SNC-Lavalin opts out of bid for South African nuclear contracts

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With as much as $100-billion (U.S) in nuclear contracts up for grabs, Canada and South Africa have begun negotiating a nuclear co-operation agreement that could pave the way for Canadian suppliers to win a chunk of one of the world's biggest nuclear energy expansions.

But while nearly a dozen Canadian companies are seeking a piece of the South African project, Canada's main nuclear exporter has opted out. Despite invitations from the South African government, SNC-Lavalin Group Inc. says it has decided not to bid for the main contract to build up to eight nuclear reactors.

The South African government has repeatedly claimed that Canada is one of seven countries preparing bids for the main part of the massive nuclear-reactor project, which would supply 9,600 megawatts of power to a country plagued by crippling electricity shortages.

But the claim by the South African Energy Ministry seems to be false. SNC-Lavalin, which created Candu Energy Inc. in 2011 with the purchase of the reactor division of Atomic Energy of Canada Ltd. from the Canadian government for $15-million, says it won't bid for the South African contract because its "chances of success" would be better elsewhere.

The decision will feed speculation that South Africa has already decided to buy its nuclear reactors from Russia. The government denies it, but South African media have reported Russia is likely to get the contract. Critics have warned the contract will be so huge and opaque that it could be unaffordable for South African taxpayers and vulnerable to corruption.

South African President Jacob Zuma has spent many days in Moscow over the past several years visiting Russian President Vladimir Putin, and the two leaders are said to be close. Russia is also offering to provide financing for the reactor deal, a major attraction for Mr. Zuma's cash-strapped government. If the Zuma government is already favouring a Russian supplier, a Canadian bid may be pointless.

"SNC-Lavalin is not in discussions with South Africa for a new-build nuclear contract," said Katherine Ward, communications director for SNC's power division.

"SNC-Lavalin is pursuing new-build contracts in several promising markets. As a commercial business, we assess the markets and allocate our resources to those markets where we have better chances of success. Currently, our team is focusing on opportunities in Argentina, China, Poland, Romania and the United Kingdom."

Canada's Foreign Affairs department has confirmed that Canada is negotiating a nuclear co-operation agreement with South Africa. The agreement under negotiation could be "beneficial" to Canada's nuclear industry, department spokesperson Amy Mills said in an e-mailed response to The Globe and Mail.

The co-operation agreement could be signed by the end of this year, according to Ron Oberth, president and chief executive officer of the Organization of Canadian Nuclear Industries. "It's close to being completed, and it would open the door for more Canadian involvement," he said.

He estimated South Africa's nuclear plan would put it among the five or six countries most aggressively expanding their nuclear energy programs. It is currently the only African country that operates nuclear plants, with two reactors at its Koeberg site.

Mr. Oberth's organization, which has 180 members, is confident Canadian companies could play a role in South Africa's ambitious nuclear expansion. Earlier this year, it sent a trade mission to South Africa, and five Canadian nuclear suppliers participated in a "vendor parade" in South Africa, with five other Canadian companies also represented indirectly, Mr. Oberth said.

One of the Canadian companies hoping to win business in South Africa is Montreal-based L-3 MAPPS, which has already provided training simulators for South Africa's existing Koeberg reactors.

Other Canadian companies in the vendor parade, Mr. Oberth said, included Cameco Fuel Manufacturing Inc., Anric Enterprises Inc., and the nuclear division of Curtiss-Wright Corp.

Although the South African government has not yet formally approved the purchase of the nuclear reactors, Mr. Zuma has pushed hard for the deal, which he wants to be approved by the end of this year. He has faced strong criticism for the country's electricity shortages, which have badly damaged South Africa's economy and caused frequent power outages affecting homes and factories.

Mr. Zuma wants the first new nuclear reactor to be operating by 2023 and the entire expansion to be completed by 2030. It would be South Africa's biggest-ever infrastructure project, providing thousands of badly needed construction jobs. But opposition politicians and media commentators say it could be a corrupt and secretive deal, imposing a heavy burden on the treasury.

The bidders for the South African deal are believed to include Russia, China, France, Japan, the United States and South Korea.