Good day and welcome everyone to the USEC, Inc.’s Fourth Quarter 2007 Earnings Results Conference Call. Today’s call is being recorded. With us today from the company are Mr. John Welch, President and Chief Executive Officer; and Mr. Steven Wingfield, the Director of Investor Relations. Management will make opening remarks, which will be followed by a question-and-answer period. Now I am pleased to turn the meeting over to Steve Wingfield.

Good morning. Thank you for joining us for USEC’s conference call regarding its fourth quarter and full year 2007, which ended December 31. With me today are John Welch, President and Chief Executive Officer; John Barpoulis, Senior Vice President and Chief Financial Officer; Bob Van Namen, Senior Vice President; Phil Sewell, Senior Vice President; and Tracy Mey, Controller and Chief Accounting Officer. Before I turn the call over to John, I want to welcome all of our callers, as well as those listening to our webcast via the Internet. This conference call follows our earnings news release issued yesterday after the markets closed. USEC is making reference to non-GAAP financial information in both our earnings news release and on this conference call. A reconciliation of those non-GAAP financial measures to the comparable GAAP financial measures is contained in the earnings news release. That news release is available on many financial websites as well as our corporate website usec.com. I want to inform all of our listeners that our news releases and SEC filings, including our 10-K, 10-Qs and 8-Ks are available on our website. We expect to file our 10-K for 2007 later today. A replay of this call also will be available later this morning on the USEC website. I would like to remind everyone that certain of the information that we may discuss on this call today maybe considered forward-looking information that involves risk and uncertainty, including assumptions about the future performance of USEC. Our actual results may differ materially from those in our forward-looking statements. Additional information concerning factors that could cause actual results to materially differ from those in our forward-looking statements is contained in our filings with the SEC, including our Annual Report on Form 10-K and subsequent quarterly 10-Qs. Finally, the forward-looking information provided today is time-sensitive and accurate as of today, February 26, 2008. This call is the property of USEC, any redistribution, retransmission or re-broadcast of this call in any form without the expressed written consent of USEC is strictly prohibited. Thank you for your participation, and now I would like to turn the call over to John Welch.

Thank you, Steve, and good morning to you all. Thank you for joining us to discuss our 2007 results. John Barpoulis will provide a detailed review of the financial results in just a moment. Before that, however, I want to give you a status report on the American Centrifuge project. I also want to outline the areas specific for management focus in 2008. We have a lot to cover and I want to leave plenty of time for your questions, so we will jump right in. Taking a quick look at the bottom line upfront, we earned $25.1 million in the fourth quarter and $96.6 million for the full year. Last February when we held this call, we were projecting a small net loss for the year. We were able to significantly improve the results as the year went on, thanks to hard work by the people at our Paducah plant to cut production cost in a five-year power purchase agreement with TVA that gives us additional production flexibility. When you take into account that our 2007 net income is after $126 million in expenses for American Centrifuge, the results are even better. As we go forward you will see a strong management emphasis on maintaining our profitability over the next several years, as we transition the gas distribution plant at Paducah to the American Centrifuge plant we’re building in Piketon, Ohio. In addition to our earnings release, we also issued an update yesterday on our continued progress with the American Centrifuge project. I’m sure that for many of you the takeaway was that the price tag for the plant has such gone up substantially. Let me give you my views on our American Centrifuge achievements in 2007, the factors underpinning the cost escalation, and the steps we have ahead…

Thank you, John, and good morning everyone. We want to get to your questions quickly, so I’ll keep my report to the key points. We expect to issue our 10-K report later today and its 125 plus pages have substantial detail. Each quarter I start my report suggesting that investors view our financials over a one-to-two-year period due to the nature of the nuclear fuel business cycle. Reactors are refueled on a 12 to 24 month cycle and that can result in large quarterly swings depending on the timing and mix of deliveries. As you can see with our 2008 guidance, that refueling cycle and the mix of customer deliveries can also cause swings in our annual results. Starting at the top line for the quarter, revenue was $617 million or $73 million more than the same quarter of last year. As is the norm, SWU sales made up the vast majority of the revenue at $536 million, an increase of $174 million or 48% from the same quarter in 2006. SWU sales in the fourth quarter reflected a 33% higher volume of customer deliveries, and an 11% increase in the average price billed to customers. Uranium revenue was $29 million, about $106 million less than the same quarter of last year as both the volume and price declined. U.S. government contracts and other was $52 million, an increase of almost $6 million reflecting additional scope of work performed at the Piketon site under the cold shutdown contract with DOE. Looking at the full-year period, SWU revenue was $233 million, higher than in 2006 due to higher SWU sales volume and average price. Total revenue for the period in 2007 is $1.928 billion, an increase of $79 million over last year. Revenue from SWU in 2007 was $1.571 billion, a…

(Operator Instructions) We will go first to Gabby Kalinsky - Goldman Sachs.

This is Gabby filling in for Albert Kabili. Just had a couple of quick questions. First you mentioned in the call that in September you provided us with some estimates on the cost associated with ACP, came into about $2.7 billion with contingencies, and now you are seeing these costs closer to $3.5 billion. Could you run us through some of the key drivers and provide us with more color behind this big increase? Is it mainly the commodity cost pressures that you are seeing? And secondly, are you thinking about any kind of contingencies to these estimates? I just want to figure out how big the difference will be when you give us another update in the second quarter?

I will take a shot at that and I think you correctly surmise that in the fall we have said $2.3 billion, and that a 15% to 20% contingency was appropriate at that time, and that was really as I had mentioned, was what we were getting back as we were negotiating these contracts for certain parts of the project, and that was reflecting some of that commodity pressure that you talk about. So, if you look at that, what you are really talking about from that point of $2.7 to $2.8 billion to where we are today is about $700 to $800 million worth of difference there, and let me address what’s driving costs higher in those areas. More than half of the increase is driven by a significant increase in expected EPC cost both indirect and direct cost. That’s primarily the floor scope of work, as I mentioned earlier back when we did our target estimate last February, that was at a relatively low design completion of the plant. We are seeing an increase in labor hours, rates, engineering, home office support, construction management and direct fuel costs. And as I said that’s about half of the increase. We also see anticipated centrifuge machine manufacturing and assembling cost increasing in both direct and indirect cost related to project management, supervision, G&A fees, direct labor hour rates and materials. And as we mentioned, we have not been able to achieve the full value engineering that we anticipated in that activity. So where we are in coming to that estimate with the supplier is a much more conservative position until we have demonstrated that value engineering. That is potentially an area of improvement going forward but for where we are right now that makes it up another major portion of…

Okay, thank you. It seems like you have great visibility into 2008. So if I understand you correctly, the cash flows and the deliveries are going to be more back end loaded, is that correct?

Yes, and I think that we’re saying two things: one is that the relative level of SWU deliveries in 2008 compared to 2007 will be lower, but also as indicated that there is a significant amount that is in the fourth quarter and in December. So that is in terms of the delivery levels, that certainly impacts our expected revenues in 2008, but it is even more importantly impacting our current outlook for cash from operations. And again important to reinforce there that as the timing and mix of customer deliveries very much impacts our expected cash from operations and that could shift this year. And we will let you know if things change.

Okay, and one final question. In the press release on the ACP update, there is a comment that you make about AC100 design release will not meet your desired targets for machine cost and performance. Could you please help me understand what this means? Are you referring to the target output that it’s not meeting your targets or is it the reliability of the machines? And how close are you to commerciality?

Okay. Let me take a shot at that, and Phil back me up; keep me out of trouble. We do anticipate that this initial design release will have a SWU performance of 350 SWU. Nothing has changed on that. When we say this initial design release won’t meet our targets for performance, we are really talking about performance other than SWU efficiency, and we still need to validate and give ourselves confirmation that we have performance margin in certain operating environments and on a hand full of components. It’s a relatively small number, but there is additional testing that will be required. Phil, anything you wanted to add beyond that?

It’s just that we will be continuing to do Lead Cascade operations to prove out and validate these margins that we are looking for. We are in the process of Lead Cascade operations now that we will put prototype components in as the year goes on, and we will finalize design as we continue the testing of those components for the AC100 machine that we will then build and then a cascade by the end of the year and operate in –2009. All of which we’ll be intending to validate the margins for those components that John referred to. So 350 SWU performance is there. We are very confident of it, and we just want to make sure that we validate the margins that we need for all of the components.

Our next question will come from Mark Manley - Natixis Bleichroeder.

Back on the ACP cost estimates, I wanted to drill down on how the numbers are calculated. How much of the new estimate of $3.5 million is based on assumptions of future material and labor price increases, and can you give me a sense of sensitivities for that?

I don’t have the specific numbers on that, John, do you want to?

Mark, I think it is important to emphasize where we are in the cost estimates in our budgeting process. I think just to reinforce there, we are negotiating with our suppliers on their respective scopes and costs for the American Centrifuge commercial plant. We are not done in those negotiations and we really plan to continue into the second quarter, at which time we will produce a project budget. And so what we are trying to provide investors right now is our best current snapshot of where we are. We’ve published the number because of the material increase that we are seeing in our negotiations compared to our earlier estimates. I just want to reinforce as John mentioned earlier, our suppliers are working with much more detailed but not yet final designs for the machine and EPC scope, including balance of plant. Again, our key suppliers are working at a very detailed or breakdown structure level, and so as we have additional information, largely as we emerge from the project budgeting process, we will share a greater level of detail on specifics.

And just to emphasize, I mentioned earlier that carbon fiber is one area that we have tied down, we have completed the contract for all of the casings, so all of the steel associated with the casings is tied down.

It was about $500 million almost in contracts for materials and commodities.

And maybe on those and on future ones, I got the impression that a lot of your contracts were on a cost plus basis for the moment but it sounds like your carbon fiber and steel would be on a fixed cost basis. Of the total what do you expect to be cost plus and could you confirm the structure of the carbon fiber and steel contracts?

Sure. I think, as we described in our disclosures and at previous conversations, currently we are operating under cost reimbursable type contracts, and we’re looking to migrate more toward cost plus incentives and/or fixed-price type contracts. The two contracts, I think that we issued 8-Ks regarding back in August I think are good examples of how we are seeking to address commodity risk in the project, again the ATK-Hexcel contract with respect to carbon fiber addressed our carbon fiber needs for project rotors, and we are not subject to carbon fiber risk for that piece that had an inflation, a GDP type of escalation component. And so that is an example of how we are looking to address materials cost. On the steel casings, within that contract, we do have steel commodity risk, but when we place the order for the steel, that risk is addressed. And so, I think those are examples of the contracting philosophy. However, I think we can say that we don’t expect to reach an agreement with our EPC contractor on a fixed price type of arrangement. We don’t believe that’s market-based on the feedback we received. So, I think what we see there is that we expect to then therefore contract at a lower level in order to again address both commodity and other cost risks for the project. And so, you will likely see more reports from us on additional contracts that we’ll be executing.

The distinction there is between buying materials and labor. And buying materials is a lot more definition with respect to the cost, and we have that embedded in the contracting philosophy. With respect to the labor component for EPC and for the manufacturing, we are moving from originally cost contracts to cost plus incentive to drive those costs down and provide incentive for all parties to hit the targets we’ve been looking at.

Okay. And then just finally in the press release you talk about possibly extending the timeframe of the APC project and doing more value engineering to get costs down, or looking at that as an option. What do you think the chances are of that and how long might that get extended?

As you would expect, we are looking at how most cost-effectively balance risk cost schedule. And as I have said to you all before, we are not going to do anything stupid in this thing, if a little more time of testing retires risk and allows us to do better from a cost perspective, we will look at that very hard and do that trade-off. In that context, clearly if you’re going to do some like as you are playing that under the context of your overall business. From where we are today to where we were in 2006 looking at the viability of continuing to operate the Paducah plant, we’re in a much different position because of our ability to underfeed; our ability to get a better price for this SWU that we’re selling; our recent contracts that are reflective of that. Paducah provides a very good buffer relative to startup of the American Centrifuge. So I think that that description is code word for, when we come out with a budget on this thing, we will have also tried to drawn it through a knothole of managing the risk side of the equation, looking at our overall business operation and trying to put the most cost-effective plan in place. That’s why when I talked about two of my major objectives this year are deal with transition issues and startup issues associated with the ACP because we got to play that out in the context of the entire business, fortunately which is a lot better looking than it was right after we saw a 50% increase in power.

Next we will go to Lucy Watson - Jefferies & Company. Lucy Watson - Jefferies & Company : I just had a question about the contracts that you currently have in your backlog. All those being equal, would you expect SWU gross profit margin to be up or down in 2009 from 2008?

I think that we aren’t providing specific guidance at this point for 2009. Clearly in our outlook we are trying to give our investors a sense for very important trends. And so the information that we are providing for 2009, I think SWU deliveries are up, we expect average prices under those contracts to be up, but with respect to the cost side we mentioned there that the cost for purchase prices from Russia are increasing and that is an area of uncertainty in terms of providing actual guidance at this point for 2009. Bob?

Nothing to add there. Lucy Watson - Jefferies & Company : Okay. And as you consider potential delays to the ACP project, are you looking to push back when you begin initial production in customer sales? Or are you looking for more of a gradual ramp-up of capacity after the initial production comes on stream?

We’re not at this point looking to change schedule at all. I think as John was mentioning, the overall cost and schedule are part of our project budget review and analysis. I think two other very important factors are with respect to customer contracts and progress that we make there and also our overall detailed financing plan.

Next we will go to Tom Lewis - Century Management.

First question, you say in your press release that this year you expect prices, Bill, to be flat with last year, which is a bit at odds with the trend of the way that your contracts roll through. Was that just a reflection of the mix of how contracts underlying the deliveries were assigned or is there something else there that causes this departure from an otherwise favorable trend in SWU bill price?

No, as John said we are going to see prices continue to go up in 2009 but remain flat, a slight uptick in 2008, and that is simply the way that the contract mixes have come. We are having a lower volume of deliveries, and so in 2009 we will be adding more of the new deliveries under the higher price contracts.

Okay. And have you gotten any closer to being able to determine what kind of depreciable life you are going to assign to your Centrifuge units?

Tom, what we have said is that we are looking at a 30-year life for the plant. I think the lease is 36 years, all-in. I think an important analysis that we are going through, Tom, is upfront versus operating costs and some different tradeoffs that we are looking out there. So that, I don’t think will impact depreciable life but I think it will certainly impact upfront in an ongoing cost profiles.

Okay. So, as I am trying to think about how these cost increases in your capital cost affect your production costs down the road. And I am thinking in terms of depreciation expense per SWU. We all have to try to form our judgments there, and get a sense, “Okay, so it’s a couple of 100 million more, how much is that move the needle?” Should I think of the depreciation of, not the whole plant but on the unit basis, should I think about the depreciable life of a centrifuge or perhaps even a component within that centrifuge as being something different than 30 years?

I certainly wouldn’t look down at that level detail. I can tell you that since this is a relatively novel facility for U.S. GAAP purposes, we are certainly working now on exactly how things should be depreciated. So, our thinking and our analysis around our accounting are evolving. So, I think it’s premature to provide a greater level of detail there beyond the 30 year.

Okay. And last question, is there anything you can think about whereby these cost pressures that you face to build enrichment capacity, where a competitor for whatever reason might not be facing the exact same cost pressures?

No, we believe very strongly that the cost pressures we are seeing, our competitors are seeing, in fact perhaps more so with different currency impacts.

Next, we will go to Brett Levy - Jefferies & Company. Brett Levy - Jefferies & Company : Most of my questions have been asked. Can you talk a little bit as you mentioned that you are working on a debt financing plan later this year? Can you talk about what markets you were looking at, what size you’re looking at, what tenure et cetera? Just tell a little bit around the objectives and the overall amount of debt that you plan on adding this year?

I think, first I will start with our current liquidity status, which is very strong coming out of our securities offerings in the fall, thanks to our investors. We anticipate our investment in ACP will be funded with the cash we have on-hand, which was over $880 million as of December 31. Anticipated cash from existing operations, we’ve got available borrowing capacity under our credit facility, and then proceeds from the debt offerings that you’re mentioning. But I would reinforce our preferred path to raising the debt is through a DOE loan guarantee. But we are also pursuing or evaluating more traditional corporate approaches. As we work to complete the project budget in the second quarter, we will also be working to advance our financing plan. And we hope to be positioned to submit an application to the loan guarantee program, a solicitation for nuclear projects like ours is issued. On the non-guarantee front, again we will be pursuing these in parallel, I certainly will be looking at market conditions, and certainly what makes the most sense in terms of our long-term capital structure, while also maintaining the flexibility to proceed with an expansion of the facility if market conditions warrant them. But as we refine our financing plan, we will certainly provide more information. Brett Levy - Jefferies & Company : And it’s not something where you are prepared to say the size of the transaction at this point?

No, not at this point.

Next we will go to Peter Bonney - QVT Financial.

First, I would like to say that I am very disappointed with the upbeat tone of this conference call. You just announced an ACP cost increase, which should roughly equal to the entire market cap of USEC. This is from my perspective a major failure and I think you owe your investors an apology. The costs you cited as having changed have been increasing for a very long time at this point. And I don’t believe that all of your labor and materials costs have moved 30% in the last two months. I’m extremely unhappy with your failure to issue guidance on the size of the increase last year, despite repeated direct questions in other public forums, and I don’t feel confident that we can believe the $3.5 billion figure. My questions are following: You’ve spoken at length about project milestones and SWU per machine, but not as far as I am aware about ROI or IRR. So first I would strongly urge you to disclose your expectations for ACP’s financial performance. This is a commercial enterprise and as investors we have a right to know whether ACP will provide a reasonable return on our capital. Second, your press release alluded to the possibility of, I think slowing down the rate of spending on ACP. Has the Board considered whether ACP still makes economic sense in light of your new cost expectations?

I will answer that in a couple of ways. First, I think that if you think that this management team is happy about the expected increase in total costs I think you’re sadly mistaken. I think as John outlined, we are negotiating very hard with our suppliers and we are looking at ways to drive down the cost, point one. And point two is any implication that our disclosures do not reflect our best judgment at the time is incorrect as well. As we have said repeatedly, we let our investors know how things stand when we know it, and I would like to reinforce there that we are in the middle of this process on building up this cost budget, and we frankly struggled with exactly what kind of disclosure we should have; we are in the midst of that process and our best snapshot at this point is the $3.5 billion. I think last point would be, we are always looking at overall project economics and I think there to me five key factors drive the economic view: it’s construction costs, it’s operating costs, financing costs and structure, our enrichment market pricing and our competitive position. And as we mentioned with Tom Lewis, we believe that all of our competitors are seeing similar cost pressures, and we believe that will result in upward pressure on enrichment market pricing. We believe strongly in ACP and we believe that it will have a place in the nuclear market. And so, Peter, I appreciate your comments and we will certainly factor that into our disclosure in terms of economic objectives going forward.

Are you prepared to give any figure for what you expect the IRR of the project to be?

I don’t think that it makes sense for us to be disclosing IRR targets, but I do think is what we’ve said that we are certainly looking out for market-based returns.

Okay. I’m not sure what that means, but I would again strongly encourage you to find a way to come up with a disclosure on that front that you are comfortable with.

Thank you and we appreciate it.

And our final question on the call today comes from Baker Burleson - Fox Point Capital.

I know you aren’t thrilled with this call. But I appreciate all the details that you’ve been willing to give us, and it certainly makes the evaluation easier. My question is, I just wanted to double-check some math with you. If we are $3.5 billion now for ACP and $615 million has been spent, there is about $880 million in cash, I get to about $2 billion-ish that you need to finish ACP, and I know you have always said, equity first and then debt. Is that still realistic at this point with $2 billion to go, given the current state of the debt markets?

Yes, we are sticking with our plan and philosophy. I think the other very important piece of the capital equation is our expected cash from operations over the long-term over this time period. As John mentioned, in both his prepared text and in earlier answer, we are in a much different position there than we were a year and half ago. We accomplished a lot in 2007. We also are providing a sense of 2009 with respect to revenues. And so that is an important factor in the capital equation as well. And clearly we are still looking for the remaining capital to be debt, but as we go through this year and we refine that financing plan, we’ll let you know if that changes.

I just wanted to press you on that a little bit, John. You’ve already got quite a bit of debt on the balance sheet. How much can you really put on? I understand there is a possibility of a DOE loan guarantee but as you talk to your bankers, is this going to be an asset-based type facility? Would this be based on more traditional metrics like EBITDA? I’m just really struggling with how you get $2 billion in debt on this enterprise at this point?

Clearly going down the non-government guaranteed path will result in some asset-backed secured financing. There is no doubt there. I think given the strength of our existing operations, we certainly are looking at a more corporate approach to that. And so on the whole, I will continue to be looking at debt, that is our plan and if that changes we will let you know.

Okay. And you’ve spoken a little bit about the improved cash from operations, but as I look 2006, 2007, 2008, cash from operations has been on a pretty steep curve downwards. What is there to make us think that that’s going to get a lot better in 20’09? I know you have said it but what is there to make you think that that trend reverses, and that the legacy business produces enough cash to make a real dent in the $2 billion you need?

I think there are two factors to the response. First is, one needs to look at the level of ACP expense and cash from ops. That’s a very significant factor. So, one needs to back that out to look at the cash contribution from existing operations.

Understood.

And then on the second point that is very specifically why we felt that it was important this year to deviate from past practice and provide a sense for 2009, because of the trend that we see there in terms of revenue.

Got you.

That’s the key driver. And also, that is why we gave more color around the cash that we were expecting around the end of 2008 versus early 2009, because that can change.

This does conclude today’s Q&A session. Mr. Welch, I would like to turn the conference back to you sir for any additional or closing remarks.

Once again we thank you all for your questions this morning. We know in many ways we’re dealing with a tough issue of cost increase. Again from management’s point, we have been working very hard to operate the existing business in a way that adequately is reflective of what you should expect from us and how we manage that business, and what we have been able to garner out of that. It certainly has helped us align our development of the project much better than what we’re looking at a couple of years ago. We worked hard at that; we continue to work very hard on a day-to-day basis at that performance, and we are dealing with a very challenging project that we have got our best efforts and as good a team as we can assemble, and we will continue to work with that. The biggest thing that I would offer you in looking at this revised cost estimate is the level of design maturity for where we’re today and much better knowledge and ability to project into the future, but none of us are happy where we are, but I do think in many ways it’s reflective of the environment we’re trying to deploy this plan. So again we thank for joining us this morning. We look forward to working with all of you.