Impending AECL sale brings end to long nuclear saga

It has been called the crown jewel of Canadian technology and one of the biggest sinkholes of taxpayer money. Now the lengthy saga of Atomic Energy of Canada Ltd. appears nearly over.

A report in the Globe and Mail said the federal government is poised to announce the sale of AECL to Montreal-based engineering firm SNC-Lavalin Group.

Negotiators are still working out the final details of a deal that would see the company spin off and sell its commercial reactor division for a bargain-basement price.

SNC-Lavalin won’t say anything until a deal is done.

“We are not doing interviews on this subject yet because we are not in a position to respond to any of the information that is circulating,” said Leslie Quinton, vice-president of global corporate communications.

But it’s expected a deal will be announced within days.

That has the New Democrats calling on the auditor general to do a value-for-money audit before any contract is finalized.

“One of Canada’s largest Crown corporations is slated to be sold off in a single-bidder deal conducted in total secrecy,” NDP MP Nathan Cullen said in a statement.

“Canadians are rightly worried about getting their money’s worth, and that is why we’re asking the auditor general to evaluate the proposed deal.”

The Crown corporation has long been a headache for successive federal governments. AECL has cost Canadian taxpayers billions of dollars and faced major cost overruns at key projects in recent years while struggling to find a buyer.

The Conservative government of Prime Minister Stephen Harper didn’t exactly start a bidding war two years ago when Harper’s then-chief spokesman, Kory Teneycke, called AECL “one of the largest sinkholes of government money probably in the history of the government of Canada.”

SNC-Lavalin finally emerged as the sole bidder to meet Ottawa’s conditions for buying the financially-troubled Crown corporation.

A sale has been a long time coming.

In May 2009, the Conservatives announced plans to spin off AECL’s commercial reactor business from its research division.

The announcement coincided with what turned into a lengthy shutdown of the company’s research reactor at Chalk River, Ont., which caused a worldwide shortage of the medical isotopes used to detect cancer and heart ailments.

The National Research Universal reactor was down for 15 months. There were times when it looked like the 54-year-old reactor might never return to service.

An earlier shutdown in late 2007 also strained the global isotope supply and ended only after Parliament voted to bypass the nuclear safety regulator’s closure order.

Then there were the MAPLE reactors.

Two Multipurpose Applied Physics Lattice Experiment reactors were meant to replace the aging NRU reactor until AECL scrapped the project in 2008 due to design flaws. The MAPLE reactors were millions of dollars over budget and years behind schedule when the Conservatives finally pulled the plug.

All those research reactors and facilities will remain in government hands.

But AECL’s commercial reactor business always held great promise.

The company has bid for the two new reactors Ontario wants to build, but the province won’t make a decision until AECL’s future is certain. Ontario Finance Minister Dwight Duncan told reporters Tuesday that he doesn’t expect to sign any deals before the Oct. 6 provincial election.

There’s a good chance SNC-Lavalin isn’t counting on AECL building any new reactors, says analyst Maxim Sytchev of Northland Capital Partners.

“At this point, it’s difficult to speculate how much SNC-Lavalin could pay for the asset that in 2010 generated $428 million yet lost $104 million,” he wrote in a research note.

“SNC-Lavalin’s management is known for being conservative. As a result, we don’t believe that the purchase valuation would assign any value to new builds.”

Revenue-making repair business

That leaves AECL’s repair business. The company’s new owners are expected to make big bucks refurbishing aging CANDU reactors around the world.

“The big potential money maker is the [refurbishment] business,” said Steve Aplin, an energy policy consultant with Ottawa-based HDP Group.

He added: “This is a billion-dollar business.”

The company also comes with a deep talent pool that’s the envy of the global nuclear industry. Even French nuclear giant Areva — which makes a different kind of reactor — was once interested in AECL for the people who work there.

But the commercial division isn’t without its problems. AECL continues to lose money because of problems with the refurbishment of the Point Lepreau reactor in New Brunswick and the costly development of the next-generation Advanced Candu Reactor.

What AECL sells for is anyone’s guess. The company’s reputation took a hit after the Chalk River problems. Foot-dragging by the federal government hasn’t helped. And the meltdown at Japan’s Fukushina nuclear plant has some countries re-thinking their reliance on nuclear energy.

AECL clearly still has value. Word of a possible sale pushed SNC-Lavalin’s shares up 87 cents to $56.64 on the Toronto Stock Exchange.