Ottawa seeks bidders for Candu business; Government moves to privatize Crown corporation Atomic Energy of Canada's nuclear-reactor division
18 December 2009
Ottawa figuratively hung a "for- sale" sign Thursday on embattled nuclear-reactor designer Atomic Energy of Canada Ltd., signalling to prospective investors that the federal government is now accepting formal bids for the crown corporation's commercial Candu business.
And it's not leaving any scenario off the table.
"The Government of Canada is open to a range of options up to, and including, (an outside investment of) 100 per cent," said Jocelyne Turner, spokeswoman for Natural Resources Canada, which oversees the federal nuclear file.
The ministry said in a statement that the goal of any deal would be to "reduce the financial risks carried by taxpayers" and strengthen the ability of Canada's nuclear industry to tap domestic and global opportunities. The government also said it wants to maximize the return on its past investments in nuclear energy development.
"Nuclear energy is an emission-free source of power that is experiencing a renaissance around the world," said Natural Resources Minister Lisa Raitt. "AECL's Candu reactor division needs strategic investors to take full advantage of this opportunity."
Who might bid for Atomic Energy and how much they would be prepared to pay has been the subject of much speculation. Talk of a global nuclear renaissance has yet to translate into reactor sales, including in Ontario, where a plan to build at least two new reactors at Darlington generating station has been indefinitely put on hold.
"Any potential investor would be crazy to ante up any amount of money before knowing what's happening in Ontario," said Atomic Energy veteran Michael Ivanco, vice-president of the Society of Professional Engineers and Associates, the union representing Atomic Energy engineers and scientists.
Ontario isn't rushing, partly because of an economic downturn that has reduced electricity demand in the province.
Another setback came Thursday when the Saskatchewan government, a potential customer for Atomic Energy and nuclear operator Bruce Power, announced it would not be proceeding "at this time" with plans for a large-scale nuclear plant. "Uncertainty around long-term costs to consumers remains a lingering concern," said Bill Boyd, the province's energy and resources minister.
Atomic Energy has pitched nuclear power as a way to lower the carbon footprint of oilsands development. It announced this week it had hired oil-industry veteran and former Shell Canada executive Ramzi Fawaz as senior vice-president of operations, hinting at plans to more aggressively pursue reactor sales in the oilpatch.
A wild card could be its older Enhanced Candu 6 reactor, which at 700 megawatts is much smaller than the newer 1,200-megawatts ACR 1000, making it a better fit for developing countries that don't have the infrastructure or need for larger reactors. Candu reactors can also handle different fuel types, such as thorium, making them more attractive to uranium-poor nations such as China.
Last month, an expert panel assembled by China's nuclear power agency recommended the state purchase two Enhanced Candu 6 reactors designed to use thorium fuel.
Despite such opportunity, the investment community continues to flag the financial risks of large nuclear projects. Without public subsidies, "it is extremely unlikely that private-sector developers will be willing or able to take on the construction, power price and operational risks of new nuclear stations," bank giant Citigroup reported last month.
France's state-owned nuclear company Areva SA, GE Nuclear, Bruce Power, and engineering firm SNC-Lavalin are the usual suspects as potential bidders. One Atomic Energy veteran, who asked to remain anonymous, said the most likely scenario is a partnership between GE, SNC-Lavalin and the federal government.
Areva, despite expressing interest in the past, may be more reluctant. It has offered to license its own reactor technology to Atomic Energy, but critics are suspicious that a deal with the French company would spell the end of the Candu reactor. "A critical factor in considering potential investors is the need to retain the design capability for Candu here in Canada," said Neil Alexander, president of the Organization of Candu Industries.
Said Ivanco of Atomic Energy's union: "We are very uncomfortable about the industry falling out of government control."
Roger Alexander, president of Areva Canada, told a parliamentary committee last month that the business case for Atomic Energy is difficult to swallow. He questioned the idea of purchasing the Candu business for $300 million - the figure most frequently passed around - when the subsidies it receives annually are higher than its revenues.
"In any business deal you've got to look at your return on investment," Alexander said Thursday in a phone interview. "From that standpoint it will be interesting to see what data is available to support an investment."