This is an archived article that was published on sltrib.com in 2012, and information in the article may be outdated. It is provided only for personal research purposes and may not be reprinted.
If anyone thought that the purpose of the Utah-based waste-storage company EnergySolutions was to, well, store waste, the recent management shake-up there argues otherwise.
The purpose of EnergySolutions is making money or, as new CEO David Lockwood put it the other day, "maximizing shareholder value."
Not that there's anything wrong with that. The country gets someone to handle its nasty nuclear waste. They make money. The free market at work.
But for EnergySolutions, or any publicly traded company, profits are the prime directive. Any executive or board member who puts anything — loyalty to current management, say, or the safety of their low-level nuclear waste dump in Utah's Tooele County — ahead of maximum profits has failed in his or her fiduciary duty. They could be fired, or sued.
Not that anyone should feel sorry for deposed CEO Val John Christensen, who is getting a $3 million pay-out and a $25,000-a-month consulting contract, even as the company's stock price has tanked and its credit rating has been slashed.
Note that none of this happened because anyone suggested that EnergySolutions was failing at the job of storing low level nuclear wastes in Utah, or in decommissioning the Zion nuclear power station in Illinois. That doesn't matter at all. All the markets care about is whether those endeavors are profitable. Not just profitable, but profitable enough.
The fact that the company now projects earnings of a mere $130 million, compared to previous expectations of maybe $160 million, was the reason for the management shuffle and stock dive. It had nothing to do with the company's technical and scientific functions.
So. What happens when the new managers, or the ones after that, decide that there is not enough profit maximizing going on in Tooele County? Or if they lose business to the new Waste Control Specialists facility in Texas. Utahns who worry about the cash EnergySolutions throws around in our political circles should read "The Operator" in The New Republic to see what political grease looks like.
Pressure will grow for the state to help the company generate more income — by, say, licensing hotter levels of waste (even though the company insists it has no such plans). Or to lower costs — by, say, easing up on the $400,000 a year the company now pays toward the eventual closure and indefinite monitoring of the site.
Worst-case scenario: The company cuts and runs, because that costs less than staying.
Such events were not anticipated by the Utah Radiation Control Board when it evaluated the future of EnergySolutions in a report published last September. The report assumes another 20 years of operation, by which time the state will have socked away $13 million. That will sit in a bank, earning interest, for 100 years after the waste facility closes. That will yield nearly $100 million the state of Utah — or whatever is here in the year 2132 — will use to pay for whatever needs doing to protect whatever life is still around.
In the short term (i.e., your children's lifespan), the company has to keep active a $100 million irrevocable letter of credit — now from Zions Bank — to cover any costs left in the state's lap if EnergySolutions goes bust or otherwise decamps from its local responsibilities. A world still recovering from a global financial meltdown will be forgiven if it does not place unwavering faith in letters of credit, even from a local pillar of financial strength.
In EnergySolutions, Utah taxpayers have a huge tiger by the tail. If we hold too tight, the company's profit motive will be frustrated and it will seek more remunerative activities elsewhere. If we let go, our physical safety and fiscal security will be at serious risk.
The less you like, or trust, EnergySolutions, the more you have to hope it remains a profitable concern. That's the marketplace for you.
Twitter: @debatestate