Document:

exv10w3

 

Exhibit 10.3

CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR THE REDACTED PORTIONS. THE CONFIDENTIAL REDACTED

PORTIONS HAVE BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

ASTERISKS DENOTE SUCH REDACTIONS.

      

			
	March 2, 2006
	 	#1012780                            

TV-05356W, Supp. No. 1

Mr. Robert Van Namen

Marketing and Operations VP

United States Enrichment Corporation

Two Democracy Center, Tenth Floor

6903 Rockledge Drive

Bethesda, MD 20817-1818

Dear Mr. Namen:

This letter will confirm arrangements agreed upon between representatives of United States
Enrichment Corporation (“USEC”) and the Tennessee Valley Authority (“TVA”) for TVA to make
available, and for USEC to take, Additional Energy as provided for under subsection 2.2(e) of the
Power Contract numbered TV-05356W and dated July 11, 2000 (“Power Contract”). This letter also
confirms related arrangements to replace Article IV of the Power Contract with the new Article IV
attached hereto.

It is understood and agreed that:

	1.	 	As set forth in the following table, TVA will make available, and USEC will take, Additional
Energy in the amounts of the specified additional availability amounts at the specified prices
during the specified hours of the specified Supply Period:

	 	 	 	 	 
	 	 	Additional	 	 
	 	 	Availability	 	Additional Energy
	Supply Period	 	Amount	 	Price
	06/01/06 HE 0100 CDT to 08/31/06
HE 2400 CDT

	 	600 MW All Hours
	$	*****

(a total of 1,324,800 MWh)

	2.	 	During the Supply Periods, the total amounts of power available to USEC under the Power
Contract will be increased by the sum of the additional availability amounts designated by TVA
in accordance with section 1 above and USEC shall take such increased amounts; provided,
however, that it is expressly recognized that the Additional Energy made available under the
arrangements described by this confirmation will be subject to suspension as Interruptible
Baseline Energy in accordance with Attachment 2 to the Power Contract.
	 
	3.	 	For billing purposes, USEC’s minimum energy takings under the Power Contract shall be deemed
to have been increased by the additional availability amounts so designated by TVA

 

 

#1012780

Mr. Robert Van Namen

Page 2

March 2, 2006

	 	 	and the
Additional Energy price specified in section 1 above shall be applied to the resulting
additional minimum energy takings in accordance with subsection 2.6(b) of the Power Contract
to increase the Power Bill.
	 
	4.	 	From and after the meter-reading time on June 1, 2006, the Power Contract is further
supplemented and amended by replacing Article IV thereof with the substitute Article IV
attached to this letter agreement. Further, it is expressly recognized that the credit
assurance provisions of the attached Article IV shall apply with respect to any obligations
under the Power Contract as it may be amended, including, without limitation, the Additional
Energy arrangements provided for by this letter agreement and, unless otherwise agreed, with
respect to any subsequent Additional Energy arrangements entered into under the Power
Contract.
	 
	5.	 	It is recognized that TVA and USEC have agreed in principal to Quantity and Pricing of
Baseline Energy for the first annual period of Period Two, subject to the final approval of
the TVA Board of Directors and the execution of final documents to reflect that agreement. It
is further recognized and agreed that nothing related to any failure to complete such final
documents shall excuse the performance of either party under this letter agreement.

If the foregoing satisfactorily states the understanding between us, please have a duly authorized
representative execute this Confirmation on behalf of USEC and return by facsimile an executed copy
to Mike Davis at (423) 751-3387. Also please return one executed copy by mail to Mike Davis,
Tennessee Valley Authority, 1101 Market Street MR 2A, Chattanooga, Tennessee 37402.

Sincerely,

	 	 	 
	/s/ Clyde S. Harmon

	 	/s/ Bruce S. Schofield
	Clyde S. Harmon

	 	Bruce S. Schofield
	Sr., Manager, Origination

	 	Vice President, Industrial Marketing and Account Management

Accepted and agreed to as of

the date first above written.

	 	 	 	 	 
	 

	 	 	 	 
	UNITED STATES ENRICHMENT CORPORATION	 	 
	 
	 	 	 	 
	By:

	 	/s/ Robert Van Namen	 	 
	 	 	 	 	 
	Name:

	 	Robert Van Namen	 	 
	Title:

	 	Marketing and Operations VP	 	 

[ATTACHMENT ON FOLLOWING PAGE]

 

 

ATTACHMENT

ARTICLE IV

FINANCIAL RESPONSIBILITY AND INFORMATION

SECTION 4.1 – ADDITIONAL DEFINITIONS

In addition to the terms defined in Article I above, the following additional defined terms shall
be applicable for purposes of applying the provisions of this Article IV.

4.1.1 “Commercial Credit Rating” shall mean a credit rating assigned by Standard and
Poor’s (S&P), Moody’s Investor Services, Inc. (Moody’s), or Fitch Ratings (Fitch) (such
agencies are hereafter individually referred to as a Rating Agency or collectively referred
to as Rating Agencies) to a rated entity’s unsecured, senior long-term debt obligations (not
supported by third party credit enhancements), or if such entity does not have a rating for
its senior unsecured long-term debt obligations, then the rating assigned to such entity as
an issuer rating by S&P, Moody’s or Fitch.

4.1.2 “CRR” shall mean the customer risk rating assigned by TVA under TVA’s credit
policy for the purpose of classifying its customers, suppliers, and vendors according to the
level of risk deemed by TVA to be associated with their financial condition. Such ratings
are assigned by TVA, and updated from time to time, as a result of quantitative financial
analysis, as well as consideration of subjective judgments about both the entity being rated
and market conditions. In the event of any change in Company’s CRR which will cause
a change in the amount of Performance Assurance, if any, that Company is obligated
to provide to TVA under section 4.5 of this Article, TVA will promptly give Company written
notice of the revised CRR and, for purposes of this contract, such revised
CRR will be deemed to be effective:

	 	(a)	 	as of the date of such notice, if the revised CRR is a
higher rating than Company’s previously effective CRR, or
	 
	 	(b)	 	5 business days after the date of such notice, if the revised
CRR is a lower rating than Company’s previously effective CRR.

4.1.3 The following CRRs referred to as “Superior,” “Strong,”
“Satisfactory,” “Acceptable,” and “Below Investment Grade Rating,”
shall be defined and assigned to Company under the following framework:

	 	(a)	 	If a Commercial Credit Rating is not assigned by the Rating
Agencies, then TVA shall determine the appropriate CRR in its sole
discretion under its credit policy.
	 
	 	(b)	 	If a Commercial Credit Rating is assigned by a Rating
Agency or Rating Agencies, then the CRR will be deemed to be as is
shown on the chart

 

 

	 	 	 	below, unless there are multiple Rating Agencies and their
Commercial Credit Ratings are not equivalent under TVA’s CRR
system, in which case subsection (c) will apply.
	 
	 	(c)	 	If more than one Rating Agency provides a Commercial Credit Rating
and such ratings do not provide equivalent CRRs under the below chart, then the
following will apply:

	 	(i)	 	if two Rating Agencies provide a Commercial Credit
Rating and those ratings equate to different CRRs (according
to the chart below), then the lower CRR will govern;
	 
	 	(ii)	 	if three Rating Agencies provide a Commercial
Credit Rating and those ratings equate to three different
CRRs (according to the chart below) then the middle CRR
will govern;
	 
	 	(iii)	 	if three Rating Agencies provide a Commercial
Credit Rating and those ratings equate to two different CRRs
(according to the chart below) then the two equivalent CRRs will
govern.

Chart Comparing TVA CRR Ratings to the

Commercial Credit Ratings of Rating Agencies

	 	 	 	 	 	 	 
	 	 	S&P	 	Moody’s	 	Fitch
	TVA	 	Commercial Credit	 	Commercial Credit	 	Commercial Credit
	CRR	 	Rating	 	Rating	 	Rating
	Superior

	 	AAA
	 	Aaa
	 	AAA
	Strong

	 	AA+ to AA-
	 	Aa1 to Aa3
	 	AA+ to AA-
	Satisfactory

	 	A+ to A-
	 	A1 to A3
	 	A+ to A-
	Acceptable

	 	BBB+ to BBB-
	 	Baa1 to Baa3
	 	BBB+ to BBB-
	Below Investment Grade

Rating

	 	BB+ or lower
	 	Ba1 or lower
	 	BB+ or lower

	 	4.1.4	 	“Credit Risk” shall mean:

	 	(a)	 	an amount reasonably determined by TVA as approximating all charges
applicable for a 75-day period either under this contact or any previous power
arrangement, including, but not limited to, all amounts Company owes or will
owe for power and energy made available for, or delivered during, that period
and without regard to whether or not a bill has been rendered for such amounts,
less
	 
	 	(b)	 	the amount of credit risk protection afforded to TVA by any
then-existing Performance Assurance already covering TVA’s risk of
non-payment of the amount designated by TVA;

 

 

Provided, however, that during any period when Company is deemed to have a CRR that
is equal to a Below Investment Grade Rating so that the payment obligations provided
for below in paragraph b of section 4.5 are applicable, the 75-day period provided for in
(a) above shall be reduced to 45-days to reflect the revised payment obligations provided
for in said paragraph.

4.1.5 “Collateral Threshold” shall mean the dollar amount or amounts specified in
section 4.3 of this Article to reflect the amount of credit that will be extended to Company
without Performance Assurance being provided by Company.

4.1.6 “Performance Assurance” shall mean collateral in the form of either:

	 	(a)	 	a cash deposit,
	 
	 	(b)	 	a Letter of Credit, in form and substance acceptable to TVA, issued
by a financial institution which has and maintains at least a
Satisfactory CRR.
	 
	 	(c)	 	other security acceptable to TVA and agreed to in writing by the
parties to this contract, including, without limitation, a corporate guaranty,
in form and substance acceptable to TVA, by an entity which has and maintains
at least an Acceptable CRR; provided however, that such a
guaranty will only be acceptable to secure Performance Assurance equal
to the Collateral Threshold which TVA would assign to such entity if it
were the party contracting with TVA for the power supply arrangements that are
provided for in this contract.

SECTION 4.2 – CRR AS OF CONTRACT EXECUTION

As of the date that this contract was executed, Company has been determined by TVA to have a
CRR which qualifies as a Below Investment Grade Rating.

SECTION 4.3 – COLLATERAL THRESHOLD

At all times that Company has and maintains at least an Acceptable CRR, the amount
of the Collateral Threshold will be the applicable amount set forth in the table below as
corresponding to Company’s then existing CRR. At any other times, the amount of the
Collateral Threshold shall be deemed to be zero. Company and TVA agree that from time to
time exceptional circumstances may occur that merit either an increase or a decrease in Company’s
Collateral Threshold amounts. Accordingly, at any such time, TVA may in its discretion
revise the Collateral Threshold amounts upward or downward upon 30 days’ written notice to
Company.

	 	 	 	 	 
	COMPANY’S CRR	 	COLLATERAL THRESHOLD	 
	Superior
	 	$	0	 
	Strong
	 	$	0	 
	Satisfactory
	 	$	0	 
	Acceptable
	 	$	0	 

 

 

As set out in the above table, Company’s current Collateral Threshold is zero. At such
time, if any, that Company determined to have an Acceptable CRR or higher, TVA will
determine a Collateral Threshold appropriate to Company’s CRR.

SECTION 4.4 – FINANCIAL INFORMATION

	 	(a)	 	For TVA’s use in evaluating Company’s financial condition, at TVA’s request, Company
shall provide to TVA:

	 	(i)	 	within 120 days following the end of each Company fiscal year, a copy of
Company’s annual report containing consolidated financial statements for such fiscal
year;
	 
	 	(ii)	 	within 60 days after the end of each of its first three fiscal quarters of each
such fiscal year, a copy of Company’s quarterly report containing consolidated
financial statements for such fiscal quarter; and
	 
	 	(iii)	 	such different or additional financial information as TVA may from time to
time reasonably request for TVA’s use in evaluating Company’s financial condition;

provided, however, Company shall not be required to provide TVA with such information if:

	 	(i)	 	the information is publicly available and accessible by TVA, or
	 
	 	(ii)	 	Company is rated by S&P, Moody’s or Fitch.

	 	(b)	 	In all cases the statements to be provided under (a) above shall be for the most recent
accounting period and prepared in accordance with generally accepted accounting principles;
provided, however, that should any such statements not be available on a timely basis due
to a delay in preparation or certification, such delay shall not be a breach of this
contract so long as Company diligently pursues the preparation, certification and delivery
of the statements. Further, it is expressly recognized that TVA prefers the financial
statements provided under (a)(i) above to be audited financial statements and the
unavailability of audited statements may be considered by TVA to be a negative factor in
evaluating Company’s CRR.

SECTION 4.5 – PERFORMANCE ASSURANCE OBLIGATION

	 	(a)	 	If at any time during the term of this contract the then-applicable Credit Risk
exceeds the then-applicable Collateral Threshold, a Performance Assurance
Deficiency in the amount of the excess shall exist. Upon written notice from TVA of such
Performance Assurance Deficiency, Company shall be obligated to promptly provide
Performance Assurance, or additional Performance Assurance, as applicable,
to TVA in an amount equal to the amount of such Performance Assurance Deficiency.

 

 

	 	(b)	 	In addition, if at any time during the term of this contract, Company is deemed to have
a CRR that is equal to a Below Investment Grade Rating, the following shall
apply:

	 	(i)	 	Notwithstanding Section 2 of the Terms and Conditions of the Power Contract,
Company shall pay by using one of the electronic methods approved by TVA, all charges
applicable under the Power Contract within ten (10) days after the date of any bill;
provided, however, if the tenth day after the day of the bill is a non-business day,
then payment shall be made by no later than the next business day. If such charges are
not paid within such period, then TVA may, upon 5 days’ written notice, discontinue
supply of power to Company. Any such discontinuance of supply shall not relieve
company of its liability for minimum monthly charges or payment of past due amounts.
	 
	 	(ii)	 	Notwithstanding sections 2(b) and 2(c) of the Terms and Conditions, the late
payment charges provided for in section 2(b) shall be applicable to any amount
remaining unpaid after the end of the payment period provided for in subsection (i)
above.
	 
	 	(iii)	 	Notwithstanding sections 2(b) and 2(c) of the Terms and Conditions, the early
payment credit shall be applied as follows: For any month that that Company pays its
bill in full prior to the payment date established in subsection (i) above, TVA shall
apply the amount of the Average Short Term Interest Rate (as defined in the Terms and
Conditions) to the amount of such early payment for each day prior to the payment date
for which the bill is paid. No early payment credits shall be applicable
for any payment that is not made prior to the payment date provided for in subsection
(i) above.

SECTION 4.6 – FAILURE TO PROVIDE PERFORMANCE ASSURANCE

In the event of any Performance Assurance Deficiency arising under 4.5 above:

	 	(a)	 	If Company does not fully remedy the Performance Assurance Deficiency by the date
falling 10 days after the date when TVA gives notice of such deficiency under 4.5 above (or
such later date as may be agreed upon), TVA shall have the right, upon 5 days’ notice, to
discontinue the supply of power, and may refuse to resume delivery as long as
Performance Assurance has not been provided to fully remedy the deficiency.
Discontinuance of supply under this paragraph (a) shall not relieve Company of its
liability for minimum monthly charges or payment of past due amounts.
	 
	 	(b)	 	If Company does not fully remedy the Performance Assurance Deficiency by the date
falling 30 days after the date when TVA gives a notice of such deficiency under 4.5 above,
TVA shall have the right to consider the contract breached and to cancel the contract upon
written notice that if full Performance Assurance is not received within 5 days (or
such longer period as may be specified) after the date of said notice, the contract shall
be deemed permanently breached and canceled; and such cancellation by TVA shall be without
waiver of any amounts which may be due or of any rights, including the right

 

 

to damages for
such breach, which may have accrued up to and including the date of such cancellation.

SECTION 4.7 – SECURITY INTEREST

To the extent Company provides any Performance Assurance under section 4.5 of this Article,
Company grants to TVA a present and continuing security interest in, and lien on (and right of
setoff against), and assignment of, all cash collateral and cash equivalent collateral and any and
all proceeds resulting therefrom or the liquidation thereof, whether now or hereafter held by, on
behalf of, or for the benefit of, TVA, and Company agrees to take such action as TVA may reasonably
require in order to perfect TVA’s first-priority security interest in, and lien on (and right of
setoff against), such collateral and any and all proceeds resulting therefrom or from the
liquidation thereof. It is expressly recognized and agreed, however, that:

	 	(a)	 	any security interest provided for under this section 4.7 above shall only apply to the
specific collateral that is provided as Performance Assurance to meet Company’s
obligations under this Article IV; and
	 
	 	(b)	 	by virtue of this section 4.7, TVA will have no security interest of other preferred
interest in any other property of Company or in any other property of any other entity
providing the Performance Assurance. It is expressly recognized and agreed that
this paragraph shall not affect any security interest that may be provided for under a
separate agreement.

SECTION 4.8 – REMEDIES

Upon failure of Company to pay all charges applicable under this contract within 30 days after the
date of any bill, or any shorter period for final payment or for correcting a Performance Assurance
Deficiency applicable under any provision of this contract or any amendment or supplement to this
contract, it is expressly recognized and agreed that TVA may do any one or more of the following:

	 	(a)	 	exercise any of its rights and remedies with respect to such failure to pay and any of
its rights and remedies with respect to Performance Assurance, including any such
rights and remedies under law then in effect;
	 
	 	(b)	 	exercise its rights of setoff against any and all property of Company in the possession
of TVA;
	 
	 	(c)	 	draw on any outstanding letter of credit issued for its benefit; and
	 
	 	(d)	 	liquidate all Performance Assurance then held by or for the benefit of TVA,
free from any claim or right of any nature whatsoever of Company or other pledgor of
Performance Assurance, including any equity or right of purchase or redemption by
Company or any such pledgor.exv10w4

 

EXHIBIT
10.4

CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR THE REDACTED PORTIONS. THE CONFIDENTIAL

REDACTED PORTIONS HAVE BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

ASTERISKS DENOTE SUCH REDACTIONS.

      

			
	March 2, 2006
	 	TV-05356W, Supp. No. 2

Mr. Robert Van Namen

Marketing and Operations VP

United States Enrichment Corporation

Two Democracy Center, Tenth Floor

6903 Rockledge Drive

Bethesda, MD 20817-1818

Dear Mr. Van Namen:

In accordance with the provisions of Power Contract TV-05356W, as amended (Power Contract), TVA has
determined that United States Enrichment Corporation (Company) presently has a CRR equal to
a Below Investment Grade Rating. Accordingly, this letter is to confirm the arrangements
agreed upon between representatives of TVA and Company, regarding Company’s Performance
Assurance to be provided and maintained by Company:

It is understood and agreed that until such time, if any, that Company’s CRR and
corresponding Collateral Threshold is such that no Performance Assurance is due
from Company under the Power Contract, and in accordance with Article IV of the Power Contract, the
parties have agreed that the provisions below shall be applicable to provide for the
Performance Assurance to be provided and maintained by Company.

	 	1.	 	Letter of Credit. Company shall provide TVA an Irrevocable Letter of Credit,
in a form acceptable to TVA, in the amount of $***** not later than March 15, 2006.
Company shall at all times keep such Letter of Credit in full force and effect. The Letter
of Credit may be utilized by TVA to cover any obligations arising after June 1, 2006, for
which the Power Contract provides and for which payments are not made by Company,
including, but not limited to, minimum bill obligations. Notwithstanding hereunder,
Company will remain obligated to make all payments as they become due under the Power
Contract.
	 
	 	2.	 	Weekly Prepayments. Notwithstanding the provision of section 2.6 of the Power
Contract, Company shall pay TVA a designated sum of money per week in advance for
power and energy used under the Power Contract (Weekly Prepayment). On or before May 26,
2006, Company shall pay TVA the amount of $*****. Beginning on June 2, 2006, and each
Friday thereafter, Company shall pay TVA a Weekly Prepayment in the amount of $***** per
week. Such Weekly Prepayments shall be made no later than 3

 

 

Mr. Robert Van Namen

Page 2 of 3

March 2, 2006

	 	 	 	p.m. CST or CDT, whichever is
currently effective, on each Friday and shall be made electronically through Automated
Clearing House to TVA’s account. TVA’s monthly bill for power and energy shall reflect the
cumulative Weekly Prepayments for that month as a credit to be applied against that monthly
bill. Company shall have seven (7) days from the date of the monthly bill, or until the
next Weekly Prepayment (whichever comes later) to pay any amount that is not covered by the
cumulative Weekly Prepayments for that month. In the event that the cumulative Weekly
Prepayments for any month exceed the amount of that monthly bill, TVA shall notify Company
of the overpayment and credit such amount to Company’s next Weekly Prepayment.
	 
	 	3.	 	Adjustments to Performance Assurance. The Performance Assurance provided for
in this letter agreement is based on the price and usage of power and energy taken by
Company and may be adjusted by TVA as provided in the Power Contract. If TVA determines
that any adjustment is necessary, TVA will provide Company with written notice of any
increased or decreased amount of Performance Assurance required under the Power Contract.
Within ten (10) days after such notice is given, Company shall provide TVA with the amount
of the adjusted Performance Assurance required.
	 
	 	4.	 	Early Payment Credits. Notwithstanding Section 2 of the Terms and Conditions
set forth in Attachment 4 of the Power Contract, for any Billing Month, in which
Company fails to make a Weekly Prepayment on or before a Weekly Prepayment Due Date falling
within that Billing Month, Company shall not be entitled to any early payment
credit that would otherwise apply with respect to early payments for usage in that
Billing Month.
	 
	 	5.	 	Default. Failure to comply with any of the above provisions shall constitute
an immediate default under this contract. Upon such default, TVA shall have the right to
immediately discontinue the supply of power, upon 5 days’ written notice, to Company.

Discontinuance of supply under this letter agreement shall not relieve Company of its liability for
minimum monthly charges or payment of past due amounts. TVA’s election of any remedies under this
letter agreement shall be without waiver of any other rights, including, without limitation, the
right to damages for such default.

The Power Contract, as supplemented and amended by this letter agreement, is hereby ratified and
confirmed as the continuing obligation of the parties.

If this letter satisfactorily sets forth the understandings between us, please have a duly
authorized representative execute two copies on behalf of Company and return them to TVA. Upon
completion by TVA, one fully executed copy will be returned to you.

Sincerely,

/s/ Bruce S. Schofield

Bruce S. Schofield for

Kenneth R. Breeden

 

 

Mr. Robert Van Namen

Page 3 of 3

March 2, 2006

Executive Vice President

Customer Service and Marketing

Accepted
and agreed to as of the

date first above written:

UNITED STATES ENRICHMENT CORPORATION

	 	 	 
	 

	 	/s/ Robert Van Namen
	By:

	 	Robert Van Namen
	 

	 	Marketing and Operations VP

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