Edited by Douglas Harbrecht

PRIVATIZATION ON THE WAY FOR U.S. ENRICHMENT CORP.

President Clinton is set to go ahead with privatization plans of U.S. Enrichment Corp., the quasi-governmental uranium-enrichment processor spun off from the Energy Dept. several years ago, Business Week Online has learned. A White House decision could come by the end of July.

With the President's signature, action will shift from Washington to Wall Street. According to the dual-track privatization plan submitted to the White House in 1995, USEC's board, in consultations with the Treasury Dept., will begin weighing bids from prospective acquirors against the likely proceeds from an initial public offering.

If USEC goes the IPO route, Merrill Lynch & Co. and Morgan Stanley will co-head a syndicate of eight underwriters. If USEC is sold in an M&A transaction, Morgan Stanley will serve as adviser. A source close to USEC indicates that the process would likely be completed early next year.

White House action would set the stage for what could be the largest privatization of a federal agency in U.S. history. Conrail, which did a $1.6 billion IPO in 1987, is the biggest privatization of a federal asset to date, but USEC may top that. The corporation estimated in July, 1995, that an IPO would generate gross proceeds of $1.5 billion to $1.8 billion, plus an "exit dividend" of $600 million to $800 million.

USEC was spun off as part of the Energy Policy Act of 1992, but efforts at privatizing it quickly stalled. One reason for the delays, according to one source who declined to be identified, may have been second thoughts by some lawmakers on Capitol Hill about letting go of a government unit that actually produces revenue for the Treasury. USEC, which enriches uranium for commercial nuclear power plants, generated net income of $313 million on revenues of $1.6 billion in fiscal 1996.

By Phil Zweig in New York