Ontario's decision not to build new nuclear power plants will keep Canada's home-grown atomic power company, SNC-Lavalin subsidiary Candu Energy Inc., dependent on maintenance and refurbishment of its existing reactors around the world.
Ontario Energy Minister Bob Chiarelli confirmed Thursday a report in The Globe and Mail that the province scrapped a plan to spend as much as $10-billion new nuclear reactors as part of its long-term energy strategy. Declining demand for electricity in the province, the potentially huge nuclear build-out costs and decreasing prices for natural gas and other power sources undercut the economic justification for nuclear plants. Ontario will, however, continue an ongoing refurbishment of Darlington Nuclear Generating Station's four reactors.
The Energy Ministry's decision "is a psychological blow, although not a huge surprise," said Mark Winfield, an environmental studies professor at York University in Toronto, who follows the nuclear industry. "The writing has been on the wall for several years," he said, since the provincial government balked at an earlier plan for new reactors back in 2009.
Indeed, SNC Lavalin made it clear when it bought Atomic Energy of Canada Ltd. (now Candu Energy) from the Canadian government in 2011 for $15-million, that it was picking up the operation mainly for its refurbishment business. That's one reason the price was so low, Mr. Winfield said.
Maxim Sytchev, an analyst who follows SNC Lavalin at Dundee Capital Markets, said the company's acquisition of AECL "was always viewed as a way to play the refurbishment cycle, not a new build cycle." As a result, Ontario's decision "is not a make or break situation" for Candu Energy or for SNC Lavalin, he said.
Candu Energy said Thursday that it is disappointed with the Ontario decision, but that it still has "promising opportunities" for sales of new reactors offshore, particularly in China and Britain. The company said it doesn't think the prospects for those sales will be hurt by the Ontario decision, which it hopes will eventually be reconsidered.
In the meantime, "our role as a major player in past, present and future refurbishment and life extension projects is healthy and growing," said spokeswoman Katherine Ward.
There are about three dozen Candu nuclear reactors in seven different countries, including Romania, China and South Korea. The last one to go online was in Romania in 2007, and no new sales of a Candu have been made for about two decades. While China and India are building new nuclear reactors using other technology, the industry's growth has slowed because of the 2011 nuclear accident in Fukushima, Japan, the gas fracking boom, and declining renewable power costs.
Maintenance work on existing rectors can be lucrative, given the long life of nuclear facilities, said A.J. Goulding, an energy economist at London Economics International LLC. Eventually, though, that business will dry up if a company is not selling new units, unless it shifts strategy to maintenance of other company's reactors, he said.
Over all, "if they are not able to get people in their home market to buy, it makes their marketing path yet more challenging," Mr. Goulding said.
Michael Ivanco, president of the Society of Professional Engineers and Associates, which represents engineers and technologist workers at Candu Energy, said the company's situation is similar to a car company with a strong auto repair and refurbishment arm. "If you want to stay in business over the long term, you've got to sell new cars,too."
If Candu Energy does not get any new sales in Canada, "it doesn't give customers [elsewhere] a warm a fuzzy feeling that they are buying from a company that has local support," Mr. Ivanco said.