About INTERNATIONAL BUSINESS RELATIONS, LLC (IBR TM )

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2 About INTERNATIONAL BUSINESS RELATIONS, LLC (IBR TM ) INTERNATIONAL BUSINESS RELATIONS, LLC (IBR TM ) was set up in 1991 by a group of researchers and engineers who previously worked at enterprises under the USSR Ministry of Atomic Power and Industry. IBR TM is specialized in consulting & engineering along with project management in nuclear power and nuclear fuel cycle. Leading Russian and foreign companies, as well as state organizations, are constant clients of IBR TM. The IBR TM successful activities are based on high professionalism of the company staff, which implies: Deep knowledge of technologies and operational experience in nuclear power and nuclear fuel cycle; Knowledge of the tools for economic and investment analysis of nuclear technologies; Experience in successful management of nuclear projects. IBR TM strives for expansion and intensification of cooperation with its constant clients and welcomes collaboration with new clients in the interests of further improvement of safety and efficiency of nuclear technologies. International Business Relations, LLC (IBR TM ) info@ibr.ru 2

3 PROJECT TEAM 2017 The IBR TM staff Selected experts International Business Relations, LLC (IBR TM ) info@ibr.ru 3

4 Russian Uranium Enrichment Industry State & Prospects of Development 2017 CONTENTS ABOUT INTERNATIONAL BUSINESS RELATIONS, LLC (IBR TM ) 2 PROJECT TEAM 3 CONTENTS 4 LIST OF TABLES 7 LIST OF FIGURES 10 EXECUTIVE SUMMARY 12 CHAPTER 1 RUSSIAN URANIUM ENRICHMENT INDUSTRY BACKGROUND 17 CHAPTER 2 RUSSIAN URANIUM ENRICHMENT INDUSTRY: MANAGEMENT SYSTEM AND INFRASTRUCTURE 2.1 Reforms in the Russian Nuclear Complex Corporate Structure of the Russian Uranium Enrichment Industry The New Image Program 32 CHAPTER 3 STRATEGY & DEVELOPMENT PROGRAM FOR THE RUSSIAN URANIUM ENRICHMENT INDUSTRY 3.1 Strategy of the SC Rosatom Fuel Division Development through Year Analysis of the SC Rosatom / JSC TVEL / JSC Techsnabexport forecasted world market demand in Russian EUP/ SWU. SC Rosatom / JSC TVEL / JSC Techsnabexport forecast of Russian Uranium Enrichment Industry Development in The Russian uranium enrichment enterprises development strategies & programs Development dynamics of the Russian uranium enrichment industry planned by SC Rosatom / JSC TVEL 45 CHAPTER 4 STATE AND OUTLOOKS FOR THE RUSSIAN URANIUM ENRICHMENT TECHNOLOGIES DEVELOPMENT 4.1 Management system for the development of uranium enrichment technologies Background, state and perspectives in the Russian GC design development 53 4

5 4.3 State and perspectives in the development and production of structural materials for GC State and perspectives in the development of auxiliary technologies and equipment State and perspectives in the development of sublimation & desublimation facilities (SDF) 82 CHAPTER 5 RUSSIAN URANIUM ENRICHMENT INDUSTRY: STATUS AND DEVELOPMENT FORECAST 5.1 Data analysis for the formation of the IBR TM forecast of Russian uranium enrichment industry development IBR TM s forecast for the Russian uranium enrichment industry development Structure of capacity loading in the Russian uranium enrichment industry 99 CHAPTER 6 RUSSIAN URANIUM ENRICHMENT INDUSTRY: REVIEW OF THE MAIN PROJECTS AND INTEGRAL INDICES OF THE ACTIVITIES 6.1 Organization-technological and financial scheme of the Russian uranium enrichment industry product manufacturing & marketing FA supplies to Russian and foreign customers Russian enrichment industry European market Russian enrichment industry region of Asia and Africa Russian enrichment industry American region Integral results of JSC Techsnabexport foreign trade activities in nuclear material and services export 120 CHAPTER 7 RUSSIAN URANIUM ENRICHMENT INDUSTRY: FEED FLOWS 7.1 Structure of feed flows in the Russian uranium enrichment industry Characteristic of some individual feed flows in the Russian enrichment industry Balance of the natural-grade uranium production, import, export, generation and consumption in Russia 125 CHAPTER 8 ANNEX 1 SOME ECONOMIC ASPECTS OF FUNCTIONING OF THE RUSSIAN URANIUM ENRICHMENT INDUSTRY 126 RUSSIA AND CHINA COOPERATION IN TRANSFER OF URANIUM ENRICHMENT TECHNOLOGIES 128 ANNEX 2 INTERNATIONAL URANIUM ENRICHMENT CENTER 130 5

6 ANNEX 3 GENERAL STRUCTURE OF GC BLOCKS OF THE RUSSIAN URANIUM ENRICHMENT ENTERPRISES 134 ANNEX 4 RUSSIAN INDUSTRY ENGAGED IN GC PRODUCTION 140 ANNEX 5 CURRENT STATE & PROSPECTS OF THE RUSSIAN-KAZAKH PROJECT CJSC URANIUM ENRICHMENT CENTER 141 ANNEX 6 TECHNO ECONOMIC INDICES OF THE RUSSIAN URANIUM ENRICHMENT INDUSTRY. TECHNOECONOMIC INDICES OF THE RUSSIAN GC MANUFACTURE INDUSTRY 143 6

7 LIST OF TABLES Table 1.1 Table 2.1 Table 3.1 Table 3.2 Table 3.3 Table 3.4 Table 3.5 Table 3.6 Table 3.7 Table 3.8 Table 4.1 Table 4.2 Table 4.3 Table 4.4 Table 4.5 Table 4.6 Table 4.7 Main events in the history of establishment and development of the Russian uranium enrichment industry List and functions of the enterprises of the Russian uranium enrichment industry Comparison of forecast data (reference scenarios) for the development of global nuclear power: WNA-2011, WNA-2015 и IAEA-2016 Dependence of the economically justified technological tails value on the price of natural-grade uranium hexafluoride and SWU price for the Underfeeding task Estimated depleted uranium reserves accumulated by Russian industries The volume of EUP / SWU production by Russian Enrichment Industry in the period and directions of SWU utilization forecasted by SC Rosatom / JSC TVEL Actual data (2016) and planned dynamics of UECC installed and operational capacities in , Mln. SWU per year Actual data (2016) and planned dynamics of ECP installed and operational capacities in , Mln. SWU per year Actual data (2016) and planned dynamics of SCC installed and operational capacities in , Mln. SWU per year Actual data (2016) and planned dynamics of AECC installed and operational capacities in , Mln. SWU per year GC 1-6 generations technical indices GC 7-10 generations technical indices Characteristics of the GC 1-6 generation rotor design and materials Characteristics of the GC 7-10 generations rotor design and materials GC energy consumption characteristics Schedule of the 9 th generation GC testing Decrease in the price of the generation 9+ GC due to the use of other structural materials in the rotor design (In prices of 2016) Table 4.8 Specific costs for modernization based on the technologies of Generations 9 and 9+, RUR with VAT Table 4.9 Table 4.10 Generation 9+ GC test schedule Qualitative comparative analysis of production/assembly/operation process cycles based on GC 9+ and GC 11 technologies Table 4.11 Chemical composition of the V-96Ts alloy (also known as alloy "1960"), % 7

8 Table 4.12 Table 4.13 Table 4.14 The list and characteristics of structural materials supplied to the Russian GC industry for GC rotor manufacture SSFC-200 summary specifications SSFC T summary specifications Table 4.15 Russian enrichment enterprises capacity factor, % Table 5.1 Table 5.2 Table 5.3 Table 5.4 Table 5.5 Comparison of specific investment characteristics of the URENCO and JSC TVEL technologies Comparison of the specific operating characteristics of the URENCO and JSC TVEL technologies Illustration of the transfer-based price formation for GC assemblies IBR TM forecasted global market demand for Russian origin EUP / SWU & direction of SWU utilization in Cost of goods, products, works, services (ECP) Table 5.6 Directions of enrichment capacities utilization (ECP), % Table 5.7 Table 5.8 Table 5.9 Table 5.10 Table 5.11 Table 5.12 Table 5.13 Table 5.14 Table 5.15 Table 5.16 Table 5.17 Table 5.18 Table 5.19 Table 5.20 Table 5.21 Directions of enrichment capacities utilization (ECP), Mln. SWU LEU 4.5% 235 U production (ECP), tu The amount of natural quality uranium supplied, generated and utilized (ECP), tu Directions of enrichment capacities utilization (UECC), Mln. SWU LEU 4.5% 235 U production (UECC), tu The amount of natural quality uranium supplied, generated and utilized (UECC), tu Directions of enrichment capacities utilization (SCC), Mln. SWU LEU 4.5% 235 U production (SCC), tu The amount of natural quality uranium supplied, generated and utilized (SCC), tu Directions of enrichment capacities utilization (AECC), Mln. SWU LEU 4.5% 235 U production (AECC), tu The amount of natural quality uranium supplied, generated and utilized (AECC), tu Directions of enrichment capacities utilization (Russian industry), Mln. SWU LEU 4.5% 235 U production (Russian industry), tu The amount of natural quality uranium supplied, generated and utilized (Russian industry, LEU 4.5% 235 U), tu 8

9 Table 5.22 Table 5.23 Table 6.1 Estimated output of the final EUP with the required quality (year-average enrichment) by Russian enrichment industry, tu Volume of the natural uranium supply, generation and consumption to/by Russian enrichment industry for production of the EUP with the required quality (year-average enrichment), tu Uranium of natural quality (U3O8, UF6) purchases by JSC TVEL and JSC Techsnabexport, Bln. RUB Table 6.2 SWU transfer prices in Table 6.3 Table 6.4 Table 6.5 Table 6.6 Table 7.1 Table 7.2 Table 8.1 Table 8.2 Table 8.3 Table 8.4 Physical volume of FA and fuel pellets supplied by TVEL in 2011 thru 2016, pc. Quotas for LEU supply to the USA in conformity with amendment to agreement on discontinuance of anti-dumping investigation of uranium products supplies from Russia to the USA (SPAR) dated February 1, 2008 Integral results of JSC Techsnabexport foreign trade activities in export, $ Mln The results of JSC Techsnabexport foreign trade activities in export of nuclear materials and services to specific regions of the world, % of incomes Characteristic of specific feed flows in the Russian uranium conversion and enrichment industry (import) Characteristic of some flows of NU and NU quality products out of the Russia (export) Russian enrichment enterprises SWU net cost Russian enrichment enterprises kg SWU full net cost (net cost + commercial expenses + management expenses) Specific net cost of kg SWU production at the Russian enterprises inclusive of commercial and management costs with regard for other revenues and other costs balance JSC TVEL transfer s prices Table A.5.1 Fulfillment of UEC Project in Table A.6.1 Table A.6.2 Techno economic indices of the Russian uranium enrichment industry (4 enrichment enterprises) Techno economic indices of the Russian GC manufacture industry 9

10 LIST OF FIGURES Figure 1.1 Dynamics of the Russian uranium enrichment industry installed capacity in , Mln. SWU per year Figure 1.2 Dynamics of the Russian uranium enrichment industry nominal capacity in , Mln. SWU per year Figure 1.3 Figure 1.4 Figure 1.5 Figure 1.6 Figure 1.7 Figure 2.1 Share of each enrichment enterprise capacity in the Russian enrichment industry capacity in , Mln. SWU per year The number of different generations GC in the Russian uranium enrichment industry in the period of , Mln pieces Share of GC of the relevant generations in the total number of GC in the Russian uranium enrichment industry in , Mln. SWU per year The share of installed capacity in the Russian uranium enrichment industry supported by different generations GC in the period of , % Dynamics of Russian enrichment industry capacity input/output in , Mln. SWU per year Corporate structure of the Russian uranium enrichment industry Figure 3.1 The Russian uranium enrichment industry installed capacity dynamics in , SC Rosatom / JSC TVEL plans, Mln. SWU per year Figure 3.2 The Russian uranium enrichment industry nominal capacity dynamics in , SC Rosatom / JSC TVEL plans, Mln. SWU per year Figure 3.3 Figure 3.4 Figure 3.5 Figure 3.6 Figure 3.7 Figure 3.8 Figure 4.1 Figure 4.2 Figure 4.3 The enterprises share in installed capacity of the Russian uranium enrichment industry in the period of , %, SC Rosatom / JSC TVEL plans The number of different generations GC in the Russian uranium enrichment industry in the period of , Mln. pieces, SC Rosatom / JSC TVEL plans The share of different generations GC in the Russian uranium enrichment industry in the period of , %, SC Rosatom / JSC TVEL plans The share of installed capacity in the Russian uranium enrichment industry supported by different generations GC in the period of , %, SC Rosatom / JSC TVEL plans Russian uranium enrichment industry installed capacity input/output dynamics in the period of , %, SC Rosatom / JSC TVEL plans Investment dynamics in the development of the Russian uranium enrichment industry in the period of (RUR 60 = $ 1), %, SC Rosatom / JSC TVEL plans Product desublimators at AECC RIF new product desublimators at UECC Heat exchange surface of the Korall product desublimator trial model 10

11 Figure 5.1 Figure 5.2 Figure 5.3 Figure 5.4 Figure 5.5 Figure 5.6 Figure 5.7 Figure 5.8 Figure 5.9 Dynamics of UECC s operating costs ( actual, planned), Million rubles Dynamics of the GC specific cost production (apparently per SWU of installed capacity) Actual ( ) and forecasted ( ) dynamics of UECC Corrected Free Cash Flow UECC, Billion. Rubles Dynamics of installed capacity of the Russian uranium enrichment industry, Mln. SWU per year, IBR forecast Dynamics of nominal capacity of the Russian uranium enrichment industry, Mln. SWU per year, IBR forecast Dynamics of share of each enterprise in total capacity of the Russian enrichment industry, %, IBR forecast Dynamics of changes in the number of GC of different generations in the Russian uranium enrichment industry, Mln. pcs., IBR forecast Dynamics of share of GC of the relevant generations in the total number of GC in the Russian uranium enrichment industry, % IBR forecast Dynamics of share of GC of the relevant generations in the installed capacity of the Russian uranium enrichment industry in the period of , %, IBR forecast Figure 5.10 Russian uranium enrichment industry installed capacity input/output dynamics, %, IBR forecast Figure 5.11 Figure 6.1 Figure 7.1 Investment dynamics in the development of the Russian uranium enrichment industry (RUR 60 = $ 1), $ Mln., IBR forecast The example of FA supplies from data base (Report Nuclear Fuel & FA Production Industry in Russia, Kazakhstan & Ukraine, IBR) Approximate balance of the natural-grade production, import, export, generation and consumption in Russia in 2016 Figure A.3.1 UECC (shop No. 54) Figure A.3.2 Figure A.3.3 Figure A.3.4 Figure A.3.5 Figure A.3.6 ECP SCC AECC UECC shop AECC shop 11

12 EXECUTIVE SUMMARY On June 8, 2006 the RF President Vladimir Putin approved the Program of the RF Nuclear Industry Development aimed at further development of the Russian nuclear complex. The reforms in the Russian nuclear complex based on a new legislation were defined as one of the Program top-priority objectives. Largely, the new nuclear legal base was provided within The issues of principal importance in the new legal base are: Potentiality granted to the Russian civil nuclear complex enterprises to function as joint stock companies; Opportunity granted to the joint stock companies to own and manage power grade nuclear materials and nuclear facilities. By the end of 2009, privatization (incorporation to joint-stock companies) of the federal state unitary enterprises within civil sector of the Russian nuclear complex planned for privatization was largely completed. The period of in corporate development of the Russian nuclear complex nuclear fuel division (uranium mining, conversion, enrichment, nuclear fuel and FA fabrication) is characterized by a string of ill-conceived administrational decisions bringing about several attempts of reforms in the nuclear fuel division corporate structure. A next in turn stage of the Russian nuclear complex nuclear fuel division reforming commenced late in 2009 after decision-making about concentrating the assets in uranium conversion and enrichment, as well as nuclear fuel and FA fabrication, within a single corporate structure set up on the basis of JSC TVEL. By early 2011, actual buildup of the JSC TVEL corporate structure was completed. Reforms in the Russian nuclear complex nuclear fuel division concerned research and production enterprises, besides the division corporate structure, include: Reforms of research and production enterprises internal organizational structures; Reforms of research and production enterprises internal business relations, for improving the economic efficiency of the fuel division functioning as such. Active measures aimed at reduction of management and production costs (inclusive of non-core processes divestiture, transfer of some services and subdivisions to outsourcing, introduction of programs of SC Rosatom thrifty processes ) are taken. The main costs saving measures (mainly connected with enterprises restructuring) were implemented in the period of Enterprises restructuring associated with the withdrawal of non-core assets was largely completed to The measures directed to the costs saving are developing and implementing every year. The Strategy of the SC Rosatom Fuel Division 1 Development was adopted on December 6, The Strategy of the SC Rosatom Fuel Division Development was updated in mid-2013 and at the end of On January 28, 2014, JSC Techsnabexport s Strategy of Development through 2030 was approved. On December 9, 2014, SC Rosatom Strategy Council approved the following documents: Strategy of the Fuel Company TVEL Development through 2030 (Strategy); Business Plan for Fuel Company TVEL for 2015 thru The Strategy of the Fuel Company TVEL Development through 2030 and enrichment enterprises medium-term development programs provide for further upgrading of the Russian uranium enrichment industry and growth of its installed/nominal capacity. In compliance with Strategy of the Fuel Company TVEL Development through 2030, Fuel Company TVEL and Techsnabexport would acquire 42% of the global market of commercial uranium enrichment services (commercial SWU) by 2030 of which: 1 Originally, SC Rosatom Fuel Division was consisted of JSC TVEL and JSC Techsnabexport. At the end of 2013, JSC Techsnabexport was excluded from SC Rosatom Fuel Division. 12

13 20% would fall on TVEL; 22%, on Techsnabexport. As the main scenario for the world nuclear power development of the, SC Rosatom / TVEL are considering the reference scenarios of the WNA-2015 and IAEA-2016 forecasts. In accordance with the Strategy of the Fuel Company TVEL Development through 2030, SC Rosatom / JSC TVEL plan, apart from taking up 42% of the commercial SWU market, to develop an additional uranium enrichment capacity for the economically effective utilization in the following areas: Underfeeding; Enrichment of Accumulated Depleted Uranium Quantities. As shown in the IBR TM analysis, with regard for the three SWU utilization areas, SC Rosatom / JSC TVEL plan the following development dynamics for the Russian uranium enrichment facilities (nominal capacity): 2016 ~ 28.0 million SWU; 2025 ~ 33.0 million SWU; 2030 ~ 37.5 million SWU. At this point in Russia GC of four generations are in commercial operation (6 th (6-th & 6+), 7 th, 8 th and 9 th ). Modern technology of uranium enrichment is based on supercritical GC of the generation 9+, which industrial production was started at the beginning of The project for GC of 10-th generation development was closed in The reason for project closing is the absence of technical & economics advantages of 10-th generation GC in comparison with 9+ generation GC. Allegedly, in 2015 JSC TVEL decided to reduce considerably the R&D on GC-11 due to the absence of obvious economic advantages in the switchover from the GC-9+ technology to the GC-11 technology. Besides: The GC-11 manufacturing and assembly technology is much more complex than the GC-9+ technology; The reliability of GC-11 is lower than that of GC-9+. In , JSC "Production Association" Electrochemical Plant "(ECP) implemented R & D on the justification of operation of the 6 th generation (6 and 6+) GCs in supercritical mode at a rotor rotation frequency of 1,550 Hz, which leads to an increase in the capacity of GC 6 Generation (6 & 6+) to 5.6 SWU per year. In connection with the positive results of R & D, the ECP since the middle of 2017 has begun to modernize the dynamic frequency converters that provide electrical supply to the 6 th generation GC. JSC TVEL plans to close the Isotope Separation Plant (ISP) on the site of JSC Siberian Chemical Combine (SCC), moving the 8 th generation GC to the site of the JSC Production Association Electrochemical Plant (ECP). JSC TVEL argues its decision with the need to optimize the Russian Enrichment Industry. IBR TM experts estimate the likelihood of implementation of this decision as 80%. According to the experts of IBR TM, the decision of JSC TVEL to close the ISP at SCC is based on the desire of TVEL JSC to shift the costs of decommissioning of the ISP SCC from JSC TVEL expenses to the expenses of federal budget from which the Program "Ensuring Nuclear and Radiation Safety for the Period " is funded. In the opinion of IBR TM, the Strategy for the Development of SC Rosatom s Fuel Division until 2030 and, accordingly, the Strategy for the Development of Russian Uranium Enrichment Industry are extremely ambitious and, in the opinion of IBR TM, cannot be implemented in practice due to: The forecasts for the development of the global nuclear power (WNA-2015 & IAEA-2016 reference scenarios on which the forecast by Rosatom / JSC TVEL is based) being too optimistic; The target share at the market of uranium enrichment services (42% by 2030) SC Rosatom / JSC TVEL is being significantly overstated. 13

14 The performance by IBR TM of: An analysis and a forecast for the development of the world nuclear power and the forecast for the EUP / SWU demand corresponding to the world nuclear power development forecast; An analysis and a forecast for the development of companies rendering uranium enrichment services; A comparative feasibility analysis of the technologies used by companies rendering uranium enrichment services with regard for the actual economic environments in the countries in which plants owned by these companies are in operation; An analysis and a forecast for the prices for nuclear materials and services, and a forecast for the optimum tails assay dynamics (or contracted / transactional assay), has made it possible for IBR TM to provide a forecast for the development of Russian uranium enrichment industry which should be to ensure: The production of commercial SWUs in the amounts corresponding to the share of SC Rosatom / JSC TVEL at the market of commercial SWU; Economically reasonable underfeeding (production of extra natural-quality uranium quantities as the result of a difference between the commercial and technical tails assay); Economically reasonable enrichment of the accumulated depleted uranium (production of extra natural-quality uranium quantities). When developing: The forecast for the development of the global EUP / SWU demand which is the function of the world nuclear power development; and The forecast for the development of Russian uranium enrichment industry and the share of Rosatom / JSC TVEL at the market of commercial SWU, IBR TM was taking into account the following factors: Under the present international political-and-economic situation, future activity of SC Rosatom looks rather uncertain; It seems that economic recession, which started in Russia in mid-2014, would last for long. As a result, Russia s capabilities to finance NPPs construction abroad to Russian designs would narrow greatly, which would lead to sagging demand for Russian uranium enrichment products against the pre-crisis forecasts; The drop of prices for fossil energy sources such as oil & gas would preserve at least in the midterm, which would decelerate the rate of nuclear power development the world over; The Russian enrichment industry is provided with competitive technologies for at least in the next 10 years; The Russian industry engaged in manufacture of equipment for the enrichment industry can provide for the needs in the equipment production; In the period the Russian enrichment industry will basically have most of the necessary investment resources for being upgraded; The 6-th generation GC operational life-time was extended from 30 to 35-40; The nominal capacity of at least a part of the 6 th generation (6 and 6+) GC will be increased to 5.6 SWU per year; The commercial production of GC-9+ was started in The GC-9+ will be the main centrifuge until 2035; Economically, as earlier, Russian uranium enrichment industry remains more effective as compared to the best foreign companies (URENCO). To a great extent, this was contributed to by a dramatic fall in the ruble exchange rate against $ and in In Russian industry, the specific investments in the development of the enrichment industry (new build, upgrading) and the specific operating cost of the SWU production are much lower as compared to URENCO and AREVA. 14

15 In accordance with the IBR TM forecast, in terms of nominal capacity, the forecast for the development of Russian uranium enrichment industry looks as follows: Mln. SWU; Mln. SWU; Mln. SWU; Mln. SWU; Mln. SWU. In , Russian uranium enrichment companies, following a period of rather a prolonged reduction in the specific operating costs, have reached a plateau in the specific operating costs (in the ruble equivalent and in the 2015 prices). The capabilities for a further reduction in the specific operating costs (in the ruble equivalent and in the 2015 prices) by uranium enrichment companies have been largely exhausted. There are two factors to influence the dynamics of the specific operating costs on a long-, mid- and short-term evolution horizon of Russian uranium enrichment industry. One of the factors is the switchover from the technology based on gas centrifuges (GC) of generations 6 and 6+ to a technology based on generation 9+ GCs, which leads to a reduction in the specific operating costs through a reduction in the quantity of the equipment maintained, production areas, power consumption and personnel number. The second factor is an increase in wages, an increase in the electricity rates, and an increase in the cost of repairing and maintaining the aging company infrastructures, which leads to an increase in the specific operating costs. In 2017, the GC manufacturers switched to production of generation 9+ GCs. According to plans, the specific production cost of generation 9+ GCs is expected to go down by ~ 45%, as compared to the specific cost of generation 9 GCs, as soon as in Due to quality problems with Russian-made carbon fibers and the need, primarily, for using more expensive foreign-made carbon fibers, Russian GC manufactures are likely to achieve the planned GC specific cost reduction only by , after a new Russian plant for the PAN precursor production is put into operation. Long-term programs for the development of Russian uranium enrichment companies stipulate a decrease in the SWU specific production cost by Thus, ECC plans to cut the SWU specific production cost by 23% by As before, the Russian uranium enrichment industry remains the most economically efficient, even if compared with the best foreign companies (URENCO). In many ways, it was stipulated by the sharp drop in the ruble rate against the $ and, that took place in The specific investments in the development of enrichment industry (new construction, upgrading) and the specific operating costs in the SWU production are much lower in Russian industry, as compared to URENCO and AREVA. Export dynamics of the Russian uranium conversion and enrichment industry (EUP; uranium conversion and enrichment services) 2 : 2006 year - $ 1,954 Mln; 2007 year - $ 2,339 Mln; 2008 year - $ 3,059 Mln; 2009 year - $ 3,048 Mln; 2010 year - $ 3,490 Mln; 2011 year - $ 3,388 Mln; 2012 year - $ 3,219 Mln; 2013 year - $ 3,046 Mln; 2014 year - $ 2,200 Mln; 2015 year - $ 2,700 Mln; 2016 year - $ 2,100 Mln. 2 Excluding exports of EUP in the composition of the fuel pellets and fuel assemblies by JSC TVEL. 15

16 The RF President Vladimir Putin authorized selling of a shareholding (25% + 1 share) in JSC Ural Electrochemical Combine to the Russian Kazakh joint enterprise CJSC Uranium Enrichment Center (CJSC UEC ). The relevant regulation No. 258-rp was signed on June 29, The document permits open joint stock company Incorporated Company Separation-Sublimate Complex (a JSC TVEL subsidiary) to carve-out 10 Bln. 446 Mln. 261 thous. 17 registered share of common stock in JSC UECC in its possession to CJSC UEC ownership. The transaction on the assets acquisition in the JSC UECC authorized capital, i.e. 25% plus 1 share, by the Russian Kazakh joint enterprise CJSC UEC was bought in on September 27, JSC TVEL earned 17,278 Bln. roubles (~ $ 556 Mln.) as a result of the transaction. The CJSC "UEC" sales volume was: 2013 ~ 0.3 Mln. SWU; 2014 ~ 5.0 Mln. SWU; 2015 ~ 5.0 Mln. SWU; 2016 ~ 5.0 Mln. SWU. 16

17 CHAPTER 1 RUSSIAN URANIUM ENRICHMENT INDUSTRY BACKGROUND The history of establishment and development of the Russian uranium enrichment industry is considered in report Russian Enrichment Industry. Status and Development Outlooks Annual Report, IBR TM Table 1.1 presents major events in the history of setting up and development of the Russian uranium enrichment industry. Main events in the history of establishment and development of the Russian uranium enrichment industry Table 1.1 Year Major events Laboratory No. 2 was set up (currently known as the Russian Research 1943 Center Kurchatov Institute ) aimed at, among other things, development of uranium enrichment processes. Ad hoc Committee under the USSR State Committee for Defense was set up for nuclear weapons development and production. The main trends in the activities aimed at the development of industrial process of uranium enrichment were identified German specialists were attracted to the development of uranium enrichment processes. On December 1, 1945 the URRS Government made decision about construction of the first uranium enrichment plant using gas diffusion technology The first plant making use of D-1 gas diffusion technology attained the design capacity of 7,500 kg SWU/year The USSR Government made the decision about designing and production of a gas centrifuge (GC) for uranium commercial enrichment. The USSR Ministry of Medium Machine-Building was established for exercising control over nuclear weapons development and production The USSR Ministry of Medium Machine-Building took the decision on concentrating the efforts aimed at designing a GC with a rigid rotor proposed by Kirov Plant Special Design Bureau (Leningrad) The USSR Government made the decision about construction of the Pilot Centrifugal Plant integrating ~ 2,500 GC manufactured at Kirov plant Manufacture of 1 t generation GC (VT-3) was started The Pilot Centrifugal Plant was made operational The Pilot Centrifugal Plant reached its design capacity of ~ 1,500 kg SWU/year Manufacture of 2d generation GC (VT-3F) assembled in the assembly (16 GC in the assembly) at three mechanical engineering plants was started. The first phase of uranium enrichment plant (GT-1) making use of gas 1962 centrifuge technology was placed into operation at UECC. Manufacture of the 3 rd generation GC (VT-3FA) assembled in the assembly (20 GC in the assembly) was started The second phase of uranium enrichment plant (GT-1) making use of gas 1964 centrifuge technology was placed into operation at UECC. The third phase of uranium enrichment plant (GT-1) making use of gas centrifuge technology was placed into operation at UECC Manufacture of the 4 th generation GC (VT-5) was started Manufacture of the 5 th generation GC (VT-7) was started. 17

18 1973 International cooperation with foreign companies in uranium enrichment was commenced Manufacture of the 6 th generation GC (VT-33) was started Production of weapons-grade uranium was stopped The USSR Ministry of Nuclear Engineering and Industry was set up Enriched uranium production using gas diffusion process was stopped The USSR Ministry of Nuclear Engineering and Industry was transformed into the RF Ministry for Atomic Energy Manufacture of the 7 th generation GC (VT-25) was started. The RF Government approved the program of atomic energy development in and through In the framework of the program of atomic 1998 energy development in and through 2010 the RF Ministry for Atomic Energy developed and approved a branch program of upgrading the Russian conversion and enrichment industries in the period up to The branch program aimed at the Russian conversion and enrichment industry upgrading in the period through 2010 was revised. Manufacture of the 8 th generation GC (PGTs-8) was started. The RF Ministry for Atomic Energy was transformed into Federal Atomic Energy Agency. President of the RF approved a new Russian Nuclear Complex Development Program. The RF Government approved Federal Targeted Program Development of the Atomic Power and Industry Complex of Russia in and through Task No. 12 of the Program consists in the development, upgrading and expansion of capacities in the enrichment and sublimate industry. Large-scale reforms in the Russian nuclear complex were initiated. The Tunnel Law aimed at reforms in the Russian nuclear complex was passed, permitting privatization (transformation into a joint-stock company) of the nuclear complex enterprises and introduction of a new system of regulation of the nuclear materials and nuclear facilities proprietary rights. JSC Atomenergoprom, integrating a considerable part of civil nuclear assets of the Russian nuclear complex was set up. State Atomic Energy Corporation was set up for managing the Russian nuclear complex which was successor in title of the Federal Atomic Energy Agency. The Program of SC Rosatom Development in was approved. Section 10 of the program envisages development, upgrading and expansion of capacities in the enrichment and sublimate industries. The branch program of the sublimate-separation complex development in the period up to 2015 and through 2030 was approved. The reforms in the Russian separation-sublimate complex and in the industry engaged in manufacture of equipment for the separation-sublimate complex are underway. The assets of the Russian enrichment and sublimate industries are consolidated under the management of the four holding companies: 2009 JSC Joint Company Separation-Sublimate Complex uranium conversion and enrichment processes; JSC Engineering Center Russian Gas Centrifuge development and manufacture of equipment for the uranium conversion and enrichment industry; JSC Research and Production Complex Khimpromengineering development and production of structural materials for the uranium conversion and enrichment industry; JSC Techsnabexport export of nuclear materials and services. SC Rosatom made the decision on setting up a Fuel Company based on JSC TVEL integrating the enterprises in the separation-sublimate complex and enterprises engaged in manufacture of equipment for the separationsublimate complex. 18

19 Corporate structure of JSC TVEL was formed. The enterprises of the separation-sublimate complex and enterprises engaged in manufacture of equipment for the separation-sublimate complex were included in JSC TVEL corporate structure. The following programs were started: 2010 Program of non-core assets reduction at the enterprises in the separation-sublimate complex and enterprises engaged in manufacture of equipment for the separation-sublimate complex; Program Rosatom Production System, envisaging a cut in expenditures, net cost reduction, and increase in labor productivity Agreement (the Protocol of Intentions) was reached between SC Rosatom and NAC Kazatomprom about sale of a JSC Urals Electrolyzing Chemical Combine shareholding (up to 49%) to CJSC Uranium Enrichment Center (a joint venture of JSC TVEL and NAC Kazatomprom ). SC Rosatom Fuel Division Development Strategy through 2030 was approved on December 6, The 9-th generation GC industrial production was started in the 2012 II-d quarter. ECP (Electrochemical Plant) commissioned the first block/unit of 9th generation gas centrifuges Russian President Vladimir Putin approved sales of a package of shares (25% + 1 share) of the Ural Electrochemical Integrated Plant to Russian- Kazakh JV "Uranium Enrichment Center" (UEC). SC Rosatom Fuel Division Development Strategy through 2030 was updated due to changes at the world uranium enrichment market. JSC Techsnabexport development strategy was adopted. The Strategy and Business Plan for concerning the development of the SC Rosatom Fuel Division (Fuel Company TVEL) through 2030 is approved. Pilot operation of the 9+ generation GCs started. The decision was made to stop the work at the 10-th generation GCs and concentrate efforts on the development of the 11-th generation GCs. A decision was made to establish a scientific and production association (SPA) to integrate in a single entity the development and production of GCs and auxiliary equipment, and the assembly and commissioning of the GC assemblies. The decision on GC-11 R&D significant reduction was adopted. Operation of all 5th generation GCs were terminated at the end of The acceptance commission of Fuel Company TVEL has adopted the design of a more efficient gas centrifuge of generation 9+. Generation 9+ GCs have been recommended for serial production. Establishment of the Center for Integrated Servicing of Foreign-made Casks at UECC. Figures presents the data describing the dynamics of the development of Russian uranium enrichment industry in the

20 UECC ECP SCC AECC Figure 1.1 Dynamics of the Russian uranium enrichment industry installed capacity in , Mln. SWU per year UECC ECP SCC AECC Figure 1.2 Dynamics of the Russian uranium enrichment industry nominal capacity in , Mln. SWU per year 20

21 UECC ECP SCC AECC Figure 1.3 Share of each enrichment enterprise capacity in the Russian enrichment industry capacity in , Mln. SWU per year th 6-th 6+ 7-th 8-th 9-th 9+ Figure 1.4 The number of different generations GC in the Russian uranium enrichment industry in the period of , Mln. Pieces 21

22 th 6-th 6+ 7-th 8-th 9-th 9+ Figure 1.5 Share of GC of the relevant generations in the total number of GC in the Russian uranium enrichment industry in , Mln. SWU per year th 6-th 6+ 7-th 8-th 9-th 9+ Figure 1.6 The share of installed capacity in the Russian uranium enrichment industry supported by different generations GC in the period of , % 22

23 Old capacities decommissioning New capacities commissioning Figure 1.7 Dynamics of Russian enrichment industry capacity input/output in , Mln. SWU per year 3 3 The temporary decommissioning of blocks, associated with their temporary suspension of the operation or with their movement from one site to another or with other reasons, is not taken into account. 23

24 CHAPTER 2 RUSSIAN URANIUM ENRICHMENT INDUSTRY: MANAGEMENT SYSTEM AND INFRASTRUCTURE 2.1 Reforms in the Russian Nuclear Complex On June 8, 2006, the RF President Vladimir Putin approved the Program of the RF Nuclear Industry Development. The Program objectives were as follows: Extended reproduction of the Russian nuclear sector products based on the development of the nuclear weapons, nuclear power and research and engineering complex, as well as nuclear and radiation safety assurance complex; Maintaining of the process links integrity based on innovation development; Improvement of the products competitiveness, strengthening of position of the Russian enterprises on the world market of nuclear materials, equipment, technologies and services. The attaining of the objectives set in the Program necessitates: Formulation of a new nuclear regulatory and legal base harmonized with the norms of the international law and general approaches employed for regulating the activities in peaceful use of nuclear energy in highly developed countries; Implementation of reforms in the Russian nuclear complex; Employment of program-targeted approach to all components of the Russian nuclear complex. By middle of 2016, the following results in implementation of the Program of the RF Nuclear Industry Development have been achieved: The new nuclear regulatory and legal base has been provided, which permits legal entities to own nuclear materials of power grade and nuclear facilities and regulates the procedure for granting the right to legal entities; State Atomic Energy Corporation Rosatom (SC Rosatom), i.e. the authority for nuclear energy use in the RF, has been established. JSC Atomic Power and Industrial Complex (JSC Atomenergoprom) has been set up, concentrating all the civil assets of the Russian nuclear complex ((the date of completion of the civil assets transfer to JSC Atomenergoprom is set in the RF Presidential Decree of December 1, 2008). 100% ownership for JSC Atomenergoprom shares was transferred to SC Rosatom. Privatization (incorporation into a joint-stock company) of the most part of the federal state unitary enterprises is completed, and these enterprises stocks were partly transacted to JSC Atomenergoprom and SC Rosatom, and partly transacted to holding companies belonging to JSC Atomenergoprom and SC Rosatom; The new holding company JSC TVEL or Fuel Company TVEL, the decision of its setting up made by SC Rosatom on November 11, 2009 is formed; SC Rosatom Fuel Division was established (JSC TVEL + JSC Techsnabexport) 4 ; SC Rosatom Fuel Division Development Strategy through 2030 was approved on December 6, 2011; SC Rosatom Fuel Division Development Strategy through 2030 was updated in the mid-2013 and at the end of 2014; On January 28, 2014, Techsnabexport s strategy of development through 2030 was approved. On December 9, 2014, SC Rosatom Strategy Council approved the following documents: Strategy of the Fuel Company TVEL development through 2030 (Strategy); Business Plan for Fuel Company TVEL for 2015 thru JSC Techsnabexport was excluded from SC Rosatom Fuel Division in

25 CHAPTER 3 STRATEGY & DEVELOPMENT PROGRAM FOR THE RUSSIAN URANIUM ENRICHMENT INDUSTRY 3.1 Strategy of the SC Rosatom Fuel Division Development through Year 2030 On December 6, 2011, the Strategy of the SC Rosatom Fuel Division Development Through 2030 (Strategy-2011) was approved. Pursuant to the Strategy, the following were included into SC Rosatom Fuel Division: Fuel Company TVEL (or JSC TVEL); JSC Teсhsnabexport. The Strategy of the SC Rosatom Fuel Division Development Through 2030 is a system document encompassing both internal projects pertinent to the Fuel Division infrastructure development and the Fuel Division position on external markets. The Strategy postulates that the Fuel Division development in the period through year 2030 will be implemented in the context of very difficult market conditions: The primary front-end nuclear fuel cycle (FE NFC) market will increase by 2-3% annually up to year 2030, meanwhile, the foreign-design reactor market will grow 3-4 times more rapidly that the VVER one; The Fuel Division is already one of the largest agents in the FE NFC global market, the high starting position restricts the opportunities for further development; The risk increases of position enhancement of the existing agents and emergence of new ones having access to the technologies, political and investment resources. Main provisions of the Strategy of Fuel Division development through 2030 are: Holdup of the global leadership in FE NFC will be provided due to differentiated approach to the market two key segments: nuclear fuel market and uranium enrichment services market; JSC TVEL market strategy in nuclear fuel fabrication is based on protection of traditional markets and expansion to the new markets at the expense of innovation products and production localization. Increase in nuclear fuel production from 1,500 (2011) to 2,500 tons of heavy metals by year 2030 shall be achieved as a result of the strategy implementation in nuclear fuel fabrication (FA, pellets); Rise (in monetary terms) of the main market share at the initial stage of the nuclear fuel cycle from 25% (2011) to 30 32% (2030); Increasing in enrichment market share (commercial SWU) from 33% (2011) to 41% (2030) 7 ; Increase in FA fabrication market share from 16% (2011) 8 to 20% (2030); The Strategy objectives will be achieved within two focus areas of the strategy implementation, i.e. increase in NFC markets, modernization and process efficiency improvement. In money terms, the Strategy-2011 envisages sales growth of nuclear products and services rendered by the Fuel Division from $ 5.1 Bln. in 2011 up to $ 11.7 Bln. in Besides, the Strategy-2011 provides for sales growth of the Fuel Division non-nuclear products from $ 1 Bln. in 2011 up to $ 4.2 Bln. in In the accordance to the Strategy, new, more efficient models of gas centrifuges and auxiliary equipment (condensate & evaporation facility; process monitoring, control and emergency protection system; static frequency converter, etc.) shall provide the technological base for developing the Russian uranium enrichment industry. 7 In according to the JSC Atomenergoprom data, SC Rosatom / JSC TVEL s share at the market of commercial SWU was 36% in In according to the JSC TVEL data, SC Rosatom / JSC TVEL s share at the market of FA production was 17% in

26 Table 3.4 The volume of EUP / SWU production by Russian Enrichment Industry in the period and directions of SWU utilization forecasted by SC Rosatom / JSC TVEL Item Year World Nuclear Power Installed Capacity 19, WNA-2015, GW (e) World Market Demands in EUP, WNA-2015, tu EUP Average Enrichment, % 235 U EUP Substitution by MOX, RepU(M/H) & HEU, tu World Market Demands in EUP with account of Substitution by MOX, RepU(M/H) & HEU, tu EUP Average Enrichment, % 235 U EUP Leveling Production, tu EUP Average Enrichment, % 235 U SC Rosatom / JSC TVEL Share at the EUP World Market (JSC TVEL Development Strategy), % SC Rosatom / JSC TVEL Share at the EUP World Market (JSC TVEL Development Strategy), tu EUP Average Enrichment, % 235 U Optimum Tail (Customers Requirements), % 235 U Technical Tail (Russian Enrichment Industry), % 235 U SC Rosatom / JSC TVEL SWU Production, thous. SWU, including: Demands in Russian Commercial SWU, thous. SWU Underfeeding, thous. SWU Enrichment of Accumulated Depleted Uranium, thous. SWU Industry demand for natural uranium, tu, including: Generation of Natural-grade UF6 from Accumulated Tails, tu Natural-grade Mining Industry, Import, RepU and Reserves, tu Quantity of accumulated depleted uranium, enrichment 0.3% 235U, tu Consumption of accumulated depleted uranium, enrichment 0.3% 235U, tu Quantity of accumulated depleted uranium, enrichment 0.2% 235U, tu Consumption of accumulated depleted uranium, enrichment 0.2% 235U, tu Notes to the Table: The world market demand for EUP has been calculated based on WNA-2015; The calculation model assumes that EUP is produced one year before the loading into the nuclear reactor. For the uniform loading of production facilities, the model permits the production of up to 10% of EUP, intended for loading into the nuclear reactor in the year N, in the year N-2 ( smoothing (leveling) of the EUP production volumes Production Leveling). RepU(M/H) is regenerated uranium with an average or high enrichment which is used for the EUP production by mixing; After 2030, the average technological tails assay somewhat increases, as compared to the average technical tails value prior to 2030 inclusively, due to lack of the sufficient capacity. In practice, this will mean that most of the natural uranium will be enriched, as earlier, with tails of 0.120% 235 U, and the smaller part of natural uranium will be enriched with tails of 0.200% 235 U. 19 Only nuclear units in operation are taken into the consideration. 40

27 3.3 The Russian uranium enrichment enterprises development strategies & programs Since 2011 fiscal year, JSC TVEL Investment Committee actually plays the main role in the approval of short- and medium-term investment projects connected with the Russian enrichment industry development. The regulation on the JSC TVEL Investment Committee was approved by order No. 26 dated February 26, 2010 with amendments, approved by order 4/289-p of November 22, President of JSC TVEL chairs the Investment Committee. The Investment Committee is standing collective advisory body acting under the leadership of the Committee Chairman and implementing the investment policy principles of SC Rosatom and its organizations. The main mission of the Investment Committee consists in elaboration of a concerted position on: Priorities in JSC TVEL investments for implementation of the Strategy of SC Rosatom and JSC TVEL activities; Composition, structure, parameters of JSC TVEL pipeline of projects and the relevant amendments; Decisions promoting JSC TVEL project implementation and obtaining of anticipated results; Supervision over JSC TVEL project implementation at all stages of the project life cycle, taking of preventive and corrective actions. Based on procedures currently effective in JSC TVEL the enrichment enterprises incorporated into JSC TVEL must submit their investment projects, including the enrichment process upgrading projects, to the Investment Committee for consideration and approval. A package of documents to be submitted to the JSC TVEL Investment Committee shall contain, among other things, technical and economic assessment of the investments. Feasibility studies for projects are planned, formed and performed by companies jointly with respective departments and divisions of JSC TVEL. In 2014, the Investment Committee approved investment projects for uranium enrichment enterprises for 2015 thru 2019 (including those relating to modernization of production), which were incorporated in JSC TVEL s business plan for the same period (approved by SC Rosatom on December 9, 2014). In , a number of investment projects planned for implementation in were cancelled or stopped (see hereinafter). Strategy and program of development of Urals Electrochemical Combine The Company s major goal for the time interval of up to 2030 is a balanced growth with retaining the technological leadership and the competitive price advantage. Basic goals and objectives of the Urals Electrochemical Combine (UECC) for 2017 thru 2019: Maintain a high level of process discipline for trouble-free and efficient operation of core process equipment; Commission two GC blocks (cascades) after modernization including replacement of the 5th generation GCs (shut down in 2015) by those of the 9+ generation started from 2017 (blocks (cascades) numbers 61 and 62 in the shop 54) 20 ; Extend service lives of the 6th generation GCs to years thus cutting a volume of investment in development of production capacities; A reduction in the total unit cost of separation products in 2018, in comparable 2015 prices, by not less than 13.9% against the actual 2015 figure. A reduction in the conditionally fixed costs in 2016, in comparable 2015 prices, is by 41% from the 2013 level; An increase in the productivity of labor in 2018 is by 23% from the 2015 level. 20 Two GC blocks (cascades) were commissioned in 2015 and one block (cascade) was commissioned in 2016 (blocks (cascades) numbers 58, 59, 60). 41

28 GC 1-6 generations technical indices Table 4.1 GC model VT-3 VТ-3F VT-3FA VT-5 VT-7 25 VT-33D VT-33D2 VT-33D & VT-33D2 GC generation I II III IV V VI VI+ VI & VI+ GC design designation Product 128 Product 351D Product 351D2 Product 351D / Product 351D2 Year of GC commercial manufacture onset ~ / ~ 1991 GC output, SWU per year Geometrical dimensions of the rotor, height/diameter (internal), mm ~ 0.8 ~ 1.1 ~ 1.8 ~ 2.2 ~ 2.7 ~ 3.6 ~ 3.9 ~ 5.6 ~ 600 / ~120 ~ 600 / ~120 ~ 600 / ~120 ~ 550 / ~126 ~ 550 / ~126 ~ 570 / ~126 ~ 570 / ~126 ~ 570 / ~126 Rotor rotation operation frequency, Hz ~ 600 ~ 700 ~ 900 ~ 1,000 ~ 1,100 ~ 1,250 ~ 1,300 ~ 1,550 Linear velocity of the internal/external rotor side wall, m/sec Design (guaranteed)/ Forecasted / Actual life-time, years The probability of failure: design / actual for guarantee resource / actual for after guarantee resource, % per year ~ 226 / ~ 234 ~ 264 / ~ 273 ~ 328 / ~ 350 ~ 396 / ~ 411 ~ 435 / ~ 453 ~ 495 / ~ 526 ~ 515 / ~ 547 ~ 613 / ~ 638 ~ 3/ - / - ~ 3/ - /~10 ~ 10/ - /~ / - /~ /35/35 15/40/33 15/40/25 0.2/0.2/- 0.2/ / / / Since the second half of 1975, solely the VT-7M retrofitted 5 th generation centrifuge was manufactured. Considerable outage of the VT-7 GC after two years of operation, caused by crack initiation and propagation in the GC rotor, was the reason for the retrofitting. Alterations were made in the GC design as a result of the retrofitting. Certain structural materials of the GC were also replaced. In 1980 one more retrofitting of the 5 th generation GC was made, which improved the GC reliability. The retrofitting did not affect the 5 th generation GC efficiency. 26 The operator points out a very high reliability of the 6 th generation GC (6 & 6+). Hence, ECP specialists in 2012 stated that throughout the long period of the 6 th generation GC (6 & 6+) operation actually no coming off-line was pointed out. 27 The operator points out a very high reliability of the 6 th generation GC (6 & 6+). Hence, ECP specialists in 2012 stated that throughout the long period of the 6 th generation GC (6 & 6+) operation actually no coming off-line was pointed out. 54

29 From the very inception of the activities aimed at designing GC, preference was given to the simplest design of GC, which would simplify large-batch commercial production of GCs. The first eight generations of GC are subcritical, i.e. the GC rotor working rotational frequency is less than the frequency of the rotor bending oscillation first resonance. The 9 th generation GC is supercritical in all the developed design modification options, i.e. rotor rotation frequency is higher than the first bending oscillation resonance. The GCs are integrated into assemblies of 20 pieces in each. Manufacturer plant supplies the GCs to enrichment enterprises as such assemblies. All GC within an assembly operate in parallel. It permits to keep the assembly in operation; in case of failure of one GC (operation of failed centrifuge is stopped both by using the power supply line and by interlocking the feed, product and waste pipelines). Each of the GCs, in the event of its failure, automatically (mechanically) disconnects from the pipelines with uranium hexafluoride and electric power supply. GCs of all generations demonstrate very stable characteristics and their operation is highly reliable. The design probability of the 5 th and 6 th generation GC failure does not exceed 0.2% per year, the relevant value for the 7 th and 8 th generations GC being 0.1% 36. Failed GCs are replaced at the enrichment enterprises by specialized personnel. Their design life-time was repeatedly extended. Owing to production needs, the efforts aimed at justification of the 5 th and 6 th generation GC assigned life extension to 30 years were completed in Potentiality of placing a new generation GC set instead of the previous generation GC set was one of the most fundamental requirements to GC of every next generation. The basic requirement permitted retaining the entire infrastructure of the GC block during retrofitting and replacing solely the GC assemblies as such 37. That means that financial and material expenditures for retrofitting are significantly less than investment in new plant construction. GC of 6-th generation The GC of generation 6 th was indexed VT-33 at the stage of its concept development. In the process of R&D, the VT-33 initial design was modified (the rotor length was increased, the rotation speed was reduced). The new centrifuge version was indexed VT-33D, which was recommended for commercial production in UECC s proposal was introduced in the VT-33D operation process to reduce the rotor lid stresses, which allowed increasing the hydrodynamic load and enhancing the capacity. This centrifuge (VT-33D2), following the pilot batch testing, was commercialized around VT-33D2 centrifuges were adopted for service with Russian uranium enrichment plants and with Russian-designed plants in China. JSC TVEL and enrichment companies are interested in extending the specified life of generation 6 th GCs. The specified life of generation 6 th GCs is expected to be extended each 5 years to 40 years. In 2013, as the result of the respective case study, the specified life of generation 6 GCs was extended from 30 to 35 years. In late 2016, contracts were made for 2017 between enrichment companies and JSC Ural Plant of Gas Centrifuges (in 2016, GC design bureaus were integrated into JSC Ural Plant of Gas Centrifuges as its divisions), which, inter alia, provide for the assessment of capabilities to extend the specified life of 351D and 351D2 products. The specified life of generation 6 th GCs is expected to be extended to 40 years in In 2015, ECP has launched a project to increase the 6-th generation GC capacity (VT-33D or product 351D & VT-33D2 or product 351D2). The project is jointly supervised by the ECP's energy service and operation technology services. The essence of the project. 6 th & 6 th + generation GC (VT-33D / VT-33D2), set in , operate at the ECP building 904. The R&D, implemented in , have been demonstrated that GC design has the designing reserve that permits to GC operate at the frequency 1,550 Hz (instead of 1,250 / 1,300 Hz) with high reliability. Correspondingly, as the result of GC's rotor rotation operating frequency increasing, the GC capacity increases up to 5.6 SWU per year. The GC's electric power supply system at 904 building ECP is based on the dynamic frequency converters still, that have enough losses. In the middle of 2017, the ECP started the project implementation Modernization of electric drivers of the high frequency electric current generators (HFECG) type VGT-1500 (HFECG-1500) with the aim to increase the main technological equipment capacity (GC generations 6th and 6th+) situated in the building 904, as the result of VGT-1500 s rotor rotation frequency increasing, that (VGT-1500) is the high frequency electric power supply for GC operation. The contract (~ 79.0 Mln. RUR (~ $ 1.3 Mln.) for six high voltage frequency converters (HVFC) purchasing and commissioning was concluded by ECP at the middle of Each of six HVFC has capacity 3,150 kw and operation voltage 10,000 V. HVFC is intended for frequency control of 36 In the accordance to the other data, this value for 7 th and 8 th GC generations is in 2-3 times less ( %) per year. 37 GC unit modernization: replacement of GC, control system, power supply system, pumps, valves. 59

30 Table 4.7 Decrease in the price of the generation 9+ GC due to the use of other structural materials in the rotor design (In prices of 2016) Construction materials used in the GC rotor design Glass fiber VMPS6-14.4*4 Z ,4С Glass fiber VMPS8-27*4Z100-4С Aramid fiber Ruslan-VM 58.8 tex Carbon fiber type VMN-4MS1 & GZ 23/360K Basalt fiber twisted BS * 2Z75 - KV 12 Carbon fiber T800HB-12K-40B / T800HB-12K-50КВ Basalt fiber twisted BS * 2Z75 - KV 12 Carbon fiber TENAX -E IMS65 Specific price of construction materials per one GC of generation RUR Specific price of construction materials per one GC of generation RUR ~ RUR Price with VAT of 1 kg of construction materials in 2016 year prices RUR RUR RUR RUR RUR RUR (105 евро) RUR RUR (128 евро) Basalt fiber twisted BS * 2Z75 - KV RUR ~ RUR Carbon fiber Tansome H3055S-12К ~ RUR ($ 65) Basalt fiber twisted BS * 2Z75 - KV 12 Carbon fiber UMT45-12K-EP Basalt fiber twisted BS * 2Z75 - KV 12 Carbon fiber UMT49-12K-EP ~ RUR ~ RUR RUR ~ RUR RUR ~ RUR 65

31 where the containers are cooled by cold (-25C) air. At large plants (UECC, ECP) in all probability there are several independent tails desublimation stations, although we do not have direct data. The product, i.e. enriched UF 6, is condensed into special traps cooled by refrigerant. A brine (CaCl 2 solution) and dry ice are used as the refrigerant. The brine is cooled by the cold produced by an ammonia-refrigerating machine at some enterprises. Gaseous nitrogen produced by liquid nitrogen evaporation is used at other enterprises (UECC). The drawbacks of the existing product condensation schemes, i.e. the brine high corrosiveness and viscosity, low efficiency of cooling by gaseous nitrogen and its relatively high cost, gave impetus to development of new systems for the product desublimation. New systems, i.e. Korall and RIF, were developed at JSC UECC in The systems make us of small refrigerating systems with freon, rather than ammonia as a working fluid. Meanwhile, the heat exchanger, where UF 6 condensation occurs, is simultaneously the refrigerating machine evaporator. The approach provides for a higher modularity of the equipment and a higher cold efficiency. In 2012 the RIF-20 apparatuses, their output 20 gram of UF 6 per second, are being installed at UECC for test operation. Two modifications of the RIF facility have been developed: RIF-PE (capacity 1.5/2.0 g of UF 6 per second in condensation/evaporation mode, volume 130 kg, working surface area 2.9 m 2 ), and RIF-PK designed for the CEU sections with main and intermediate tanks. RIF-PE is intended to capture the uranium hexafluoride breakthrough fraction in the main tanks and return it into the process chain. One tank is used instead of a pair of outdated 40 liter tanks cooled by dry ice. RIF-PK is used to clean UHF from light impurities. It is used instead of three 60 l tanks operating in one section. RIF-50 is designed to condense UHF in between the processing steps and in event of off-normal emergencies. It is used instead of eight 60 l tanks. Since 2015, RIF tanks have been manufactured commercially and supplied to plants. Figure 4.1 Product desublimators at AECC 83