After 60 years of operation and $21-billion invested, Ottawa is unloading Atomic Energy of Canada Ltd.’s Candu business for a mere $15-million and future royalties.
It will now up be to Montreal-based SNC-Lavalin Group Inc. to determine whether Canada will remain in the nuclear business, or whether the reactor division will be allowed to wither without a serious commitment to product development.
Natural Resources Minister Joe Oliver announced the sale on Wednesday, but said the federal government will still be on the hook financially if AECL’s existing, problem-plagued contracts continue to have cost overruns.
And Ottawa – which has poured more than $2-billion into AECL over the past three years alone – will provide another $75-million toward completing development of the enhanced Candu 6 reactor, an updated version of AECL’s most successful workhorse. “The transaction will place Candu technology in proven, competent hands to be serviced and deployed in Canada and abroad,” Mr. Oliver said.
But critics accuse the government of botching the deal by running AECL into the ground and then desperately seeking to sell it for a pittance. New Democratic Party MP Nathan Cullen said he’ll ask the Auditor-General to review the transaction.
“Ideologically, the Conservatives never wanted it and they disliked AECL from the start – they just wanted it off their hands,.” Mr. Cullen said. “The buyers had a desperate seller who didn’t know what they were doing and they were able to take advantage.”
Ottawa will keep the Chalk River laboratory, which produces medical isotopes and research for the broader nuclear industry, but will contract out the management of the facility, which itself has been plagued with costly and embarrassing breakdowns.
AECL’s fortunes have been battered by the virtual drying up of international sales amid stiff competition with global industry giants, and by soaring cost overruns at key projects. This year’s explosion at Japan’s Fukushima plant has also cast a pall over the global nuclear industry.
The low sale price partly reflects AECL’s financial demands and the uncertainty of future prospects and profits. For SNC, however, the acquisition of AECL may provide a lucrative business servicing and refurbishing the existing 34 Candu reactors in seven countries.
Mr. Oliver said AECL had no prospect for success under federal ownership and the government was concerned about the continuing demands on the treasury at a time of constraint. Mr. Oliver said the current value of possible future royalties payable to the government could be as much as $285-million, though he refused to disclose the assumptions used to reach the figure, saying such details are confidential.
The only alternative to selling it would have been “a wind-down of the business,” he said.
“And that would have meant ultimately all the employees dismissed, much more significant losses, an abandonment of current customers, and damage to Canada’s international reputation.”
SNC says it plans to build the business but is narrowing the focus of the AECL commercial division. It will employ only 1,200 of the nearly 2,000 people who are now working in AECL’s commercial division. And employees fear that new reactor design, and ground-breaking work with China on new fuelling technology, will be lost, thereby jeopardizing the future opportunities.
And the Montreal engineering giant has made it clear that it will not jeopardize its own healthy financial condition to take undue risks with nuclear projects, raising questions whether the company has the capacity to thrive in a business that is inherently risky.
But SNC insists it is buying AECL’s Candu business with growth in mind.
“With our expertise and experience in the nuclear sector, we believe that Candu Energy will allow us to open new markets and capitalize on existing ones,” Patrick Lamarre, the company’s executive vice-president global power, said in an interview. He said both Ottawa and Ontario remain committed to the nuclear business.
AECL is targeting markets such as Jordan – which is now pursuing a purchase – Argentina, Turkey and China for its enhanced Candu 6 reactor. Ottawa will provide the backing of Export Development Canada for international deals, as it does for other export-oriented companies.
But there are doubts about AECL’s ability to succeed in a market dominated by large international conglomerates, many of which benefit from generous state support.
The privatization deal threatens to spark a political battle between Ontario’s Liberal government and the federal Conservatives.
Premier Dalton McGuinty has long urged the Harper government to make a commitment to support Ontario’s planned purchase of two enhanced Candu 6 reactors.
Mr. Oliver said Wednesday that the federal agreement with SNC includes no obligation to help Ontario with the costs of its two planned nuclear plants.
He acknowledged that Ontario is pushing hard on this issue, but said he is not conducting talks with his provincial counterpoints at the moment. He would not say whether he was willing to negotiate on that issue in the future.
Speaking to reporters after the press conference, Ontario Energy Minister Brad Duguid said he was “disappointed” that the federal government will not commit to assistance for the reactor sales.
He noted that Ottawa has made commitments to Newfoundland to help with the Lower Churchill hydro projects, and “many investments out West when it comes to the oil and gas industry.”