The Ontario government has thrown a wrench in Ottawa's plans to privatize Atomic Energy of Canada Ltd., demanding the federal government reduce AECL's bid price and clarify its ownership before the province commits to buying new reactors.
Without an Ontario sale, AECL faces a bleak future.
The company will be hard-pressed to persuade potential foreign reactor customers to purchase its new Advanced Candu Reactor if it can't close a deal in its home province. And investors will be reluctant to buy the federally owned company except for its high-tech work force and its business repairing the existing Candu fleet.
"If Ontario does not order it, I think it has no prospects of sales elsewhere," says Steve Thomas, professor of energy policy at the University of Greenwich in Britain. "I would be surprised if AECL survives, to be honest. I think Candu is really in a very weak position now."
Energy Minister George Smitherman Monday confirmed what The Globe and Mail reported six weeks ago: that the province has selected AECL as the winning technology, but wants to negotiate a lower price with Ottawa.
Mr. Smitherman said the province is delaying its plans to proceed with the bid to ensure AECL has a stable ownership structure in light of the federal government's decision to seek buyers for the Crown corporation.
"The government of Canada needs to do the work that they're doing now to clarify the future ownership of AECL, and when they have clarified that, to sharpen their pencils substantially so that the people of the province of Ontario can renew their nuclear fleet with two new units from that company," Mr. Smitherman said.
The Ontario bid process required the risk of cost overruns to be assumed by the would-be vendors, which initially included French-based Areva Group, and Westinghouse Electric Co.
AECL was the only one of the three that met the province's demand that the vendors assume all the risk for cost overruns.
In a statement, AECL trumpeted the fact it was the only one to meet the rigorous Ontario conditions.
"We are very pleased that our bid proposal was determined to be the best among the group of world-class vendors who participated in the process," chief executive officer Hugh MacDiarmid said.
He added he looked forward to the "next phase" in which the company and the province can negotiate a contract. Mr. Smitherman made it clear, however, that the province won't move until Ottawa clarifies the ownership issue, a process which will take at least until fall.
The Harper government told AECL that its bid must provide a commercial rate of return, and that its price must recover all costs, rather than spread them out over future sales. The federal officials who prepared the briefing documents predicted Ontario would be knocking on Ottawa's door for a better deal.
"While Ontario is likely to ask AECL to lower its price, the government would need to ensure the project is commercial to preserve AECL's value as it is restructured and to avoid [federal taxpayers]subsidizing Ontario ratepayers," the briefing note said.
Mr. Smitherman said Monday the AECL bid was "billions" above what Ontario is prepared to pay.
Initially, Ontario was told it would cost about $6-billion to build a new reactor, but those estimates have more than doubled, said Shawn Patrick Stensil, an anti-nuclear campaigner with Greenpeace.
"Saying no to a nuclear bailout would not only save the federal taxpayer billions," Mr. Stensil wrote in a blog, "but force Ontario to look at cheaper and less risky energy options like renewables, conservation and decentralized supply - all things Smitherman claims to support."
AECL's supporters say the two governments would be foolish to walk away from company that has a globally competitive reactor and employs thousands of Canadians in the manufacturing and engineering sectors.
"We can't see any reason why they would not go forward," said Neil Alexander, president of the Organization of Candu Industries, an AECL supplier group.
Other provinces, notably New Brunswick and Saskatchewan, have also indicated an interest in building new reactors. Saskatchewan Premier Brad Wall, whose province produces a quarter of the world's uranium, envisions building a full-fledged nuclear industry there, including a possible reactor purchase.
In New Brunswick, the province is pursuing construction of an AECL reactor to export power into the United States, but will require private-sector investors to finance the project.
Provincial Energy Minister Jack Keir said Monday he remains optimistic the project will go ahead, and that Ottawa will help shoulder some of the risk. But he drew a line in the sand: "Not on your life is the province going to take on the risk," he said.
With reports from Martin Mittelstaedt and The Canadian Press