[cdn-nucl-l] Nuclear selloff in works

["Adam McLean" <adam.mclean@utoronto.ca>]

Posted in the Toronto Star on July 6, 2007 and at:
http://www.thestar.com/News/article/233052
All but a done deal???

Adam

------------------

Nuclear selloff in works
`GE is very confident that this is a done deal' Source close to General
Electric 
Jul 06, 2007 04:30 AM 
TYLER HAMILTON 
ENERGY REPORTER

The federal government is in advanced negotiations with U.S. industrial
giant General Electric Co. to sell a large share of Crown-owned Atomic
Energy of Canada Ltd., the Star has learned.

Sources say Natural Resources Minister Gary Lunn has been leading the
privatization discussions along with AECL's new chair Michael Burns. 

The aim is to establish the strategic partnership by year's end, giving the
Ontario government a chance to consider the new arrangement in advance of
any decision to build new nuclear reactors in the province.

"Lunn is driving this himself," said one source close to GE. "GE is very
confident that this is a done deal."

AECL has been the heart of Canada's nuclear industry for more than 50 years
and its engineers are considered world class.

Its CANDU reactor technology -somewhat unique for relying on heavy water and
natural uranium fuel - 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 also has the reputation of being a sinkhole for taxpayer dollars
and a struggling underdog in a market increasingly dominated by three global
giants - GE, Areva and Westinghouse.

Past projects in Ontario have been controversial, and future projects based
on next-generation CANDU technology are uncertain, raising questions about
the company's ability to compete globally and the willingness of taxpayers
to continue funding it to the tune of more than $100 million a year.

A strategic partnership with GE would likely aim to shift much of the
financial risk of nuclear projects away from Canadian taxpayers, keep the
CANDU design and its proud heritage alive, and protect Canadian jobs in a
nuclear-power sector on the verge of a renaissance.

GE would gain new intellectual property related to reactor design, waste
storage and fuel recycling, as well as access to a talented pool of nuclear
engineers. 

The company would also have another product to offer its global customers as
it bids against Areva and Westinghouse for lucrative contracts in the United
Kingdom, the U.S. and massive emerging markets such as China.

Such a deal would require cabinet approval, and the government may yet
decide to open the process to other bidders, particularly France's
state-owned nuclear giant Areva Group.

Lunn and other federal officials met with Areva's Paris-based CEO Ann
Lauvergeon, considered the most powerful businesswoman in France, and Areva
Canada president Armand Laferrere on June 19 to discuss Areva's role in the
Canadian nuclear industry and its willingness to invest in AECL, according
to a source connected to the meeting. 

When contacted by the Star, Laferrere confirmed that a meeting took place
but would not discuss details, saying only that Areva is interested in a
partnership with AECL that could include part ownership.

One source said the government's preference is to maintain a 51-per-cent
stake in AECL's commercial CANDU business. Ottawa would retain sole
ownership of the Chalk River laboratory, AECL's research and development
arm.

The majority interest in the commercial business would give Ottawa veto over
any changes to the structure of AECL or threat to CANDU's survival, but the
minority partner would get to appoint management and have complete
operational control.

Sources point to the recent decision by AECL chief executive Robert Van Adel
to retire in November, well before his contract expires, as a sign that the
federal government is determined to get a deal done by year's end.

"We don't comment on speculation or rumour," said AECL spokesperson Dale
Coffin. GE officials, including the company's Canadian nuclear boss Peter
Mason, would not comment.

A spokesperson for Lunn said only that the government "sees expressions of
interest" in AECL "from time to time," but would not confirm that a deal
with GE was in the works or that Lunn met with Areva executives last month.

Some industry observers estimate that a 49-per-cent stake in AECL could
fetch up to $300 million, but an agreement is likely contingent on Ontario
selecting CANDU's heavy-water technology either alone or in combination with
the winning bidder's light-water reactor design.

Light-water reactors, by far the most popular models in operation and used
exclusively in the United States, use ordinary water and enriched uranium as
fuel.

Ontario Energy Minister Dwight Duncan has repeatedly said that Ontario is
open to choosing a foreign nuclear reactor supplier if it's found to be in
the best interest of the province's economy and hydro ratepayers.

Laferrere, in a speech last month at the Toronto Board of Trade, argued
Canada would be better off if it diversified its choice of nuclear reactor
design.

"Canada should not only develop skills in its homegrown technology, which
accounts for 10 per cent of the existing global fleet, but also gain a
significant foothold in the light-water technology which today represents
clearly more than 90 per cent of world demand," said Laferrere.

It's an argument that could just as easily come from GE, which in many ways
has a natural edge over Areva in any dealings with Ottawa.

GE's historical ties to AECL run deep. The two companies collaborated on the
original CANDU reactor design, but GE decided in the late 1960s to leave the
heavy-water business so it could focus on other areas.

More recently, GE and AECL have agreed to collaborate closely on any CANDU
refurbishment contracts and, according to AECL's annual report, GE has no
immediate plans to enter the Ontario market because of its "strong alignment
with CANDU products" in Ontario.

Specifically, GE supplies most of the uranium fuel that is used in CANDU
reactors operated by Ontario Power Generation and Bruce Power. 

It has fabricated uranium pellets at a Toronto facility since the 1960s and
turns those pellets into CANDU fuel bundles at a Peterborough plant,
representing a constant flow of revenue worth protecting.

GE's nuclear business in Canada is worth about $60 million and could grow
with stronger ties to AECL and by maintaining a stable fleet of CANDU
reactors that need a stable supply of fuel. Alternatively, it could shrink
if AECL and Areva link up.

Industry officials say Van Adel has strongly opposed any partnership between
AECL and Areva. They point out, however, that the government may have called
a meeting with the Areva executives after Prime Minister Stephen Harper
talked about nuclear power issues with French President Nicolas Sarkozy on
June 5 at a meeting of G8 leaders.

Laferrere was a personal adviser of Sarkozy when the French president was
minister of interior between 2002 and 2004. Sarkozy, personal friends with
Lauvergeon, is reportedly keen on expanding and privatizing Areva's global
nuclear business.

The nuclear industry has been hit with a wave of consolidation that has
already seen Areva team up with Mitsubishi Heavy Industries, Japan's Toshiba
acquire Westinghouse, and GE partner with Hitachi.