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Candu Energy changes tack in China, seeks construction partnerships

A worker checks the control panel of the No.1 unit of Qinshan No. 2 Nuclear Power Plant, China's first self-designed and self-built national commercial nuclear power plant in this June 10, 2005, file photo, in Qinshan, about 125 kilometers (about 90 miles) southwest of Shanghai, China.

Eugene Hoshiko/The Canadian Press

When SNC-Lavalin Group Inc. bought Candu Energy Inc. for $15-million, it took private an asset that had, over 60 years, sucked $21-billion from Ottawa.

Just three years later, SNC is pinning hopes for future billions on another government, this time in Beijing. With a long-standing effort to sell new reactors to China yet to produce any fruit, Candu is now seeking to link hands with state-owned Chinese firms to build new reactors abroad, an ambition that has eluded the Canadian nuclear industry for many years.

The first potential site is in Romania, where China is considering a massive investment into construction of two new nuclear power units at a partly built site that has lain fallow for decades. "We've been working collaboratively with the Chinese to see if there is a way we can put the model together and complete those two units," said Preston Swafford, who in late February became chief executive officer of Candu Energy.

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And, he added in an interview in Beijing, if that works, "it clearly could be a relationship that [lasts] many years."

Indeed, the company is also laying plans to join with Chinese interests in building a new reactor in Argentina, where one Candu reactor is already operational.

At stake are the vast sums of money it takes to build new nuclear capacity – and a brighter future for Candu and its new masters. The relationship with Chinese companies, both inside and outside China, "could be quite significant," Mr. Swafford said.

Consultancy Deloitte LLP has estimated the total cost of completing two more Romanian units at about $7-billion, including financing. China General Nuclear Power Group, which in November signed a letter of intent to invest in the project, wants to get capital costs down to roughly $5-billion before proceeding. The primary hurdle "is making sure the economics work for China," Mr. Swafford said.

China's deep pockets are a principal selling point for the global industry – French companies Areva SA and Électricité de France SA have also joined with China General Nuclear Power Corp. and China National Nuclear Corp. in plans to build the first new nuclear power plant in Britain since 1995.

Both Chinese firms have made clear their desire to gain a foothold outside Asia.

In that sense, it's not clear how lasting the relationships will be: In China, for example, foreign nuclear technology has been largely supplanted by domestic models. And "they are interested in expanding their technologies around the world," Mr. Swafford said.

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He is separately pushing Candu to expand parts of its business that are independent from its namesake technology. He wants to build up an inspection and maintenance business that could see the company work on reactors built by competitors. Such a business would compete with Entergy Corp. and Exelon Corp.; Mr. Swafford has served as senior vice-president at the latter. No longer a Crown corporation, Candu now has the ability to more aggressively target new business.

He also wants to prove to China that Candu can successfully pump electricity out of recycled uranium, drawing power from the byproduct of other reactors. Several tests with recycled uranium fuel have already been completed in China, where two Candu reactors have operated for more than a decade. By early 2015, Candu expects both units to run fully on spent fuel.

It then hopes to persuade China to build new Candu reactors that can exclusively use recycled uranium, or perhaps thorium, which China has in abundance. The company believes China could install one Candu heavy-water reactor per four light-water reactors – a ratio that would mean construction of as many as 25 Candu units in coming decades.

But the story of Candu is one of big dreams that rarely materialize, and several fruitless years have already elapsed in the pursuit of new recycled uranium reactors. (The first test in China was in 2011.) It will be at least another six to 12 months before Chinese officials complete their review of the safety and suitability of the recycled fuel in new installations. Candu also has to prove it's cost-effective.

Candu does have one thing on its side: favour among some in China. "I believe the industries from Canada and China have a very bright future to work together," said Shen Lixin, deputy secretary-general of the Chinese Nuclear Society, on Thursday. A Chinese nuclear researcher told The Globe and Mail that it is likely that "new reactors that run recycled uranium" will be built. A reactor engineer with China National Nuclear Corp. called such plans "possible"; his company, at the China International Nuclear Industry Exhibition, posted an information board boasting that using recycled uranium as fuel "has been approved as a national independent and innovative energy project."

That board made no reference, however, to building new reactors – nor even to Candu – and it's clear Canada has some ways to go if its nuclear industry is to win over China.

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On Thursday, a Canadian delegation took to the podium Thursday at the industry exhibition in Beijing to sell its goods to the local market. But the Canadians offered slide shows with virtually no Chinese, causing interpreters to stumble through terms like "seamless custom zircoloid tubing" (the one notable exception: Babcock & Wilcox Canada Ltd., a subsidiary of a U.S.-headquartered boiler maker whose representative spoke in Mandarin). One Canadian slide-show presentation never appeared, replaced instead by an on-screen Microsoft security warning.

By mid-morning, a previously full room was left half empty.

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