period of 2.5 years.

(15) Income Taxes

Prior to the completion of our initial public offering on November 20, 2007, our operations consisted of both an LLC, which is not taxed as a separate entity, and corporate
subsidiaries, that are subject to taxation under the provisions of the Internal Revenue Code. Concurrent with the completion of our initial public offering, we began doing business as
EnergySolutions, Inc., a taxable corporate entity. Income taxes for the year ended December 31, 2008 and 2007 consist of the following:

For the Year Ended December 31,2008

2007

2006(in thousands of dollars)Current:Federal

$
11,499

$
(1,110
)
$
(2,603
)State


2,748


(163
)

385Foreign


15,590


3,934


29,837


2,661


(2,218
)DeferredFederal


1,310


8,826


381State


(933
)

1,114


(505
)Foreign


(9,116
)

(1,283
)

(8,739
)

8,657


(124
)$
21,098

$
11,318

$
(2,342
)


Income
taxes are reconciled to the amount computed by applying the statutory federal income tax rate of 35% to income before income taxes as follows:

2008

2007

2006(in thousands of dollars)Federal income taxes at statutory rate

$
23,198

$
847

$
11,236State income taxes, net of federal tax benefit


1,180


618


(120
)UK research and development credit


(4,987
)




Foreign tax rate differential


(892
)




Excess compensation


2,134





Non-taxable entities





(289
)

(13,724
)Change in valuation allowance


196


768


467Change in taxable status of LLC





9,942


Other


269


(568
)

(201
)$
21,098

$
11,318

$
(2,342
)


F-33

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Table of Contents

EnergySolutions, Inc.

Notes to Consolidated Financial Statements (Continued)

(15) Income Taxes (Continued)

The
significant components of our deferred tax assets and liabilities as of December 31, 2008 and 2007 consist of the following:

December 31, 2008

December 31, 2007(in thousands of dollars)Deferred tax assetscurrent:Accrued compensation

$
3,600

$
2,548Accrued rate and contract reserves





3,222Inventory capitalized costs


220


192Accrued expenses


8,224


4,513Allowance for bad debt


536


212Net operating loss carryforwards


226


352Other


287


492Deferred tax assetscurrent


13,093


11,531Valuation allowance


(464
)

(991
)Deferred tax assetscurrent, net of valuation allowance


12,629


10,540Deferred tax liabilitiescurrent:Prepaid expenses


(4,549
)

(3,696
)Deferred revenue


(10,147
)

(8,246
)Net deferred tax liabilitiescurrent

$
(2,067
)
$
(1,402
)Deferred tax assetsnoncurrent:Asset retirement obligations

$
11,746

$
11,215Accrued rate and contract reserves


1,646


Stock compensation


3,465


AMT credit carryover


444


Operating rights


1,261


1,271Net operating loss carryforwards


17,825


11,018Other


2,763


685Deferred tax assetsnon current


39,150


24,189Valuation allowance


(1,743
)

(1,020
)Deferred tax assetsnoncurrent, net of valuation allowance


37,407


23,169Deferred tax liabilitiesnoncurrent:Plant, equipment and intangible assets principally due to differences in depreciation and amortization


(76,028
)

(74,075
)Acquisition costs





(814
)Partnership investments


(1,008
)

(10
)Reclamation


(1,707
)

(1,774
)Other


(49
)

Net deferred tax liabilitiesnoncurrent

$
(41,385
)
$
(53,504
)Total deferred tax assets

$
50,036

$
33,709Total deferred tax liabilities

$
93,488

$
88,615


F-34

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Table of Contents

EnergySolutions, Inc.

Notes to Consolidated Financial Statements (Continued)

(15) Income Taxes (Continued)

At December 31, 2008, net operating loss carryforwards were $46.2 million, including $17.8 million related to our UK operations and $0.6 million related to
our Canadian operations. The net operating loss carryforwards expire at various dates through 2027.

Under
the Tax Reform Act of 1986, our ability to use our federal and state net operating loss carryforwards and federal and state credit carryforwards to reduce future taxable income and
future taxes, respectively, is subject to restrictions attributable to equity transactions that have resulted in a
change of ownership as defined in Internal Revenue Code Section 382. As a result, net operating loss carryforwards of $5.4 million as of December 31, 2008 are restricted under
Section 382.

Further,
as a result of our various affiliated companies becoming part of a single consolidated filing group for federal income tax purposes, net operating loss carryforwards of
$22.4 million will be subject to separate return loss year limitation rules. The realization of these losses in future years will be dependent on the taxable income of the subsidiary that
generated the net operating loss carryforward.

During
the year ended December 31, 2008 and 2007, respectively, the tax benefits associated with the realization of $407,000 and $1.8 million of net operating loss
carryforwards was credited to goodwill as a result of adjustments to deferred taxes of acquired companies.

In
assessing the realizability of deferred tax assets, we considered whether it was more likely than not that some portion or all of the deferred tax assets will be realized. The
ultimate realization of the deferred tax assets is dependent upon the generation of future taxable income during periods in which temporary differences become deductible. We considered income taxes
paid during the previous two years, projected future taxable income, the types of temporary differences, and the timing of the reversal of such differences in making this assessment. Based upon the
level of historical taxable income and projections for future taxable income over the periods in which the temporary differences are deductible, we have determined a valuation allowance is necessary
of $2.2 million and $2.0 million as of December 31, 2008 and 2007, respectively. The net change in the valuation allowance for the years ended December 31, 2008, 2007 and
2006 was an increase of $196,000, $768,000, and $467,000, respectively. In future periods, $1.5 million of the valuation allowance will reduce goodwill when realized.

We
paid income taxes of $22.7 million, $3.9 million and $8.3 million during the years ended December 31, 2008, 2007 and 2006, respectively.

As
of December 31, 2008, we have not made a provision for U.S. income taxes on unremitted earnings of our international subsidiaries. These earnings are intended to be permanently
reinvested outside the U.S.

F-35

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Table of Contents

EnergySolutions, Inc.

Notes to Consolidated Financial Statements (Continued)

(15) Income Taxes (Continued)

On
January 1, 2007, we adopted FIN 48. A reconciliation of the beginning and ending balances of the total amounts of gross unrecognized tax benefits is as follows (in
thousands):

Gross unrecognized tax benefits at January 1, 2007

$
313Gross additions based on tax positions related to the current year


563Gross unrecognized tax benefits at December 31, 2007


876Gross additions based on tax positions related to the current year


30Gross unrecognized tax benefits at December 31, 2008

$
906


As
shown in the table above, at December 31, 2008, we had $906,000 of unrecognized tax benefits, of which $593,000 may impact our annual effective tax rate in future years.

We
recognize interest and penalties related to unrecognized tax benefits as a component of the provision for income taxes. For the year ended December 31, 2008, we accrued $5,000
of interest and penalties as a component of income tax expense. For the year ended December 31, 2007, we had not paid nor accrued interest or penalties as a component of income tax expense.

We
file income tax returns with the Internal Revenue Service and various state and international jurisdictions. For jurisdictions in which tax filings are prepared, with few exceptions,
we are no longer subject to income tax examinations by local, state and U.S. federal tax authorities for years prior to 2004 and prior to 2001 for international jurisdictions. There were no federal
income tax audits in progress or concluded during 2008. We have been notified that the Internal Revenue Service will be auditing the income tax returns of Duratek for the tax periods ended
December 31, 2004 and 2005 and June 6, 2006 and the income tax returns of Savannah River Corporation, a subsidiary of BNGA, for the tax periods ended March 31, 2006,
December 31, 2006 and November 15, 2007. The examinations are scheduled to begin in the first quarter of 2009.

We
expect that our unrecognized tax benefits could continue to change due to the expiration of statutes of limitation in the next 12 months and the settlement of audits of the
income tax returns of Duratek and Savannah River Corporation. However, we do not anticipate any such changes to have a significant impact on our results of operations, financial position or cash flows
in the next twelve months.

(16) Segment Reporting and Business Concentrations

We provide our services through four segments: Federal Services ("FS"), Commercial Services ("CS"), Logistics, Processing and Disposal ("LP&D"), and International. Prior to our
acquisitions of RSMC in 2007 and Safeguard in 2006, we derived less than 1% of our revenues from our international operations. Accordingly, through the first quarter of 2007, we reported results from
our international operations in our Commercial Services segment. Beginning with the second quarter of 2007, we began reporting results from our operations outside North America in a new International
segment. Goodwill and long-lived assets that were previously reported in other segments were reclassified to this new segment as appropriate. We evaluate the segments' operating results to
measure performance.

F-36

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Table of Contents

EnergySolutions, Inc.

Notes to Consolidated Financial Statements (Continued)

(16) Segment Reporting and Business Concentrations (Continued)

The
following table presents segment information as of and for the years ended December 31, 2008, 2007 and 2006:

As of and for the Year Ended December 31, 2008FS

CS

LP&D

International

Corporate
Unallocated
Items

Consolidated(in thousands of dollars)Revenues from external customers(1)

$
271,820

$
107,198

$
246,810

$
1,165,803

$


$
1,791,631Income (loss) from operations


29,583


25,825


87,893


56,669


(82,207
)

117,763Depreciation and amortization expense


406


1,941


21,511


9,460


13,106


46,424Goodwill


143,514


90,129


233,193


61,418





528,254Other long-lived assets(2)


34,104


22,455


232,433


97,074


85,055


471,121Purchases of property, plant and equipment


4,543


735


9,905


660


10,786


26,629Total assets(3)


281,263


149,804


568,734


340,003


210,908


1,550,712




As of and for the Year Ended December 31, 2007FS

CS

LP&D

International

Corporate
Unallocated
Items

Consolidated(in thousands of dollars)Revenues from external customers(1)

$
151,355

$
137,378

$
262,801

$
541,079

$


$
1,092,613Income (loss) from operations


31,077


20,082


100,311


2,930


(79,821
)

74,579Depreciation and amortization expense


376


789


23,892


4,713


13,460


43,230Goodwill


143,138


90,994


232,745


59,163





526,040Other long-lived assets(2)


32,960


28,982


253,321


105,942


73,295


494,500Purchases of property, plant and equipment





1,560


4,296


498


6,958


13,312Total assets(3)


202,756


164,721


592,968


490,081


174,424


1,624,950




As of and for the Year Ended December 31, 2006FS

CS

LP&D

International

Corporate
Unallocated
Items

Consolidated(in thousands of dollars)Revenues from external customers(1)

$
79,941

$
54,137

$
293,025

$


$


$
427,103Income (loss) from operations


20,634


7,092


144,251





(82,003
)

89,974Depreciation and amortization expense


347


362


23,100





4,819


28,628Goodwill


132,201


98,358


231,830








462,389Other long-lived assets(2)


36,371


51,593


256,609





80,498


425,071Purchase of property, plant and equipment


735


539


22,300





336


23,910Total assets(3)


129,753


200,011


668,221





159,220


1,157,205


---

F-37

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Table of Contents

EnergySolutions, Inc.

Notes to Consolidated Financial Statements (Continued)

(16) Segment Reporting and Business Concentrations (Continued)

Our revenues and long-lived assets by geographic region as of and for the year ended December 31, 2008, 2007 and 2006 are as follows (in thousands of dollars):

As of and for the Year Ended December 31,

United
States

United
Kingdom

Other

Total2008Revenues from external customers

$
600,273

$
1,165,803


25,555

$
1,791,631Property, plant and equipment, net


112,982


882


157


114,0212007Revenues from external customers


529,550


541,079


21,984


1,092,613Property, plant and equipment, net


109,897


591


200


110,6882006Revenues from external customers


419,354


620


7,129


427,103Property, plant and equipment, net


128,612


233





128,845


(17) Customer Concentrations

Our International segment derives its revenues primarily through contracts with the NDA. For the years ended December 31, 2008 and 2007, respectively, 64.8% and 48.6% of our
revenues were from contracts funded by the NDA. Accounts receivable relating to the NDA at December 31, 2008 and 2007 were $115.0 million and $273.7 million, respectively.

We
have contracts with various offices within the DOE, including with the Office of Environmental Management, the Office of Civilian Radioactive Waste Management, the National Nuclear
Security Administration and the Office of Nuclear Energy. Revenues from DOE contractors and subcontractors represented approximately 11.2%, 16.7% and 47.9% of consolidated revenues for the years ended
December 31, 2008, 2007 and 2006, respectively. Accounts receivable and costs and estimated earnings in excess of billings on uncompleted contracts relating to DOE contractors and
subcontractors at December 31, 2008 were $45.6 million and $42.0 million, respectively. Accounts receivable and costs and estimated earnings in excess of billings on completed
contracts relating to DOE contractors and subcontractors at December 31, 2007 were $31.3 million and $17.0 million, respectively.

(18) Commitments and Contingencies

(a)   Leases and Other Contractual Obligations

We have several noncancellable leases that cover real property and machinery and equipment. Such leases expire at various dates with, in some cases, options to
extend their terms. Several of the leases contain provisions for rent escalation based primarily on increases in real estate taxes and operating costs incurred by the lessor. Rent expense on
noncancellable leases was $12.2 million, $14.7 million and $11.6 million for the years ended December 31, 2008, 2007 and 2006, respectively.

We
are obligated under capital leases covering computer equipment and certain machinery and equipment that expire at various dates during the next three years. As of December 31,
2008 and 2007,

F-38

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Table of Contents

EnergySolutions, Inc.

Notes to Consolidated Financial Statements (Continued)

(18) Commitments and Contingencies (Continued)

the
gross amount of property, plant and equipment and related accumulated amortization recorded under capital leases were as follows:

December 31,
2008

December 31,
2007(in thousands of dollars)Computer equipment

$
3,913

$
4,133Machinery and equipment


668


492Trucks and vehicles


332


3324,913


4,957Less accumulated amortization


1,783


1,084$
3,130

$
3,873


Amortization
of assets held under capital leases is included with depreciation and amortization expense.

The
following is a schedule of future minimum annual lease payments for all operating and capital leases and annual payments for other contractual obligations with initial or remaining
lease terms greater than one year as of December 31, 2008:

Year ending December 31,

Operating

Capital

Other
Contractual
Obligations(in thousands of dollars)2009

$
10,605

$
1,501

$
2,5002010


6,848


484


2,5002011


5,764


21


2,5002012


5,569





2,5002013


3,786





2,500Thereafter


5,490





5,000Future minimum lease payments

$
38,062


2,006

$
17,500Less portion representing interest





99Less current portion of capital lease obligations





1,396Long-term portion of capital lease obligations




$
511


The
current portion of the capital lease obligations is included in accrued expenses and other current liabilities. The long-term portion of the capital lease obligations is
included in other noncurrent liabilities in our consolidated balance sheets.

During
the years ended December 31, 2008 and 2007, respectively, we entered into $155,000 and $2.5 million of capital leases.

(b)   Letters of Credit/Insurance Surety

We are required to post, from time to time, standby letters of credit and surety bonds to support contractual obligations to customers, self-insurance
programs, closure and post-closure financial

F-39

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Table of Contents

EnergySolutions, Inc.

Notes to Consolidated Financial Statements (Continued)

(18) Commitments and Contingencies (Continued)

assurance
and other obligations. As of December 31, 2008 and 2007, respectively, we had $100.0 million and $99.9 million of letters of credit issued under our senior credit
facilities. As of December 31, 2008 and 2007, respectively, we had $2.6 million and $26.3 million in surety bonds outstanding. With respect to the surety bonds, we have entered
into certain indemnification agreements with the providers of the surety bonds, which would require funding by us only if we failed to perform under the contracts being insured and the surety bond
issuer was obligated to make payment to the insured parties.

Our
processing and disposal facilities operate under licenses and permits that require financial assurance for closure and post-closure costs. We provide for these
requirements through a combination of restricted cash, cash deposits, letters of credit and insurance policies. As of December 31, 2008 and 2007, the closure and post-closure state
regulatory requirements for our facilities were $150.8 million and $125.8 million, respectively, which amount is not determined on the same basis as the asset retirement obligation
calculated under SFAS No. 143.

(c)   Legal Proceedings

We have engaged in discussions with Sogin, SpA, the Italian state-owned utility company, to provide D&D and radioactive materials management services in support
of the clean-up of Sogin's nuclear facilities. Our pending license application with the Nuclear Regulatory Commission ("NRC") to import material from Italy, to process it at our facility
in Tennessee and to dispose of the residual material at our Clive facility in Utah has generated local and national expressions of opposition. We believe our license application is consistent with all
applicable laws and regulations and with past practices. Moreover, the Italian materialmetals, paper and clothingis the same type of material that we handle routinely from
the domestic nuclear industry.

The
NRC has issued numerous licenses over the past ten years allowing the importation of LLRW to be processed and ultimately disposed at our Clive facility. Under these licenses, our
Clive Facility has received Class A LLRW originating in Germany, Canada, France, Taiwan, and the United Kingdom.

The
States of Tennessee and Utah have confirmed to the NRC that the proposed Italian project is consistent with the licenses and permits issued by those States. However, the Governor of
the State of Utah announced on April 23, 2008, that he would send his representative to the May 8, 2008 meeting of the Northwest Interstate Compact on Low-Level Radioactive
Waste Management (the "Northwest Compact") to vote against any proposal that would allow us to receive international waste at our Clive facility.

On
May 5, 2008, we filed a declaratory judgment action in the U.S. District Court of Utah asking the court to declare that (i) the Northwest Compact does not have
regulatory authority over our Clive facility, which is a private commercial facility rather than a regional facility created by the Compact, (ii) the U.S. Constitution does not allow the
Northwest Compact to discriminate between identical domestic and foreign materials handled at our Clive facility, and (iii) any effort by the Northwest Compact to restrict our receipt of
foreign LLRW is pre-empted by federal statutes and regulations. The State of Utah and the Rocky Mountain Interstate Compact on Low-level Radioactive Waste have intervened as
defendants in the declaratory judgment action.

At
the Northwest Compact meeting on May 8, 2008, the representatives of the eight member States of the Northwest Compact, despite our commitment to restrict our receipt of
international waste

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Table of Contents

EnergySolutions, Inc.

Notes to Consolidated Financial Statements (Continued)

(18) Commitments and Contingencies (Continued)

to
5% of the remaining capacity at our Clive facility, unanimously adopted a clarifying resolution proposed by the Utah committee member, clarifying that the Northwest Compact has never adopted a
resolution permitting us to receive international waste at our Clive facility. We continue to believe that the Northwest Compact does not have regulatory authority over our Clive facility, and that
neither the U.S. Constitution nor Federal law permits the Northwest Compact, to prohibit us from receiving international waste at our Clive facility.

On
October 6, 2008, the NRC approved an order holding in abeyance its decision with respect to our pending import license application until the U. S. District Court of Utah issues
its ruling in the Company's declaratory judgment action.

We
intend to vigorously prosecute our declaratory judgment action, but we do not believe we will be able to process and dispose of any radioactive materials contemplated by the Italian
initiative during fiscal 2009.

In
addition, we are subject to various claims and legal proceedings covering matters that arise in the ordinary course of its business activities. Management believes any liability that
may ultimately result from the resolution of these matters will not have a material adverse effect on our consolidated financial position, operating results and cash flows.

(19) Employee Benefit Plans

During 2006, we participated in various defined contribution 401(k) plans that covered substantially all full-time employees. The plans were subject to the provisions of the
Employee Retirement Income Security Act of 1974. We provided for a match under the applicable plans. Participants vested in our contributions ratably over 4 years. As of January 1, 2007,
we combined all previous plans into a new plan. Under the new plan, employees become eligible to participate immediately upon employment but are not eligible for a company match until one year of
employment is completed. We match 50% of the first 6% of a participant's deferred contribution. In addition, we may at our discretion contribute an additional 1% of a participant's deferred
contribution. Employee contributions are fully vested immediately. Our contributions vest ratably over 4 years. We contributed $2.3 million, $2.3 million and $2.2 million
for the years ended December 31, 2008, 2007 and 2006, respectively.

On
March 14, 2008, we obtained majority voting rights for another one of our minority-owned joint ventures. Accordingly, we have reported its operations in our consolidated
financial statements from
March 14, 2008. The joint venture sponsors a defined contribution plan for its eligible employees. The plan provides for matching employer contributions of 100% up to 4% of employee
compensation. Additionally, the plan provides for an additional employer contribution for employees who are not eligible to participate in the joint venture's defined benefit pension plan ranging from
2.5% to 5.8% of employee compensation. Contributions to the plan totaled approximately $502,000 for the period from March 14, 2008 to December 31, 2008.

The Electricity Supply Pension Scheme ("ESPS")

In connection with our acquisition of RSMC on June 26, 2007, we began providing a pension plan for the benefit of approximately
60 RSMC employees in the United Kingdom (the "RSMC Plan"). The RSMC Plan is funded by contributions from the employees and EnergySolutions. In addition,
under the

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Table of Contents

EnergySolutions, Inc.

Notes to Consolidated Financial Statements (Continued)

(19) Employee Benefit Plans (Continued)

terms
of our contract with the NDA, EnergySolutions, through RSMC, took over the management of the Magnox North and Magnox South pension plans (the
"Magnox Plan"), which provides pension benefits to a majority of the 3,000 employees under management in the United Kingdom. The Magnox Plan is funded by contributions from the employees and the NDA.
The two plans are separate sections of an overall industry scheme, the Electricity Supply Pension Scheme ("ESPS").

As
part of the reorganization of the UK nuclear industry by the UK Government, the NDA assumed responsibility to fund all employer pension contributions, including any deficit (and
obtained the benefit of any surplus), to the Magnox Plan. In order to reflect these arrangements, these financial statements include an amount recoverable from the NDA, included within other
noncurrent assets in an amount equal to the recorded Magnox section liability, net of tax, with a corresponding credit to revenue since the charges are allowable costs under our cost-plus
contract with the NDA, offsetting a portion of the after-tax pension charges. The amount of the credit for the years ended December 31, 2008 and 2007, respectively, was
$95.4 million and $51.6 million. No amount was included in our financial statements in periods prior to our acquisition of RSMC in June 2007. The amount payable to the NDA, due to our
overfunded status, was $93.5 million at December 31, 2008 and is included in pension liabilities. The amount recoverable from the NDA, due to our underfunded status, was
$46.3 million at December 31, 2007 and is included in other noncurrent assets.

The
following table sets forth a reconciliation of the pension plans' beginning and ending balances of the benefit obligation for the years ended December 31, 2008 and 2007:

2008

2007(in thousands of dollars)Changes in projected benefit obligation:Projected benefit obligation at beginning of period

$
3,449,737

$
Acquisitions





3,389,094Service cost


48,606


25,812Interest cost


181,251


95,931Member contributions


13,914


7,398Termination benefits


7,235


5,691Benefits paid


(146,374
)

(78,859
)Actuarial loss


(275,865
)

65,363Currency translation


(912,200
)

(60,693
)Projected benefit obligation at end of year

$
2,366,304

$
3,449,737


The
termination costs relate to early retirement benefits provided to employees who have left service involuntarily before normal retirement age and have been granted an unreduced early
retirement pension. These are contractual termination benefits required under the plans' rules.

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Table of Contents

EnergySolutions, Inc.

Notes to Consolidated Financial Statements (Continued)

(19) Employee Benefit Plans (Continued)

The following table sets forth a reconciliation of the plans' beginning and ending balances of the fair value of plan assets for the years ended December 31, 2008 and 2007:

2008

2007(in thousands of dollars)Changes in plan assets:Fair value at beginning of period

$
3,405,197

$
Acquisitions





3,325,275Actual return on plan assets


9,461


186,192Company contributions


104,632


19,410Employee contributions


13,914


7,398Termination benefits


7,235


5,691Benefits paid


(146,374
)

(78,859
)Currency translation


(934,228
)

(59,910
)Fair value of plan assets at end of year

$
2,459,837

$
3,405,197Overfunded (underfunded) status at end of year

$
93,533

$
(44,540
)


Related
amounts included in the consolidated balance sheets as of December 31, 2008 and 2007 consist of noncurrent pension assets of $93.5 million, which is included in
other noncurrent assets, and noncurrent pension liabilities of $44.5 million, respectively.

Net
periodic benefit costs for the years ended December 31, 2008 and 2007 consisted of the following:

2008

2007(in thousands of dollars)Service cost

$
48,606

$
25,812Interest cost


181,251


95,931Expected return on plan assets


(189,599
)

(106,703
)Termination benefits


7,235


5,691$
47,493

$
20,731


Weighted
average assumptions used to determine benefit obligations as of December 31, 2008 and 2007 were as follows:

2008

2007Discount rate

6.0%

5.8%Expected rates of return on plan assets

4.8% - 6.6%

6.5% - 7.6%Rate of compensation increase

4.0% - 4.5%

4.4% - 4.9%


Our
overall expected long-term rate of return on assets is 4.8% to 6.6%. The overall expected long-term rate of return is based on our view of the expected
long-term rates of return of each major asset category taking into account the proportions of assets held in each category at the relevant reporting date. The expected rate of return for
equities was determined by adding a long-term equity risk premium to a risk-free rate. The equity risk premium reflects our view of expected long-term

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Table of Contents

EnergySolutions, Inc.

Notes to Consolidated Financial Statements (Continued)

(19) Employee Benefit Plans (Continued)

returns
on equities in excess of the risk-free rate, taking into account historic returns and current market conditions. The expected return on debt securities is based upon an analysis of
current yields on portfolios of similar quality and duration.

At
December 31, 2008 and 2007, the pension assets were invested as follows:

December 31,
2008

December 31,
2007Asset category:Equities


16.7
%

23.4
%Bonds


76.9
%

68.5
%Real Estate


5.4
%

7.0
%Other


1.0
%

1.1
%100.0
%

100.0
%


Our
investment policy is set by the Trustees of the pension plans, after consultation with the employer. The investment policy and appointed investment managers are reviewed regularly by
a subset of the trustees who form an Investment Committee, reporting to the full trustee body. Independent investment advice is obtained by the Investment Committee. The investment policy considers
the timing and nature of future cash flows, as well as the risk characteristics of both the liabilities and the assets held. The investment objective is to maximize returns subject to there being
sufficient assets and cash flow available to pay members' benefits as and when they are due.

The
Trustees have a policy of cash management to ensure that sufficient liquid funds are available when divestments are required to meet benefit payment obligations as they become
payable.

We
expect $49.9 million to be contributed to our defined benefit pension plans in 2009, most of which will be reimbursed by the NDA. Actuarial losses expected to be recognized as
a component of net periodic pension costs in 2008 are not material. Estimated benefit plan payments for the five years following 2008 and the subsequent five years aggregated, excluding amounts
recoverable from the NDA, are as follows (in thousands of dollars):

Year ending December 31,2009

$
117,1352010


120,0312011


123,0722012


126,1122013


129,2972014 - 2018


696,585$
1,312,232


The
preceding information does not include amounts related to benefit plans applicable to employees associated with certain contracts with the DOE because we are not responsible for the
current or future funded status of these plans.

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Table of Contents

EnergySolutions, Inc.

Notes to Consolidated Financial Statements (Continued)

(20) License Stewardship Program

On December 11, 2007, we, through our subsidiary ZionSolutions, entered into an agreement with Exelon to dismantle Exelon's Zion nuclear facility located in Zion, Illinois, which
ceased operation in 1998. Upon completion of the transaction, Exelon has agreed to transfer to ZionSolutions substantially all of the assets (other than land) associated with Zion Station, including
assets held in nuclear decommissioning trusts. In consideration for Exelon's transfer of those assets, ZionSolutions has agreed to assume decommissioning and other liabilities associated with the Zion
Station. ZionSolutions also agreed to take possession and control of the land associated with the Zion Station pursuant to a lease agreement to be executed at the closing. ZionSolutions will be
obligated to complete the required decommissioning work according to an established schedule and to construct a dry cask storage facility on the land for spent nuclear fuel currently held in spent
fuel pools at the Zion Station. Closing of this transaction is subject to the satisfaction of a number of closing conditions, including approval by the NRC of the license transfer from Exelon to
ZionSolutions.

Due
to the financial crisis that has impacted the United States and world markets, the Zion Station decommissioning trust fund balance, a significant portion of which is invested in the
stock market, has declined. On October 14, 2008, we announced that we intend to defer the transfer of the Zion Station assets until we reaffirm that there is sufficient value in the Zion
decommissioning trust funds to ensure adequate funds for the accelerated decommissioning of the plant. Pursuant to the agreement, we have until December 31, 2009 to close the transaction.

Prior
to our announcement to defer the transfer of the Zion Station assets, we had anticipated that the closing of this transaction would occur in late third quarter or during the fourth
quarter of 2008. Accordingly, we hired employees, entered into subcontracts and performed services for Exelon under a planning contract. Invoicing for some of these services provided is subject to the
closing of the transaction. As of December 31, 2008, we have incurred costs of $12.4 million that have been deferred until the closing of the transaction. Since we believe that the
closing of this transaction before December 31, 2009 is still probable, we will continue to defer these costs until we close the transaction, at which time we will recognize the costs and
related revenues. If we determine that it is not probable that we will close this transaction, we will expense these costs in the period of such determination. We have taken steps to reduce the
monthly project costs including terminating of certain employees, transferring employees to other projects and terminating certain subcontracts and lease agreements. Any costs relating to the
termination of employees, subcontractors and lease or other agreements are expensed in the period terminated.

(21) Related Party Transactions

LLC Agreement

Prior to our initial public offering, ENV Holdings entered into a limited liability company operating agreement (the "LLC Agreement"),
which governed our operations. Under
the LLC Agreement, ENV Holdings was our sole member and owned all of the outstanding membership interests. ENV Holdings created a board of managers of six persons to manage our company and our
business affairs, and ENV Holdings had sole authority to designate each of the members of the board of managers. These agreements were terminated in connection with the completion of our initial
public offering on November 20, 2007.

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Table of Contents

EnergySolutions, Inc.

Notes to Consolidated Financial Statements (Continued)

(21) Related Party Transactions (Continued)

Distributions
were made by us to ENV Holdings at such times and in such amounts as were determined in ENV Holdings' sole discretion. During the years ended December 31, 2007 and
2006 we made distributions of $8.9 million and $4.7 million, respectively, to ENV Holdings.

During
the year ended December 31, 2008, ENV Holdings committed to contribute $10.0 million to us for the sole purpose of compensating certain of our employees, as
specified by ENV Holdings, for their contributions to our growth since ENV Holdings' initial investment us in January 2005. As a result, we recorded compensation expense and additional
paid-in capital of $10.0 million during the year ended December 31, 2008.

Included
in other current assets as of December 31, 2008 and 2007 is a receivable from ENV Holdings of $10.0 million and $1.0 million, respectively.

Advisory Services Agreements

On January 31, 2005, we entered into three separate advisory service agreements with Goldberg
Lindsay & Co. LLC ("Goldberg Lindsay"), an affiliate of Lindsay Goldberg & Bessemer, Peterson Capital Inc. ("Peterson Capital"), an affiliate of Peterson Partners,
and Creamer Investments, Inc. ("Creamer Investments"), an affiliate of our Chief Executive Officer, R Steve Creamer and our Vice Chairman, J.I. Everest, II. Each advisory services agreement
includes indemnification provisions by us in favor of ENV Holdings and its affiliates. Pursuant to these respective advisory services agreements, Goldberg Lindsay, Peterson Capital and Creamer
Investments each agreed to provide us with financial advisory, monitoring and oversight services.

We
incurred fees to Goldberg Lindsay of $2.0 million for management advisory services for each of the years ended December 31, 2007 and 2006. We incurred fees to Peterson
Capital of $350,000 for management advisory services for each of the years ended December 31, 2007 and 2006. We incurred
fees to Creamer Investments of $100,000 for management advisory services for each of the years ended December 31, 2007 and 2006. These advisory service agreements were terminated on
November 20, 2007 in conjunction with the completion of our public offering.

In
addition, for the year ended December 31, 2006, we paid fees to Goldberg Lindsay and Peterson Capital $5.0 million and $382,000, respectively, for advisory services
related to our acquisition of Duratek.

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