Nuclear energy is back as a growth industry, and in preparation for the numerous nuclear projects in the pipeline, USEC (NYSE:USU) has secured a new line of credit with Wells Fargo (NYSE:WFC) and JPMorgan Chase & Co. (NYSE:JPM) to replace an older one set to expire in August 2010.
USEC Inc. announced late last week that they had secured a new credit line worth $225 million, with the option which would bring it as high as $350 million if it’s needed.
Taking into account planned building of nuclear reactors, those already in the pipeline and those approved of, just under 500 new reactors are online to be operational in the years ahead, and many nuclear-based companies are preparing for that enormous demand.
Of course the line of credit won’t last that long, as it is set to mature on May 31, 2012, but its a solid bit of business for the two banks, as well as for UBS, who also partook in the credit facility offering.
There is very little downside to this credit line, as even if we don’t exit the recession, which it seems we won’t, the commitment by governments around the world, including the U.S. government recently, to build more nuclear powered reactors, business is poised to boom in the nuclear industry, and USEC has prepared for that with this line of credit, and can expand its business now when money is the deciding factor in going forward.
I say that because uranium itself will be hard pressed to keep up with demand, which is the only potential negative in this deal as far as risk goes. In other words, can the company acquire enough uranium to supply the growing demand, which will determine their ability to repay the loans.
Other than that, this is about as close to being a sure thing as you can get for offering a credit line to a company. Both JPMorgan and Wells Fargo should make a good profit from the deal.
