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AECL to be divided, Candu division for sale

CANWEST NEWS SERVICE: DAVID AKIN - MAY 28, 2009

http://www.thestarphoenix.com/Technology/AECL+divided+Candu+division+sale/1639227/story.html

OTTAWA — The federal government took the first steps Thursday to getting out of the nuclear power business while, at the same time, committing itself to holding onto its nuclear research facility at Chalk River, Ont., the home of the rusting reactor — now in shutdown mode — that is the source of nearly half of the world's medical isotopes.

Atomic Energy of Canada Ltd., a Crown corporation that had its origins in the Cold War 60 years ago, will be split into two business units.

The research unit, which includes the Chalk River Laboratory, will remain under the control of the government, albeit with new management that will come from the private sector.

But AECL's commercial business, which designs and sells the powerful Candu nuclear reactors that are used to generate electricity, is up for grabs to the highest bidder and the government has placed no restrictions on the kinds of proposals it will entertain.

That means there are no guarantees that Canadian jobs or technology would be protected if, as the government hopes, a new foreign partner steps up to buy a chunk of AECL. The government believes that the only hope for the survival of the Candu business is to find a major foreign partner with some hefty financial muscle and promising sales prospects in global markets.

"The Candu Reactor Division is too small to establish a strong presence globally in the high-growth markets that are key to its success," said Natural Resources Minister Lisa Raitt.

But a group representing the 146 Canadian companies who are part of AECL's Candu supply chain is worried that Raitt is not more forcefully protecting the made-in-Canada Candu technology.

"That is a concern. Certainly we want to see that the Candu technology continues to develop and prosper," said Neil Alexander, president of the Organization of Candu Industries. "We believe the technology is such that people will want to invest in it and the value of it will outweigh anyone who's trying invest for negative reasons."

Still, Alexander's group supports the broad idea of splitting up the business and bringing in new partners for the commercial side of AECL.

"We think that something (is) needed to be done to position Canada for the renaissance that's taking place in the nuclear industry," Alexander said. "We think it's a good thing."

Opposition politicians, though, heaped scorn on the idea.

"The Conservatives are in full panic mode," said Liberal MP Geoff Regan. "Instead of answering for their incompetent mismanagement of Chalk River and facing up to their responsibilities, they want to chip away at their record $50-billion deficit by selling AECL in a fire-sale to private interests, risking Canada's leadership in the global nuclear industry."

Raitt also made an announcement separate from AECL's restructuring to help the government settle on a strategy to secure a long-term supply of isotopes. Raitt will convene an expert panel — the individuals are to be named later — to sort through various proposals on the isotope issue. She wants recommendations from the panel made by the fall.

On Wednesday, AECL confirmed that National Research Universal reactor at Chalk River — at 52 years the world's oldest reactor — will remain shut down for at least three months as technicians figure out how to repair the rusting hulking tank that houses the reactor's core. The reactor was shut down on May 15 when it began leaking radioactive water.

Sources tell Canwest News Service that they expect the NRU to be out of action for at least eight months, and possibly forever.

One of the reasons the government will keep control of the research reactor business is because of the huge financial liabilities associated with the nuclear waste stored at the Chalk River site. The government estimates that financial liability to be about $2.7 billion.

A five-year, $500-million plan to clean up the Chalk River site is already underway.

NDP MP Nathan Cullen said the government's timing is terrible.

"In the middle of a global recession, when prices are at their lowest, Conservatives are hell-bent on privatizing a Crown corporation that Canadians ponied up $20 billion for," Cullen said in the House of Commons Thursday. "Why now . . . do Conservatives see an opportunity to hack up AECL for bargain-basement prices?"

Part of the answer to that question may lie in the government's assessment of the international marketplace for new reactors. There are currently 44 nuclear reactors under construction around the world and, according to the World Nuclear Association, another 228 reactors worth a potential $400 billion may be built over the next 15 years.

"We are experiencing a nuclear renaissance in the world," Raitt said. "Global demand for this clean, efficient source of energy is rapidly expanding. And Canada is a world leader in nuclear technology. But we are facing stiff competition and the overall objective of this restructuring is to strengthen the capacity of Canada's nuclear industry to compete for and to deliver on domestic and international projects."

AECL is the leading bidder to win a multibillion-dollar deal from the government of Ontario to build a new nuclear reactor. The Ontario government expects to reach a decision on that next month.

Ontario, though, wants the federal government to cover any cost overruns if it picks AECL. The federal government recently paid New Brunswick $100 million for cost overruns on its Point Lepreau project.

Raitt did not address that demand specifically Thursday, but said that a stronger restructured AECL would be a better supplier for Ontario.

She also said that the decision to restructure had been in the works for 18 months and was not related either to the Ontario bid or to the isotope crisis at Chalk River.

Government officials refused to say how much they believe AECL's Candu business would be worth, saying that information would be "commercially sensitive."

The government has hired the investment bank N.M. Rothschild and Sons to develop a restructuring and provide expert financial advice. A former Bay Street investment banker, David Leith, has also been hired as an adviser to Raitt on the project.

The government has set aside $2 million to pay Rothschild and Leith for that advice, which it expects to receive in the fall.

The potential partners or buyers for AECL's Candu business is relatively small and would include AREVE NP from France, Japanese conglomerate Toshiba Group's U.S.-based Westinghouse unit, GE-Hitachi Nuclear Energy Inc., of North Carolina, Mitsubishi Heavy Industries of Japan and Russia's state-owned Rosatom. There may also be some Canadian companies, such as SNC Lavalin Inc., of Montreal who may want a piece of AECL.

The government's decision to restructure AECL is its response to a report it commissioned from the National Bank of Canada last year to advise it on what, if anything, it ought to do with the Crown corporation. The bank advised that it should sell at least 51 per cent of AECL and encourage it to strike new deals with international players to help it make new sales in international markets.

Government officials said National Bank found significant interest in buying a chunk of AECL although the bank's discussions with potential buyers concluded in the first half of 2008. Government officials conceded that market interest may have withered because of the onset of the global recession.

Nuclear Numbers

Number of AECL employees: 5,000

Total number of nuclear industry employees: 30,000

Number of Candu reactors in Canada: 17

Number of Candu reactors outside Canada: 12

Worldwide number of reactors: 441

Canadian firms supplying the nuclear industry: 146

Estimated annual economic value to Canada: $6.6 billion

Annual federal operating subsidy to AECL: $103 million

Extraordinary funding for AECL since 2007: $1.74 billion

Most recent Candu put in service: Cernavoda 2, Romania (Oct. 5, 2007)

Last sale of Candu reactor: Cernavoda 2, Romania (2003)

AECL revenues (fiscal year 2008): $599 million

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