Toronto Star
29 May 2009
Tyler Hamilton

It was anything but business-as-usual at Atomic Energy of Canada Ltd.'s headquarters yesterday after Ottawa announced it would go ahead with a long-studied restructuring of the troubled Crown corporation, including a partial privatization of its commercial Candu business.

Hundreds of employees at its Sheridan Park head office in Mississauga were pondering their future - and the future of the Canadian nuclear industry - knowing that a private-sector rival could be calling the shots within the next year.

"There's a buzz. Everyone here, this is all they want to talk about," said Michael Ivanco, an Atomic Energy engineer and vice-president of the Society of Professional Engineers and Associates, the union representing more than 900 employees at the company.

Natural Resources Minister Lisa Raitt announced yesterday that the status quo was not an option for Atomic Energy and the time had come to restructure. The company faces stiff competition from much larger, better-funded rivals and is simply too small to take advantage of the global "nuclear renaissance" on its own, she said.

"It's something we want to do to strengthen the Canadian nuclear industry," said Raitt.

Ivanco said the fear is that the government will sell part of the commercial reactor business to a foreign rival, such as France's Areva SA, that will simply let decades of Candu innovation wither and die.

"Our biggest concern is that we're bought by somebody who isn't interested in the technology, but is interested in getting rid of a competitor," he said. "If we are sold, then I hope it's to a company that will keep the technology Canadian."

The decision to restructure the Candu operations came after an 18-month review that was assisted by National Bank, which was hired back in November 2007 for $1.5 million to study options for the government.

After reviewing the bank's advice, ministry staff concluded in a separate report that Atomic Energy's commercial Candu reactor division "can be best served by a strategic alliance with one or more partners with global scale that can leverage the technology, skills and experience of AECL in Canada and internationally."

That report, publicly released yesterday, said a strategic alliance could take the form of a joint venture or merger with another nuclear reactor supplier or the sale of a minority or majority equity interest in Atomic Energy.

Ottawa also plans to separate the Candu division from Atomic Energy's research division, which includes its troubled Chalk River laboratory and National Research Universal reactor that produces up to half of the world's medical isotope supply.

The research division has been a drain on the commercial division, the report said.

In an interview, Raitt emphasized that an all-out sale is not going to happen and that the government has yet to decide on whether it would sell a minority or majority stake in Atomic Energy's commercial business.

Conditions of any equity sale, such as commitments to support the Candu reactor design or share financial and other risks, would be part of any negotiations, she said. The government has hired N.M. Rothschild & Sons to develop a restructuring plan and former CIBC World Markets banker David Leith to advise the minister in the coming months. Raitt said the plan should be complete this fall.

The partial privatization of Atomic Energy's commercial division has been long anticipated, and many companies, including Areva, Canadian engineering giant SNC Lavalin Inc., Ontario nuclear operator Bruce Power, and U.S. reactor supplier General Electric have expressed past interest in partnering with or owning a piece of the crown corporation.

"We'll look at this, of course," said Areva Canada president Armand Laferrere. GE declined comment and SNC Lavalin reconfirmed its interest. "We certainly hope to be part of any future bidding," said a spokesperson.

Ottawa's decision to restructure Atomic Energy comes as Ontario weighs bids from reactor suppliers for a newly planned nuclear plant at Darlington. Atomic Energy is competing against Areva and U.S.-based Westinghouse Electric for the business.

Energy and Infrastructure Minister George Smitherman was expected to announce a reactor supplier by June 21 but has hinted lately that the decision, originally expected last December, may be delayed for a second time.

Sources say the McGuinty government may wait for Ottawa's restructuring plan this fall before making a final decision, a luxury it can afford because of falling electricity demand caused by recession.