Canada Sells AECL’s CANDU Reactor Division to SNC-LavalinColin McClelland and Andrew Mayeda
The Canadian government agreed to sell the CANDU reactor division of Atomic Energy of Canada Limited to SNC-Lavalin Group Inc., a construction and engineering company based in Montreal.
SNC-Lavalin said in a separate release it will buy AECL’s reactor division for C$15 million ($15.5 million) plus royalty payments from the construction of new reactors and reactor refurbishment projects.
“This acquisition will require concerted and coordinated effort on the part of all stakeholders to work together,” Patrick Lamarre, executive vice president of Global Power at SNC-Lavalin, said in the statement.
The deal between Ottawa and the sole remaining bidder for the CANDU reactor builder ends the 49-year-old government agency’s role in building reactors and will probably initiate better cost controls, said Frederic Bastien, a Vancouver-based analyst with Raymond James & Associates Inc.
“The approach from the perspective of an SNC, a very disciplined capital allocator, would benefit the business overall,” Bastien said in a telephone interview. “The government has been trying to get rid of it for a while, so it looks like it wouldn’t be a big financial burden on SNC.”
The sale negotiations have dragged on since a government report in 2009 recommended selling the AECL’s commercial arm while placing its Chalk River laboratory that produces medical isotopes under an outside contract. Along the way, Westinghouse Electric Corp., the U.S.-based reactor builder owned by Toshiba Corp., Areva SA, the world’s biggest maker of nuclear equipment and Bruce Power, an atomic plant operator in Ontario, all dropped out.
SNC-Lavalin will focus on servicing the 34 CANDU reactors in seven countries, said Yuri Lynk, an analyst at Canccord Genuity in Montreal.
“The main gist behind buying it is to get guaranteed access to the refurbishment work,” Lynk said in a telephone interview. “They’re still working on the design for third-generation reactors while their competitors are well on their way to completing similar if not bigger reactors in China and they’ve even broken ground in Georgia.”
Ontario wants to buy two CANDU reactors for its Darlington plant along Lake Ontario east of Toronto. Brad Duguid, provincial energy minister, expressed concern that Ottawa’s efforts to find a buyer for AECL had delayed the reactor deal.
“Our hope is that the sale of the company would bring some stability to the situation after the federal government has been foot-dragging for almost two years now,” Duguid said in a telephone interview.
Duguid also said the province expects Ottawa to help pay for the multibillion-dollar reactors, as it did when it assisted Newfoundland’s Churchill Falls hydroelectric station and Alberta’s oil and natural-gas projects.
No impact from the AECL sale was expected on the uranium market, Amir Adnani, chief executive officer of Corpus Christi, Texas-based Uranium Energy Corp., a mining and processing company, and Rob Gereghty, a spokesman for the Saskatoon, Saskatchewan-based Cameco Corp., the world’s second-largest uranium producer, said in telephone interviews.
The government also said today it would fund C$75 million for completing the development of the enhanced CANDU 6 reactor.
The latest CANDU reactor to go into service was in 2007 in Cernavoda, Romania, said Robin Forbes, a spokeswoman for AECL. Construction began in 2003. Another unit for the site is to be completed by 2013.
The CANDU reactor uses heavy water for a moderator and coolant and natural uranium for fuel, which is unique, according to the websites of AECL and the Canadian Nuclear Safety Commission. CANDU units also differ from reactors such as the crippled ones at Fukushima Dai-Ichi in Japan in that their radioactive steam doesn’t directly power turbines to produce electricity.
Instead, the radioactive water is kept in a closed loop that transfers heat to secondary loops that can be safely vented to the atmosphere if a heat release is required. Also, the core is surrounded by “a lot more water,” Forbes said.
The reactors have been criticized for producing more radioactive waste than reactors that use enriched uranium, and while they can be refueled without going offline, their maintenance outages after a decade of operation can be more expensive than anticipated.
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