Jun. 21, 2006. 05:10 AM
France's state-owned Areva Group, the world's largest nuclear company, has had
discussions with Ottawa about the possibility of acquiring the commercial reactor business of federally owned Atomic Energy Canada Ltd., the Star
Sources say Areva has expressed an interest in AECL's Candu reactor business and that a sale to the French nuclear giant, which had $14 billion in revenues last year and touts a global workforce of more than 58,000, has been entertained by Ottawa.
"There has been discussion," said one former high-ranking nuclear industry official, adding that talks were as recent as last month. "The Candu technology is something they have a lot of interest in. If I'm Areva, I'm going at them hard right now."
AECL has been the epicentre of Canada's nuclear industry for more than 50 years. Its technology is behind the construction of 22 nuclear power reactors across the country over the past four decades, most of them in Ontario where the crown corporation's workforce is approaching 4,000.
But AECL is now at a crossroads, experts say. The latest talks come as Ontario embarks on a controversial plan to build two new nuclear reactors to rejuvenate its aging power system. If Queen's Park selects a foreign supplier, or decides to purchase current generation Candu 6 technology, plans by the struggling nuclear company to sell its next-generation Advanced Candu Reactor overseas are likely sabotaged.
"If I'm the current prime minister I'm thinking, `How the hell am I going to get an Advanced Candu Reactor built unless I get it built in Ontario?" said the industry source. "If Areva took (AECL) over, they would have the financial wherewithal to say, we can build it here, here and here."
Under proper terms, a sale to Areva could keep jobs in Canada, prop up Candu technology in the global marketplace, and shift the risk of new reactors in Canada from taxpayers to a large foreign company, the source said.
explored the privatization of AECL's Candu reactor business before, most recently in 2002 when the then-Liberal government hired BMO Nesbitt Burns to study the idea.
Ontario Energy Ministry Dwight Duncan has said the province, while it prefers to select home-grown technology, is open to choosing a foreign provider if it means the best deal for taxpayers, who still harbour memories of delays and cost overruns at Darlington.
Mike Richmond, an energy lawyer with McMillan Binch Mendelsohn, said a sale to Areva could fly politically if it was properly crafted and if Ottawa retained ownership of its prized Chalk River laboratory, AECL's major research and development arm.
"I don't think you'd see the same kind of uproar as you did when the Ontario government tried to sell Hydro One," said Richmond. "It's more a matter of national pride than an economic concern. The federal government would want to put conditions on such a sale to make sure
some of the long-term benefits stay in Canada."
Tom Adams, executive director of Energy Probe, said the federal Conservative government may find that a sale of AECL is easier to swallow politically than a decision to subsidize new reactors in Ontario.
"Looking at it from their (Tories) point of view, there's no upside for them (to support Ontario)," said Adams. "They don't have a lot of seats in Ontario, the nuclear program isn't that popular here. If they start paying for one province's power bills then other provinces start putting their hands out.
`Candu technology is something they have a lot of interest in' Former nuclear industry official
"So there's a political logic to dropping this hot potato."
Emma Welford, a spokesperson
for Natural Resources Canada, the ministry overseeing AECL, confirmed Ottawa has explored the idea of selling parts of the crown corporation.
"There have been discussions with stakeholders, whether Areva or anybody else, that's talked about this possibility," she said. "There's been interest expressed in the privatization of AECL, but while that's the case, the government of Canada is not planning on pursuing privatization in the near future."
Dale Coffin, spokesperson for AECL, said the company has not received any purchase offers. "To my knowledge nothing recently has transpired."
But Tom Christopher, Areva's chief executive for North America, told the Star
in a telephone interview that his company does have its eye on AECL. "Of course," he said, when asked if Areva would be interested in an acquisition. "AECL is a fine company that might produce excellent synergies with any one of the (nuclear) vendors."
pointed out that Areva already has 1,300 employees in Canada and revenues exceeding $500 million related to its Canadian operations. AECL, by comparison, had revenues of $378 million last year. Many of Areva's Canadian employees are former AECL staff.
"To me there is no one particular reactor model that's correct for the future, as every country has slightly different needs," said Christopher, explaining why Areva would be interested in AECL's Candu technology.
As Areva pursues business in China, which wants to build at least 30 new nuclear reactors by 2020, he said AECL's recent experience building two reactors there could prove valuable, particularly in an industry where skilled talent is dwindling.
Adams said a worldwide shortage of skilled nuclear talent could be a major motivation for Areva. "AECL's large payroll may be considered an opportunity for somebody that expects to see business grow," he said.
In the end it
may come down to scale, and uncertainty over whether AECL can compete against powerhouses such as Areva, Westinghouse and GE Nuclear Energy Inc. in a rapidly consolidating market.
"The big vendors that are there today were always there. We've always been able to find a market for our products because we offer good products," said Robert Van Adel, CEO and president of AECL.
But Areva, which lost its bid earlier this year to acquire Westinghouse Electric Co. from British Nuclear Fuels Plc, appears committed to bulking up.
Christopher declined comment when asked if Areva is in talks with the federal government.
Moments after the interview, Areva e-mailed the following statement to the Star
: "At this time, Areva has no plans to make a major acquisition in North America."