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EnergySolutions, Inc. (NYSE:ES)

Q3 2009 Earnings Call Transcript

November 5, 2009 10:00 am ET

Executives

John Rasmussen – IR Manager

Steve Creamer – Chairman and CEO

Philip Strawbridge – CFO

Analysts

Sanjay Shrestha – Lazard Capital

Scott Levine – JPMorgan

Al Kaschalk – Wedbush Securities

Jamie Cook – Credit Suisse

Min Cho – FBR Capital Markets

Tim Petrycki – Jesup & Lamont

Dan Mannes – Avondale

Elaine Kwei – Piper Jaffray

Ben Elias – Sterne, Agee

Operator

Good day ladies and gentlemen and welcome to EnergySolutions Incorporated Third Quarter 2009 Earnings Conference Call. My name is Gina and I will be your coordinator for today. At this time, all participants are in a listen-only mode. (Operator Instructions). As a reminder, this conference is being recorded for replay purposes.

I would now like to turn the presentation over to your host for today’s call, Mr. John Rasmussen, Investor Relations Manager. Please proceed.

John Rasmussen

Thank you, Gina and good morning, everyone. Welcome to EnergySolutions third quarter 2009 conference call. With me today are Chairman and Chief Executive Officer, Steve Creamer; our Executive Vice President and Chief Financial Officer, Philip Strawbridge; our Senior Vice President and Chief Accounting Officer, Mark McBride; and our Lead Independent Director, Dave Winder.

Before I turn the call over to Steve, I would like to remind the listeners that during today's call, management’s remarks may contain forward-looking statements within the meaning of Federal Securities law. These remarks include statements concerning plans, objectives, goals, strategies, and projections of future events or performance and underlying assumptions, many of which are based on certain assumptions.

Forward-looking statements involve risks and uncertainties. Although EnergySolutions believes that its plans, intentions, and expectations are reasonable, it may not achieve those plans, intentions or expectations. There are important risks and uncertainties that could cause actual results to differ materially from the forward-looking statements made in this conference call.

Such risks and uncertainties are discussed in the company's Form 10-K for the fiscal year ended December 31st, 2008 and subsequent 10-Qs filed by the company with the Securities and Exchange Commission. These and other risks could cause actual results to differ materially from those expressed in any forward-looking statements made.

Any projections as to the company's future financial performance represent management's estimates as of today, November 5th, 2009. EnergySolutions assumes no obligations to update these projections in the future due to changing conditions or otherwise.

I’ll now turn the call over to our Chairman and Chief Executive Officer, Steve Creamer.

Steve Creamer

Thank you, John and good morning, everyone. Thanks for joining us today. I’ll spend a few minutes addressing the big picture and providing an overview of our business segment. Then I will turn the call over to Philip for a detailed discussion of our financials and for guidance for the remainder of 2009.

We are pleased to generate year-over-year growth in earnings per share in the third quarter, despite a continued challenging environment for generating revenue growth. Our bottom line results benefited from lower interest costs and tax rates. Our overall level of business activity remained lower than normal in the third quarter. This was primarily due to slower-than-expected stimulus-funded work – project work, as well as commercial customers remaining cautious and moving forward on plant waste remediation and disposal projects.

And as you know, a lower level of business activity in our federal and commercial segments tend to have a flow-through effect to our logistics, processing and disposal segment as well. However, over the past month, we have seen some very encouraging signs that stimulus spending is starting to accelerate. In October, over $200 million was disbursed through environmental management projects. This spend rate was much greater than in prior months.

To date, only about 11% of the stimulus funds targeted for waste cleanup has been spent by DOE. This means there is still a great amount of stimulus money to be spent within the next two years. We are optimistic about the impact of stimulus on our federal services and LP&D segments in 2010 and 2011. As on-site cleanup services progress, disposal services will be required and we are well positioned with our Clive facility to capture our share of this business.

With that as an overview, let me discuss some of the highlights within our individual segments. In our federal segment, we had a couple of notable new contract wins. We won a $16 million – we won $16 million in waste remediation contracts in DOE’s Los Alamos National Laboratory. We will be providing services for the retrieval, packaging, and disposition of transuranic waste. We are also part of a winning bid to provide design engineering capabilities to Los Alamos. We are subcontractor to Vigil Enterprises on this project. This IDIQ contract starts in 2010 and runs for five years.

During our third quarter, our Moab project was allocated an additional $22.9 million from stimulus funds. The additional funding will enable us to increase our activity level on this project and accelerate removal of uranium mill tailings away from the Colorado River. With the recent funding, this project has now been allocated $108 million from stimulus funds. By November 17th, we will have accelerated this project to moving twice what the original was of the project and we are on schedule and on budget to be able to – to accomplish this for DOE.

We have – we continue to have good opportunities with our bids on several federal projects. I would like to give you a brief update on where we stand on three. Bids have been submitted for approximately $600 million worth of work on the advanced mixed waste treatment project in Idaho. Our team is one of three finalists for this project. We are minority member of the team. We anticipate that DOE will award this contract in early 2010.

Our second bid relates to the Paducah remediation contract valued at approximately $400 million. We are also a minority team member on this bid and we anticipate that DOE will award this contract in the summer of 2010.

The final bid that I would like to highlight is approximately $3 billion Portsmouth D&D contract. It was recently upsized from $1.6 billion to $3 billion. As a lead team member, it now represents even a larger opportunity to EnergySolutions. Final bids are in the process of being submitted and current estimate is that the award will be made in late 2010.

As I mentioned earlier, we continue to see – we continue to see caution on the part of customers in our commercial segment. We believe that commercial customers will begin moving forward on projects as the market demonstrates some stability along with continued recovery. With ongoing recovery of decontamination and decommissioning trust funds, we are optimistic that we can renew our discussions with the NRC about using these funds for large-component projects. The trust funds have had a rapid recovery that will hopefully demonstrate to the NRC that these funds can be used for proper environmental stewardship.

We have also had some encouraging development with respect to our license stewardship business and the potential agreement with Exelon to acquire the Zion Illinois nuclear reactors. First, the decommissioning fund – trust fund for Zion has recovered substantially from its low in March to – to as a low in March of about $695 million to around $870 million at the end of September, which is higher than the October 2008 number. We are currently updating our own analysis to determine what we believe the value of the fund needs to be in order for us to execute this agreement with Exelon.

Second, we negotiated an amendment to our credit facility that provides us the ability to secure a $50 million letter of credit for the project. We are currently in discussions with Exelon regarding alternative approaches to securing our performance under the Exelon agreement other than providing a $200 million letter of credit that is currently required. Accordingly, the completion of the acquisition of the Zion power plant is dependent upon other things on the continued recovery and stabilization of the value of the decommissioning fund and our ability to reach a mutually agreeable amendment with Exelon regarding the letter of credit.

Finally, Exelon has extended the deadline for closing the license stewardship agreement from December 2009 to December of 2011. We believe this clearly demonstrates their commitment to execute the Zion agreement with EnergySolutions. The combination of these developments gives us an increasing confidence that we can successful resolve the remaining issues and move forward on this project.

Looking on logistics, processing and disposal segment, we do not see a pickup in volume – we did not see a pickup of volumes at Clive, Utah facility in the third quarter. This was due to the factors I’ve already discussed, slow progress in stimulus spending and commercial customers pushing out their plant disposal projects. As I said earlier, we are seeing some encouraging signs that stimulus spending is starting to pick up in the fourth quarter, which would have a positive impact on this segment. We still expect Q4 to be by far the strongest quarter of the year for LP&D.

Moving to the international segment, we continue to execute well on our Magnox contracts and revenue has been relatively stable. Excluding the effects of foreign – relatively stable excluding the effects of foreign currency fluctuations. We continue to be hopeful about the opportunities to disposal of internationally generated material at our Clive facility.

As you know, our ability to import internationally generated material for disposal is subject to litigation and this case is currently proceeding to the appellate process after our victory in our U.S. district court. The state of Utah has decided to continue with the appeals process. So there has been no settlement of the case and therefore, no agreement to share profits with the state of Utah. The appeals court will hear the case in mid-2010 and we continue to feel very confident on our position.

Also, there is legislation in Congress that would strip the NRC of its authority to grant low-level radioactive waste import licenses. The legislation was approved by the House subcommittee this week and the full committee will mark it up sometime later this month. While we expect the legislation to pass the House of Representatives, we do not see the same interest in the bill in the Senate. I think it is very important to know that the U.S. exports are very large portion of its much more dangerous hazardous waste to foreign nations than we are proposing any level of radioactive waste coming into our facility from other nations.

Turning to our other international growth opportunities, we are proceeding with the preparation of our bid for the Dounreay decommissioning project in the U.K. This would be similar to the work that we do under our Magnox contracts. The Dounreay bids are due to submitted in mid-2010.

Looking ahead, while recent – while the recent environment has certainly been challenging, in fact the most challenging that I’ve ever encountered, I am encouraged by the fact that all of the fundamental drivers of our long-term growth remain in tact. There is decades worth of work to be done to clean up the legacy government nuclear weapon sites and there are dozens of nuclear reactors that continue to mature and require – and will require increasing D&D services.

We have consistently spoken about four major catalysts for long-term growth. Increasing our share of the market for Tier 1 federal waste disposal; two, disposal and D&D service opportunities in international markets; our large component business; and license stewardship business. As many of you know, these catalysts have been slow to progress this year. It’s been disappointing.

However, I believe we are starting to see the seeds of our hard work and the persistence as opportunities are coming back. During 2010, we hope to see positive movement in at least one or two of these major catalysts. We believe we are well positioned to deliver improved results next year as business picks up in logistics, processing and disposal units and as stimulus funding increases.

On a final note, before I turn the call over to Philip, I would like to mention that we are very pleased that the Engineering News Record recently named EnergySolutions as the Number One All Environmental Firm for the second year in a row. They also named us as the Number One Nuclear Waste Cleanup Firm and the Number One Environmental Firm Working Abroad. This is a great tribute to the hard work and unique skill sets of our team of over 7,000 worldwide. I would like to thank all of our team members for their commitment to making us a premier firm in this industry.

With that, I’ll turn the call over to Philip. Philip?

Philip Strawbridge

Thanks, Steve. Good morning, everyone and welcome. I’ll be discussing both GAAP and non-GAAP numbers for Q3 and you will find reconciliation to the non-GAAP measures to the GAAP net income in our Q3 earnings release, which hopefully all of you have by now.

First of all, revenues for the third quarter of 2009 were $364.9 million compared with $419.5 million in the third quarter of 2008. The decline of $54.6 million from a year ago includes a negative impact of approximately $31.9 million in foreign currency exchange rate adjustments as the British pound was weakest against the U.S. dollar in the third quarter of 2009 than in the third quarter of 2008.

Gross profit for the third quarter of 2009 was $43.9 million compared to $56.5 million a year ago. Gross margin for the quarter was 12% compared to 13.5% in the third quarter of last year. In general, margins were lower due to lower volumes at Clive, relative to the facility’s fixed costs and due to a shift in the mix of some federal projects. With a couple of higher-margin projects ramping down while we increased revenues on a couple of the lower-margin projects.

SG&A expenses for the third quarter of 2009 were $25.6 million compared with $30.7 million last year. A portion of the decrease is due to the reduced incentive accruals to reflect the projected shortfall of meeting some of our 2009 internal performance targets. We also had a $1.8 million one-time reduction in SG&A, resulting from a true-up in the cumulative amortization of intangible assets recorded in the British pound.

The company de-terminated inappropriately applied authoritative guidance related to the intangible assets and goodwill denominated in foreign currencies. These decreases were partially offset by incremental expenses associated with increased bidding and proposal work at business segment level particularly with respect to the Portsmouth D&D contract as Steve talked about earlier.

Interest expense was $6.4 million compared to $9.8 million last year. The decline is due to the lower level of debt that we are now carrying, as well as lower interest rates. Our effective tax rate was 11.7% in the third quarter of 2009 compared to 30.3% last year. The lower effective tax rate is due to R&D tax credits that we utilized in both the U.S. and U.K. and we expect that our full 2009 effective tax rate to be in the 25% to 27% range for all of 2009. We anticipate our effective tax rate to return to the 32% to 34% range in 2010.

Net income attributable to EnergySolutions for the third quarter of 2009 was $12.9 million or $0.15 a share compared to $10.9 million or $0.12 per share a year ago. Net income attributable to EnergySolutions before the non-cash impact of amortization of intangible assets for the third quarter of 2009 was $17.6 million or $0.20 a share compared with $15.6 million or $0.18 a share a year ago.

EBITDA for the third quarter of 2009 was $31.8 million compared with $36.8 million a year ago. The lower EBITDA is primarily due to lower level of revenue, foreign exchange fluctuations and lower gross margin.

Now, turning to the balance sheet. As of September 30th, 2009, we had $21.4 million in cash and cash equivalents. At the end of the second quarter of 2009, our balance sheet was $49.9 million. We utilized this cash and cash received in August from payment of our efficiency fees from the NDA to pay down our long-term debt by approximately $36 million during the third quarter of 2009. Our goal is to continue to reducing our debt level going forward, although it won’t the same degree as we did in the third quarter. At September 30th, 2009, we had approximately $63 million of availability under our $75 million revolving letter of credit – line of credit.

Now, I’m going to drill down into each of the four business segments. Federal services revenues for the third quarter of 2009 were $77 million compared with $84.3 million last year. The decline is primarily due to lower revenue at one of our consolidated joint ventures following the substantial completion of the construction phase of that project. This was primarily offset by increased revenues at the Moab Atlas Mill Tailings Site project due to higher level of activity as well as increased revenues for our Isotek joint venture, which is a waste remediation project at Oak Ridge National Laboratory.

Income from operations for federal for the third quarter of 2009 was $5.9 million compared with $10.9 million last year. Operating margin was 7.6% compared to 12.9% last year. Operating income and margin declined primarily due to unfavorable project mix shift with more activity occurring at lower-margin projects like the Moab Atlas Mill Tailings project and Isotek and less activity on higher-margin projects such as Savannah River and Hanford sites.

In addition, SG&A expenses in this segment increased due to higher bidding proposal expenses incurred for the submission for the Paducah, Portsmouth D&D proposals as we talked about before. I would also like to point out that a proportionate share of fee earned as a joint venture partner on the Hanford tank farm contract, as well as other our joint venture income as recorded in other income and increased to $2.8 million for the third quarter of 2009 compared to only $900,000 for the third quarter of 2008.

Commercial services revenue for the third quarter of 2009 was $21.3 million compared to $19.2 million last year. The increase in revenue is primarily due to an increase in large component operations related to the Duke McGuire project and an increase in commercial decommissioning revenue due to a project at the Pearl Harbor Navy Shipyard. This was partially offset decreased fuel operations. We expect the Pearl Harbor project to continue to positively impact our commercial decommissioning revenue in Q4.

Income from operations for the third quarter of 2009 was $4.7 million, flat with last year. Operating margin was 22.1% compared to 24.4% last year. The decline in operating margin is primarily due to lower margins on the commercial decommissioning projects during the quarter.

Now, talking about logistics, processing and disposal. Revenues for the third quarter were $52.7 million compared to $66.2 million last year. The decline in revenue is primarily due to lower commercial waste volumes at our Clive, Utah facility. We also had a decline in revenue from our Manufacturing Sciences Corporation subsidiary, which is our manufacturing operations. MSC manufactures tubes that are used in Sellafield for the Magnox fuel reprocessing in the U.K. In the third quarter last year, MSC had a large shipment of those tubes to the U.K. that had positively impacted the revenue.

Income from operations for the third quarter of 2009 for logistics, processing and disposal was $18.2 million compared to $25.5 million last year. Operating margin was 34.5% compared to 38.6% last year. The decline in operating margin is primarily due to less absorption of fixed costs at the Clive facility due to lower volumes as well as flower margins at our manufacturing operations.

Now, turning to the international segment. Excluding the effects of fluctuations of the foreign currency exchange rates, international revenues decreased by $4 million. This decline was primarily due to a lower reimbursable contract cost base for our Magnox contracts. International revenues were also negatively impacted by $31.9 million due to the foreign currency fluctuations. As a result, on a GAAP basis, international revenues for the third quarter of 2009 were $213.9 million compared to $249.8 million last year.

Income from operations for the third quarter of 2009 was $3.6 million compared with $3.3 million last year. Operating margin for the international segment was 1.7% compared to 1.3% last year. The increase in operating income and margin was primarily due to the true-up of amortization expenses for intangible assets in the U.K. that I mentioned earlier. This was partially offset by lower efficiency fees recognized from Magnox, as well as the currency – foreign currency fluctuations.

Now, what I’d like to do is to update our EBITDA guidance. Given the slower progress of the stimulus funds and the continued commercial customer delays that Steve talked about before, we are revising our 2009 EBITDA guidance to a range of $145 million to $150 million. Our previous GAAP EPS guidance remains unchanged. That guidance is $0.50 to $0.60 per share and cash EPS, which excludes the non-cash impact of amortization of intangible assets, is still expected to be in the $0.70 to $0.80 per share range. So again, unchanged.

We are able to keep GAAP EPS guidance unchanged because of the lower interest expense and lower tax rates, driven by our successful pursuit of the R&D tax credits in both the U.S. and U.K.

With that, I’ll open it up for questions for the operator.

Question-and-Answer Session

Operator

(Operator Instructions). And please standby for your first question. And your first question comes from the line of Sanjay Shrestha with Lazard Capital. Please proceed.

Sanjay Shrestha – Lazard Capital

Hi, thank you. Good morning, guys. Just a couple of quick questions here. Obviously, the stimulus money has been somewhat slow to get released and I guess it is kind of what it is, but can you sort of help us put it in context both conservative base case and potentially if all were to go right in 2010 and 2011, what kind of contribution could we get for the EBITDA related to the stimulus money?

Philip Strawbridge

Well, Sanjay – I mean, we haven’t finalized our budget for next year, but certainly it would be significantly higher over the – over 2009 for a couple of reasons. First of all, as we’ve said, it’s been a lot slower on 2009 coming in back, plus originally it was only going to be half a quarter – I mean, half of year and as we’ve said, that’s not really come about. So it will be significantly higher in 2010 and ’11. We think that the real ramp-up will probably occur in Q1, Q2 of 2010 and then will continue strong for 2011. And as far as specifically, I hate to give any guidance at this time on it.

Steve Creamer

I’d just say one of the things that’s really been kind of frustrating is that the Obama administration has been very, very – with all the things that’s happened in the past, very cautious about any chance of fraud and so as they said, we want to you get the money out of the marketplace really place. They also said we want it with zero fraud and so everything has been reviewed – everything got slowed down. What they thought would be 90 days, it turned out to be more like 120 to 130 days.

DOE has done a great job when you figure they have doubled the size of their program. They have done a great job in getting it out, they’ve been better than most agencies, but there has still been – I mean, everyone we hire were spending anywhere from three to four weeks in training and so it’s as much as you want to see the results come out. We are finally past that and the money is starting to flow for procurement, people have learned how to do it. The money is starting to come out now and we are really starting to see some significant changes. The last month has really been much better.

Sanjay Shrestha – Lazard Capital

Great. So one kind of a follow-up on that if I may. So you guys had the – won the first initial contract awards or at least sort of the project that we are going to get money allocated came out. There were a bunch of different projects you guys had already – had a presence or were in a pretty good position to win. Can you just remind us as to – timing, I understand, ’10, ’11 could be lumpy, fluctuate, but can you remind us what was the potential EBITDA opportunity related to all of those projects that you guys were already sort of kind of well positioned to win?

Philip Strawbridge

Well, as we’ve said before, I mean in terms of revenue, what we talked about before was that about a little over $1 billion of the $6 billion is that that we would target. And so – that was specifically within our area. A large – some of the areas that we are targeting of course, even though that’s – only 25% of it is really in a disposal area and when you look at that at the next level, when you look at it on a – what I’ll say is a gross profit opportunity, you’ve got over $100 million of that that would be disposal over those couple of years and again, that’s at the 30%, 40% or higher margins because of Clive.

So good opportunities still exist out there, particularly when you look at Savannah River, Portsmouth, Los Alamos, those are all sites – and Paducah are all sites that we think will be good contributors in terms of disposal.

Sanjay Shrestha – Lazard Capital

Okay, one last question from me. Then I’ll hop back in the queue in the interest of time. Well, how should we think about your tax rate going forward and the second part is you guys briefly sort of some of the large component with the market recovering you guys are really evaluating, at one point you want to move forward with it. What are some of the things we need to know hear or see before we say, “All right, we are now finally at the point where you guys can start to put some of that thing in your backlog, if you would, and start to really execute on these large projects”?

Steve Creamer

Well, on the – I’ll answer the commercial side of things and the Zion – on the license stewardship part where we believe we are very, very focused to having the fund recovered. I wish all of our 401(k)s have recovered as fast and our investments recovered as fast as the Zion plant as because it’s gone from the lower $695 million back up to $870 million, which is pretty remarkable recovery coming back up. We think we are very close – when we were ready to close it, that was at $691 million, but obviously –

Philip Strawbridge

$860 million.

Steve Creamer

$860 million. Yes, $860 million and it’s now at $870 million, but obviously looking forward in what are our investments, we – what we can assume that we can make of the investment by moving it into fixed funds has also gone down a little bit. So we are – but we feel we are very, very close to being able to be at that number. We’ve got to solve the $200 million letter of credit requirement. Exelon, we are meeting weekly with Exelon right now and trying to solve that problem and with the NRC and we are very bullish on trying to get that thing closed and on its way in 2010.

Large components were making that same issue; most of the funds have recovered really well. And where the NRC backed off the large component thing last year, all of a sudden we are making very good points with them saying, listen, and showing them exact examples of how had they have done it, that wouldn't have really affected anything because the funds have recovered that fast.

So the rapid recovery we believe will really help us with NRC to move ahead on the large components, but it’s going to be a slug out I’m sure through 2010. We’ll still have large component projects, but to really get it open – wide open, we are going to – we’ll have a – we’ll be working very hard with NRC and have to just prove to them that some of their staff there say, “Oh, you can’t touch these; these are sacred cows,” but what’s the recovery has shown is that they really can do what they should do, which is proper environmental stewardship, get the stuff off the sites and not have a 104 waste piles around America.

So we are pretty positive that – we are going to work very hard to try to get the NRC to move ahead on those. The timing on that will be just deplorable when they are right out there, ready to go.

Sanjay Shrestha – Lazard Capital

Okay, great.

Philip Strawbridge

And the other – your other question on the tax rate, Sanjay, I mean we expect next year, as I said in our – my discussion, the tax rate to return into the 32%, 34% range. What we had this year was that we pursued early on both in the U.K. and U.S. some research and development tax credits and we were successful there. But what those credits included was actually some credits from last year. So you had kind of this year, which was more significant. Those tax credits in both cases will continue on a little bit next year, but again you won’t have the one-time bank in there, if you will. So 32% to 34% is kind of what we are looking at now.

Sanjay Shrestha – Lazard Capital

Right. Thank you very much, guys.

Operator

Your next question comes from the line of Scott Levine with JPMorgan. Please proceed.

Scott Levine – JPMorgan

Good morning, guys.

Philip Strawbridge

Hey, Scott.

Scott Levine – JPMorgan

Your EBITDA guidance implies a pretty good bump in the fourth quarter, which I think you indicated you expect to be strongest for the LP&D segment. Just wondering if you could provide some additional clarity on what’s expected to drive that.

Philip Strawbridge

Yes, you’ve got a couple of things. We still do have a couple of the stimulus things that we are hopeful to get in Q4. So that’s part of it, but you also have in Q4 in LP&D also a little bit of seasonality because of the – as we’ve talked about before, you got some of the shutdowns that occur on the nuclear plants in the fall.

The other big driver there by the way is international. International is going to step up significantly quarter-over-quarter because if you remember what we said before is what we are changing is that these efficiency fees, is that we put interim milestones in. So just to remind everyone the way it works and it’s a little complicated because their fiscal years are different than ours, but we start negotiating those efficiency fees in the April/May time frame of each year and what we’ve been successful on is putting interim milestones in place.

So what that means is that in that first quarter, which is our second quarter, you really don't see much of the efficiency fees, actually none. And then it’s in the – third quarter has a little bit more, which you’ve seen, but really the fourth quarter is the one that steps up pretty significantly.

So – and then of course, our Q1 and their fourth quarter is still going to be the largest, but not a significant step-up like between Q3 and Q4. So it’s really a combination of international as well as LP&D, but international is pretty significant.

Scott Levine – JPMorgan

Okay. And focusing on the stimulus again, is that a situation where the DOE has been slow broadly speaking or does it really differ site by site and is that a question of the type of work or how much LP&D work more specifically you are doing on an individual project that really is more of a driver of the disappointment in the timing?

Steve Creamer

No, I think it’s pretty system-wide across the board. It’s just trying to get people in, get them trained, do the all the procurement reviews that’s been required by OMB. It’s been pretty much across the board in trying to get people up, get them trained, get them off board and get them going. Some of the ones, for example our top contract is probably a little ahead up in Seattle, up in Hanford because it was basically just accelerating work and there are workers up who are fairly trained and so we are able to move that one up faster.

Most of the bundling [ph] dollars go to what they call shovel-ready projects, which is D&D and tearing down the buildings and doing things like that. A lot of those, for example in Paducah right now has been slow or imports right now have been slow because before they can tear them down they have to have an approval from the – we have to prepare the paperwork, it has to go to the DOE, DOE has to approve it regionally, then it has to go the Environmental Department in Ohio and that’s just taken – even though they want to push it fast, some people go home at 5 o’clock every night and some – rest of us don't go home at 5 o’clock every night but those who go home at 5 o’clock every night can slow that process down some.

So that's been the biggest thing. It’s been just trying to get through the regulatory red tape to get it done, but I think now the pipeline is up to where it’s going to flow pretty well. I mean, they are really getting – the White House obviously is putting a lot of pressure down on all the agencies to get people hired, get them on the job, get them moving. They want to see this money spent.

So we are starting to see some real emphasis on pushing to make sure these approvals are getting done quicker so things will move and most of the projects we are doing do have a lot of disposal in them because they have – they are tearing down buildings and buildings create waste and tearing that equipment and doing things like that rather than the really high consequence waste they wanted – high consequence waste like spent nuclear fuel and different things like that. So the stimulus should be really good for us in ’10 and ’11. We are very excited about it.

Scott Levine – JPMorgan

One last one if I may. On license stewardships, sounds like you are working on trying to get Zion closed, but could you update us with regard to any negotiations you have with other prospects, there are other things going on where you see maybe – or maybe can rough out an expectation for time frame for a second closure if the first one goes according to plan?

Steve Creamer

Well, we still have the letters of intent signed on the second one. And we are just trying to get – if we get the first one, what we felt like is if we get the first one off and running that we are still in constant – talking with them and moving ahead that way, but we need to get number one done and the NRC comfortable with number one and then we are planning to move right back on the schedule of trying to close one a year. That’s what our intent was originally and it’s still our intent. We think that’s still the plan and an achievable plan to work on.

Scott Levine – JPMorgan

Thank you.

Operator

Your next question comes from the line of Al Kaschalk with Wedbush Securities. Please proceed.

Al Kaschalk – Wedbush Securities

Good morning, guys.

Philip Strawbridge

Good morning, Al.

Al Kaschalk – Wedbush Securities

I wanted – really just have one question to focus on and to get an update and I’m just going to press you a little bit on that, probably an opportunity maybe I don't say a reset the table, but on the dialog with the Exelon related to Zion, I think there is two parts that need to move along here. One is of course, kind of agreement with Zion and then two, the NRC approval too.

Can you talk about maybe what’s changed recently in the level of negotiations or discussions with Exelon and then two, how should we start to think about time frame on progress given what we think, at least from my perspective, someone who may not be as incentivized as you are to sign something else? So just hopefully get framed that out a little bit better for us, if you will.

Steve Creamer

Our discussions have recently moved to the highest levels inside of Exelon with the – I’ll say the C group. And we are meeting literally on a week – on a weekly basis with them to try to figure out a way to get this done and move it forward. They would also – in Illinois, they would also like to see the jobs created very much and they recognize – the unions are supporting as well, the Illinois government is supporting this as well and they feel like it’s a very positive thing.

Exelon is paying a lot of attention to this right now. They – even though generating power is their main business, they also see that it’s a – this would be a very positive thing for them moving forward with their business. And so we are moving ahead really well. It really comes down the LC and we are just working very hard on that, trying to figure out a way that can work for both of us on how we can get this thing done without – and still maintain – if the credit markets return backward, they want to sign this obviously. You could walk into Citibank and get a synthetic letter of credit without even thinking twice, but – ever agree to it.

I think Exelon is reviewing what the risk really is and as they are looking at the risk, I thin they recognize that they over-ask in what they ask and that’s the point we are trying to point to them and to the NRC also that they are well protected under the contract the way it is without having all of this out there, but it does take time to get this done.

We are hopeful – I mean, it’s hard to promise, I mean – the optimistic me would say we are very close and – but there is a lot of – lot of attorneys and lot of risk managers and things like that we got to satisfy on the thing. So – but all I can tell you is there is nothing that I’m more focused on than getting that thing closed as soon as we possibly can.

Philip Strawbridge

And Al, just one clarification point. You asked also about the NRC. The fact is we have approval from the NRC. We received approval from them this last year. But the – if we change the letter of credit, because in their order, we have to go back and get their approval. But again, it’s really the way that’s based on and we are subject to Exelon discussion than anything else. So just to clarify, we – under the current agreement, we actually do have approval from the NRC.

Al Kaschalk – Wedbush Securities

Okay. So would it be fair to say if things came together, whatever time frame, if it’s mid-quarter – first quarter 2010, that you need another 45 or 60 days with paperwork to move along or are we six months post on a type of announcement that we’ve got an agreement and then work could commence. How should – I realize there is a lot of legal paperwork that’s going to be coming, but – ?

Steve Creamer

By the time – I mean, if we had it worked out with the NRC next month, it would take us about 90 days to get the paperwork signed and probably another 90 days to be up and actually working on the project.

Al Kaschalk – Wedbush Securities

Okay. Thank you very much.

Operator

And your next question comes from the line of Jamie Cook with Credit Suisse. Please proceed.

Jamie Cook – Credit Suisse

Hi, good morning.

Philip Strawbridge

Hey Jamie, how are you?

Jamie Cook – Credit Suisse

Good. Just another question on 2010 and how we sort of think about the progression of these awards. I mean, the – so – I mean, I would presume just – I mean, you laid out Paducah’s summer of 2010, Portsmouth is I think you said late 2010. I mean, unless you get the advanced mixed waste, the sort of right way to think about it is if you do have earnings growth in 2010, it’s really back-end loaded. I mean, is that the right way to think about it? Because I'm assuming the commercial stuff is going to – while it could be – I’m assuming that takes longer than federal unless you can correct me if you think I’m wrong.

Philip Strawbridge

Yes, I mean I think that’s right. I mean, especially on new awards as we talked about. Portsmouth is the big one where we are the lead. But I would say, even though we say we are minority partner on advanced mixed waste and on Paducah, those are important because our role in both of those cases are we are the waste managers. So – but it is unlikely – I mean, you are exactly right that we would see much of an impact until the latter half.

Jamie Cook – Credit Suisse

Okay. That’s more of a back-end driven?

Philip Strawbridge

Yes. One of the things, one of the exceptions in it’s – makes a little more complicated because we don't show it going through federal, but in fact it is and that’s when we are going to get highlighted is our Hanford Tank farm contract. That’ continued to ramp up, that’s what we’ve mentioned in my discussion about joint venture income and is – this quarter was $2.8 million. So that will continue to slowly ramp up probably throughout the year. So that’s going to be a positive at the bottom line.

Jamie Cook – Credit Suisse

Would you care to estimate how much incremental that could be in 2010 versus 2009 on that project alone? You already have it and so you don't need to win it?

Philip Strawbridge

Yes, that's right. I mean, it’s going to step up between – it’s going step up right now as we said it’s about – it’s $2.2 million of the $2.8 million of joint venture. So it will jump up another $300,000 to $500,000 a quarter – next year.

Jamie Cook – Credit Suisse

Okay. And then – I guess, just my last question because we are all focused on the new award site or business opportunities, but as you sit here today, is there anything that we should be thinking about across headwinds that you have in 2010 that perhaps for some reason you’ve been having in 2009?

Philip Strawbridge

Not really. I mean, we will have a little bit – one of the things that you’ve seen in terms of our CapEx is that we have implemented or we’re in the process of implementing a new oracle system. So we’ve been capitalizing the cost of that. So a little bit of that will flow through. But other than that, I can’t see any significant –

Steve Creamer

If anything, we’ll remain extremely – we are really – through our budget session this year, we are really looking at every dollar of SG&A and really trying to be the pretty best managers for our shareholders we can be. So we are really trying to put – obviously, this year we’ve been watching it very close, but we are trying to really go back and evaluate every dollar we spend to make sure that if the spending are necessary.

Jamie Cook – Credit Suisse

And then – sorry, just last question, Steve. I don't think you mentioned anything on Sellafield in the prepared comments or it came up in Q&A. Any update on that or was that just sort of dead?

Steve Creamer

They are just – they are moving – they are right now – they are doing a great job, but they’re really struggling to get – I mean, they’ve got a lot of extra – they’ve got a lot of people working and they’re starting to break it down. They’ve got a lot of teams in there, it’s just going lot slower than I think they or the NDA anticipated in order for them to really start making any change and do anything. They’ve had a lot of headwinds. It wasn't – they didn’t have near the – I mean, with Magnox it was very pleasant when we moved in and took it over.

The changes have been easy to people who support this and everything has worked along. From outside looking and then from what we hear from the NDA, in the case of Sellafield it is – they are doing a great job, but they are finding a lot of balance to try to get it toward the reading and to make some changes. They still – they are still not putting anything out in the Tier 2 market at all right now. That was supposed to have started six months ago. So we are just watching and waiting.

Jamie Cook – Credit Suisse

Okay. But the – I mean, the fact that you haven't been talking about – I would say, you are less optimistic that that’s a 2010 opportunity.

Steve Creamer

Yes, I would say. I think it’s going to be – with everything they are facing over there, I think it’s going to later – if anything, late 2010.

Jamie Cook – Credit Suisse

Okay, great. Thank you. I’ll get back in queue.

Operator

Your next question comes from the line of Min Cho with FBR Capital Markets. Please proceed.

Min Cho – FBR Capital Markets

Good morning.

Philip Strawbridge

Good morning, Min.

Min Cho – FBR Capital Markets

Most of my questions have been answered here, but Philip, I did have a question about your EBITDA guidance for 2009. So we actually – you took down guidance last quarter for the full year because of the slowdown in stimulus spending. Are you seeing an actual slowdown in the – like ongoing work tied to the – because of the stimulus funds that have been coming out?

Philip Strawbridge

I won’t say we’ve been seeing a slowdown in the DOE ongoing work. The slowdown really is in our – as Steve mentioned, in our commercial segment. That’s really been the one that’s been – the one that’s significantly slower. It’s just that – we had hoped as we said last quarter that stimulus would start to be making up for part of that, but it hasn't. It’s been slower.

Min Cho – FBR Capital Markets

Okay.

Steve Creamer

Historically, we’ve always made $10 million, $15 million, $20 million of EBITDA off of one-time cleanup projects – commercial cleanup projects where the – a good example would be the Tronox project up in Chicago where they cleanup the old tailings from the – or the tailings we are making from the thorium, we are making the mantels for the Colman Lanterns and that – they’ve really slowed that project back because that one happened to be in bankruptcy were thrown offs and – but there has always been four or five or six of those coming out and with all companies kind of conserving cash, that’s where we’ve seen that segment of the market really draw back.

And we think that will – as people get more confidence in the recovery and feel better about it going (inaudible) jobs there and the EPA orders that mean – that tell these people they have to clean them up, obviously you can delay things and the whole government hasn’t been very focused on those very much. So we think as the recovery comes back and things getting along, more confidence comes, people will start spending money there. Again, we are continuation in conversations on a lot of projects and hopefully we’ll see some of them come out either late this year or early next year.

Philip Strawbridge

Yes. And I think one of the key things there, Min, is that – and I know people are probably tired of hearing it and certainly we are more disappointed than most, but is that these projects are delayed. One of the great things about the nuclear industry, they don't go away, they’re just delayed.

Min Cho – FBR Capital Markets

Okay. And again, kind of on that, in terms of the Savannah River depleted uranium opportunity, is that now – is that included in your EBITDA guidance? In other words, is that end up being zero in the fourth quarter, does that bring us to the low end of your guidance or could that potentially bring you below?

Philip Strawbridge

I think it would bring us to the low end of the guidance.

Steve Creamer

Yes, it brings us to the low end of the guidance.

Min Cho – FBR Capital Markets

Okay. And then also, if you could discuss – we haven't talked about international very much, but I know in the last call you had mentioned some project management opportunities in Germany and China, Italy, outside of the importation of ways and then things like that, but can you just talk about if there is any change in that opportunity or if you are seeing any type of acceleration internationally?

Steve Creamer

We are – we feel good about where we are going. Obviously, it’s hard, it’s a slugfest because there is – it’s hard to break into those deals, but we are working on with joint venture partners over there right now and we feel several companies right now in Italy and Germany and especially that we’ve got some very targeted opportunities that we are working very hard on to close. And hopefully, we’ll be able to get some of those out in 2010. We’ve really put some good opportunities and with some great partners that we think we are going to have some good opportunities on.

Min Cho – FBR Capital Markets

Okay.

Steve Creamer

It’s not going to big money in 2010, but we think it will be a good start in 2010.

Min Cho – FBR Capital Markets

Okay, maybe. Okay. And then finally, just a quick question. I know you were talking about the timing of stimulus funding going to the various DOE sites, why do you think Moab was able to receive the full funding so quickly where the others are – have been so much slower?

Steve Creamer

Because we are darn good. We were – it’s a project easier to – easier than lot of them to accelerate. It’s the perfect type of job to do that, plus we are prepared, we are ready to do it. We – it’s the type of job that you can really just hire more people, put more equipment and get things going and that’s one of the reasons we got a significant amount and why they gave us more in the third quarter.

And we are talking to them to giving us some more because we really can – it’s a project we can accelerate very easily and on all these sites, a lot them had to go back as they stayed back through the regional offices of DOE and stuff. And to be honest, the DOE over Moab has been very, very supportive and they moved paperwork very rapidly and that seems to be one of the bigger holdups getting through the – and the state of Utah has been very positive in supporting what’s been going on. So it’s really how the local federal office and the state offices are responding and how fast they are moving paperwork. We’ve been very successful and we’ve been very focused on getting that done.

Min Cho – FBR Capital Markets

Okay, great. Thank you very much.

Operator

Your next question comes from the line of Tim Petrycki with Jesup & Lamont. Please proceed.

Tim Petrycki – Jesup & Lamont

Hi, good morning.

Steve Creamer

Hey, Tim. How are you?

Tim Petrycki – Jesup & Lamont

Good. Thanks for the overview. Just some housekeeping questions. On the federal side, the SG&A relative to federal is a little bit higher. You stated that was because of some bidding work. Is that going to continue in the fourth quarter or should that kind of come back down?

Philip Strawbridge

It will continue a little bit in the fourth quarter, because we still – as we said, you’ve got a little bit of the Portsmouth job still being done because we are going to be submitting that I think within the next two weeks. They’ve delayed that project a little bit.

Steve Creamer

Those are in like November 10th or 11th, but it’s –

Philip Strawbridge

But it steps down a little bit.

Steve Creamer

Yes.

Philip Strawbridge

It does step down from Q3 into Q4.

Tim Petrycki – Jesup & Lamont

Got it. And I think you mentioned in terms of the corporate overhead, you had reversed that of some accruals. So would you see that step up a little bit sequentially from the third or the fourth quarter?

Philip Strawbridge

That’s right. I mean, what we did – what we did as we said before is that as we go along through the year, we accrue for bonuses assuming you would bank for bonus targets. So as we got into Q3, it was obvious that we were going to make all of our goals and so we reversed those out. So you’ve got a couple of quarters that are reversing against that third quarter. So it will step up in Q4.

Tim Petrycki – Jesup & Lamont

And then one of the questions just about the industry overall, I mean there is a somewhat well documented fact that someone sent a large component for bulk survey. I’ve been hearing it’s not really going that well whatsoever. Is this an opportunity for you to kind of maybe go to the NRC and really trying to tighten that loophole, make sure that people don't use bulk survey to dispose the large components?

Steve Creamer

I think they found us fail miserably and we keep pointing that out to the NRC and NRC recognizes that – we think the utility recognizes it and we think the company that has the contract recognizes it. So they are – we are trying to work with them right now to solve the problem because it is a – in some of these things, the only thing you can do with them is and the proper thing to do with them is just to bury them and put them away for the – they are going – there are some things that it can do that they work on, but when it comes to steam generator, it’s very, very difficult to bulk release the steam generator.

Tim Petrycki – Jesup & Lamont

Seem to be a bit of reach.

Steve Creamer

Yes.

Tim Petrycki – Jesup & Lamont

And then finally, in terms of paying down additional debt that you’ve done a great job of over the last year [ph] de-leveraging and I think you mentioned you are going to pay a little bit more down in the fourth quarter.

Philip Strawbridge

No. What we said is that through the year we will be paying more down. We’ll evaluate the paying down Q4 as it comes, but right now, we don't anticipate paying much down if we do.

Tim Petrycki – Jesup & Lamont

Okay. Thanks, guys.

Operator

Next question comes from the line of Dan Mannes, Avondale. Please proceed.

Dan Mannes – Avondale

Hey, everybody. Two – really one sort of area I want to follow-up on, depleted uranium real quick. It sounds like – so in your guidance, you still have a piece of Savannah River depleted uranium shipment. Can you a little bit about the legal aspects there? I mean, my understanding is the NRC completely allows it, but for some reason the state seems to think it has a different jurisdiction. Can you give us a little color on what that potential impact is and if – and how broad the depleted uranium is beyond just what you are doing at Savannah River?

Steve Creamer

Well, I hesitate to say too much because I know there is press on that will – any I say will be on the front page of the newspaper tomorrow morning. So I’ll just say that we believe that the – as we have publicly said, that the state is not acting appropriately and we will – as you know, we are not – we will protect our shareholders’ interest in this matter. We firmly believe that we have the right to take it, we firmly believe we've got a lot of the things that are being set out there are very much lies and half-truths to try to stir people up and we will protect the company’s and our shareholders’ rights on this matter. And I’ll just leave it at that.

Philip Strawbridge

Yes. And I’d just comment that really DU overall is a very small part of our disposal opportunity. But as Steve said, it is – we have a permit, the NRC acknowledges we have a permit and the NRC is evaluating the whole situation.

Dan Mannes – Avondale

So this is one – one effectively shipment that happened to be in guidance for 2009 that maybe delayed? So – and we shouldn’t look at anything more broad than that?

Philip Strawbridge

That’s right. That’s it, yes.

Dan Mannes – Avondale

Got it. And then – just on 2010 real quick, I mean, we talked a little about the timing and I know you are not giving out real guidance yet, there is just – it seems like there is – it seems like really when we look at 2010 versus 2009, I mean we see a lot of similarities with the uptick from stimulus with maybe if the loss of the one large component job and then Hanford, which you obviously pointed out. What else do we know is in 2010 that’s not in ’09? What else can we really look for and not just things – I mean, things that are sort of already signed and embedded that provide opportunity in ’10 versus what we already know for '09?

Philip Strawbridge

Yes, I mean, you’ve already highlighted most of them, Dan.

Dan Mannes – Avondale

Okay.

Philip Strawbridge

I mean, the fact is that if you look at where we are right now, what we see from an overall perspective is that international will be kind of cruising along as it’s done real well. There is some – a little bit of uptick that’s possible there. LP&D is going to be dependent upon the other segments. The key thing about LP&D is that we do believe the stimulus has to be spent.

And as you heard us say before, even though it’s been disappointing from being so slow, the fact is the government is going to get into kind of a use-or-lose situation and when they do that, they always use it. So I think that’s going to occur. In terms of what we have in hand, we have – the Hanford job is, as we just pointed out, which we’ll continue to crank up. So that’s something that we think that will be positive.

Steve Creamer

We think the more pressure that the White House puts for delivering jobs, the better it will be for our company because the thing that tends to slow decommissioning around the world is the lack of waste path forward and the one thing that we do have here in America, which is why there is those ways pass forward and handle tremendous volumes.

Back in 2005, we handled 25 million cubic feet of waste through Clive and right now, we are doing about 4 million to 5 million. So we have tremendous ability to ramp up and we can make – we can help DOE be extremely successful on the stimulus and we are working with every contractor to show them how we can help them accelerate what they are doing, much faster than they are doing right now. So – and it’s starting to – we think it’s starting to be heard pretty loudly as people are starting to see where the constipation in their systems are.

Dan Mannes – Avondale

And just one last thing. I mean, on license stewardships, specifically on Zion, from your commentary, the decommissioning trust is borderline getting close to where you need, the NRC supportive. I mean, Exelon can get comfortable with the risk profile in transferring over and having the risk going back, I mean, it seems like the incentive would be with them.

So the only real thing is just figuring out credit support. I guess, given where the credit markets are, can you at least give us some indication what other options are there besides just a straight letter of credit? What else can you provide that would give them comfort because it seems like everything else is wound up?

Philip Strawbridge

Well, I mean that’s where we are evaluating and having a discussion with them is what other types of opportunities can we provide them. Is that in the – from say guaranteeing them more space at Clive or is that something that wouldn't cost the company or cost the project because what we recognize – both companies recognize is that we don't want to just artificially increase the overall costs. So we are in discussions as Steve said, on a weekly basis. We are looking at what those that they would accept.

Dan Mannes – Avondale

Maybe you control the disposal cost at Clive. Are there other costs that are potentially at risk that could cause an overrun that would require this to go back to Exelon and if so, are there other sort of risk mitigants on the rest of the cost structure of the project?

Steve Creamer

Well, I think – where the $200 million came from is that they had had an old, old cost estimate done by another firm and there was a delta involved, but the way we are approaching Zion is basically what we call rip-and-ship where we tear it down and instead of having a whole bunch of people sitting there and scrabbling off of inch of concrete, testing it, trying to get rid of the – minimizing the ways, what we are saying is because at Clive, which is going to tear it down, load it in a railcar, move it to Utah and that’s the big difference. Exelon freely admits that the way we are proposing to do it is by far the least cost alternative and what they’re doing now is going back and looking at what the delta is and what they feel any – if there is any risk at all involved in it.

And so that’s what they are working on right now to come up with and we do – like I said, we are working with the “C” officers and we think that – every indication is that they’re just as excited about trying to get this closed as we are. So we are very hopeful we can get something done.

Philip Strawbridge

And I think as we’ve already mentioned, I mean, they were looking at it from a risk profile built into the spenders, which we can understand. But – and at that time, it didn’t really make any difference to us because it was insignificant in terms of the cost and as you know, the credit market was substantially different than it is today.

Dan Mannes – Avondale

Completely understood. Thank you.

Operator

Your next question comes from the line of Elaine Kwei with Piper Jaffray. Please proceed.

Elaine Kwei – Piper Jaffray

Hi Steve and Philip. Thanks for taking my question.

Philip Strawbridge

Hey, Elaine.

Elaine Kwei – Piper Jaffray

Hi. I was wondering if you could handicap the bids that you do have out for the Idaho, Paducah, and Portsmouth projects. Are these things that you think are 50-50 or do you think you are better than that on each of them and then what portion of the total project would ES represent?

Steve Creamer

On Portsmouth and Paducah, they are – on Idaho and Paducah were fairly small, we are 15% to 20% partners on those. But from a potential earnings standpoint, we are much better because it also – the true waste-up in Idaho was they are coming in with a true waste, it’s helping bring that stuff out, segregate it, figure out where it goes and there is other LP&D revenue that comes out of that, which we look at as being a positive project for us even though we are not in a lead position there.

Paducah was put out for small businesses. So we are partner in a small business bid there. I would say that on those two, we hate to say we are any better. We are probably – if you got three bidders, you are at least 33%.

Elaine Kwei – Piper Jaffray

Right.

Steve Creamer

It’s hard to say. We think we have the best people. On Portsmouth, we are the lead on that when we are at 65% – 60% or 65% partner. We have – we feel very good about that one. I mean, we have tough competition, we think there is four teams bidding on it.

We are the only company that has successfully taken down a gaseous diffusion plant. Our team is made up of people who are the only people in America, the only people in the world who have successfully done it. The people really have a lot to do with this and we think that our approach to it is – will be very – the government will like our approach to it. We’ve tried to answer every (inaudible). We think we have a good chance there, but there are four people bidding it and they are four tough – or three other tough competitors. But we have pretty good feelings about it and I’m sure they’d tell you the same thing.

Elaine Kwei – Piper Jaffray

All right. Just to clarify, you mentioned the 15% to 20%. That would be for both the Idaho and the Paducah opportunities?

Steve Creamer

That’s correct. Yes.

Elaine Kwei – Piper Jaffray

Okay, thank you.

Steve Creamer

On both of those, we’d see more actual operating income coming out of the LP&D division than we would out of the federal services division.

Elaine Kwei – Piper Jaffray

Okay, great. And just real quick, how much large components business or if any, do you see even without an NRC decision next year? Are there any triggers that require companies to being moving on this disposal projects or is this essentially just following broader economic recovery? And then just lastly, is the Duke McGuire project completely done at this point?

Steve Creamer

Duke McGuire is completed. The – we've got a contract with one of our major customers that we signed this year that we’ll be completing next year, which is – I think we've only done like maybe 20% of it. So we’ve got one contract that I think we announced with Exelon that we are bidding it out that we’ve got. That’s a small large-component project; it’s not a large one. There are some others coming up, there are utilities that are – that will be coming out, but we think most of it – the ones that we are seeing right now are 2011 rather than 2010 unless there is a recovery.

So we are really not looking for major impacts in 2010. We look at 2010 as once again going back slugging through the process with the NRC and convincing them that proper stewardship is to manage these things and get them taken care appropriately rather than just throwing them on-site. So – and given the utility’s ability to use the decommissioning fund – I – every one of the funds have recovered quite well. I mean, they were all invested fairly conservatively and as you can see in the Zion, it’s been remarkable recovery in the Zion, in the Zion 1 and they are all kind of invested in kind of the same way. So we think we have a talking story and we plan to work very hard on it in 2010.

Philip Strawbridge

Yes.

Elaine Kwei – Piper Jaffray

Great. Thank you so much.

Operator

Your last question comes from the line of Ben Elias from Sterne, Agee. Please proceed.

Ben Elias – Sterne, Agee

Thank you. Good morning. I have a question about the commercial businesses. You did say there was going to be a bit of a pickup in the back-half of the year because customers have been a little cautious in moving forward on projects. Am I right in thinking that they are – by contract, they do have to execute a certain amount of work with you or ship a certain amount of waste and is that why there is a little bit of confidence that the commercial business would be more back-end loaded or is that not accurate?

Steve Creamer

No, our life-of-plan agreements require them to ship the ongoing waste and they do a very good job of that. So that –

Philip Strawbridge

And that’s not where any of our slowdown is.

Steve Creamer

That’s not where the slowdown is. The slowdowns in the one-on projects both anywhere from the fuel fabrication facility to possibly utility doing some cleanup around one of their sites, but most of the commercial slowdown has been in – an example is the federated project that we did this year down in Houston for Asarco. It was a $20 million cleanup project we did down there.

Those have been the ones that have just really slowed down and there is – it’s amazing when you look at it. As I mentioned, the project up in Chicago that came from making the mantels for the Colman Lanterns that most of us used as kids, those are made out of thorium and so all of the byproducts off of that kind of get spread all over West Chicago and so they’ve been cleaning it up for years.

There is lots of different things that touch their sites all over America that are anywhere from $20 million to $100 million type or $5 million to $100 million type projects that different industries have to clean up and those are the ones that we have seen the real slowdown and just because companies – if you don't have to spend cash, you don't spend it, even though it’s on their balance sheet, it’s a liability. Everybody has been holding cash this year as – because of the time. So that’s where we are seeing the slowdown.

Ben Elias – Sterne, Agee

Okay. And with the trust funds recovering, do you anticipate there is going to be more RFB activity when it comes to decommissioning I think? In late or middle of 2008, there were a couple of other RFBs that were anticipated. I think one was in the $600 million range and the other was about $350 million. We have, I think, 11 more nuclear reactors that have been shut down and waiting decommissioning. Do you think those come back over the next 12 to 24 months?

Steve Creamer

Yes, we believe they will. What we are trying to do – what I think we have to do is everyone – the industry is kind of a “show me” industry. We think getting Zion completed and moving is going to be key to getting those others off and moving. As I said, we’ve got a letter of intent signed on the second one right now. And if we can get the Zion off and moving, if the NRC and everyone happy with it and going, we think that will be – that market will come back very rapidly.

Ben Elias – Sterne, Agee

So that’s a letter on intent on the second decommissioning contract?

Steve Creamer

Yes.

Ben Elias – Sterne, Agee

Is there sort of any estimate on how big that project is?

Steve Creamer

That’s the $600 million.

Ben Elias – Sterne, Agee

Oh, that’s the $600 million? Okay. And finally, the Zion – I think I got this right. You extended the – Exelon extended the closing date from December '09 to December 2010 or was that ’11?

Steve Creamer

’11.

Philip Strawbridge

Just the contract. In other words, just the contract, not the closing – but the expiration of the contract is only after 2011.

Ben Elias – Sterne, Agee

Okay. All right, thank you very much.

Operator

Ladies and gentlemen, thank you for your participation in today’s call. This concludes the presentation. Have a great day.

Philip Strawbridge

Thank you.

Steve Creamer

Thank you, everyone.

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Source: EnergySolutions, Inc. Q3 2009 Earnings Call Transcript
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