By Andrew Mayeda, Postmedia News, December 16, 2010
OTTAWA — The Harper government's plans to sell the troubled Candu unit of Atomic Energy of Canada Ltd., appear at risk of unravelling, with one of the two official bidders said to be wavering in its commitment to take on the challenge of marketing new Candu reactors.
Montreal-based engineering and construction giant SNC-Lavalin insists it hasn't withdrawn its bid to acquire the Candu division of the Crown corporation. But multiple sources within the Canadian nuclear industry say, at the very least, SNC's interest is cooling because of the federal government's desire to divest itself of the entire Candu division, including the "new-build" group that develops and sells new reactors.
A host of technical issues are also believed to be plaguing the sale, including the government's reluctance to shoulder a substantial portion of the restructuring costs.
The uncertainty over SNC's bid leaves power contractor Bruce Power as the favourite to be named the government's preferred bidder, expected to be unveiled as soon as next month. Bruce and SNC are the only remaining bidders in the sales process being overseen by investment bank Rothschild.
A former aviation-industry executive, Andrew Day, has also submitted an unsolicited bid for AECL's new-build business.
AECL's labs in Chalk River, Ont., which produce medical isotopes, are not part of the sale.
Industry sources say SNC has little interest in trying to hawk Candu reactors around the world, a task that has proven challenging in recent years. It's been three years since the last new Candu reactor went online, in Romania in 2007.
SNC's nuclear unit has been part of "Team CANDU," a consortium of companies, including GE-Hitachi Nuclear and Babcock & Wilcox, that banded together to market the reactors. But SNC has been involved mostly on the construction side — not on the development of new reactor technology, a risky business that would pit SNC against deep-pocketed multinational nuclear giants that have poured billions of dollars into designing reactors, sometimes with financial support from their governments.
Acquiring AECL's business of refurbishing reactors at sites such as the Bruce Power station in Ontario and Point Lepreau in New Brunswick would be a natural fit for SNC, said Pierre Lacroix, a financial analyst at Desjardins Securities. But the new-build business would carry some risk for SNC, despite the company's healthy cash reserves and solid balance sheet.
"It's a good move. Is it a risky one? Probably yes, because they're not normally involved at the technology level," said Lacroix.
SNC chief executive Pierre Duhaime said this fall that the company sees potential in the investments by developing countries in energy projects and the move away from fossil fuels. But an SNC spokeswoman said Thursday the company couldn't comment further, because of a confidentiality agreement signed by the bidders.
"We did not withdraw our bid and we are still awaiting an official announcement from the government regarding this file," Leslie Quinton, vice-president of global corporate communications, said in a statement.
One nuclear-industry expert said it's not surprising SNC would be getting cold feet, given the delays and massive cost overruns often associated with building new reactors.
The situation is complicated by the fact that the next Candu project likely would involve the so-called "enhanced" CANDU 6, which have never been built before, said John Cadham, a doctoral fellow at Carleton University who has closely studied AECL.
"I'm sure there's very little cash on the table," Cadham said, referring to the value of the two bids. "My sense is that either the bids are going to die a quiet death, or the feds will be on the hook to support them in new builds."
That would frustrate the Harper government, which has been eager to get the Candu division off its books. Last year, the division lost $331 million, even after receiving $124 million in parliamentary appropriations.
A spokesman for Natural Resources Canada, to which AECL reports, said the government won't comment on "rumours."
"The process is being conducted in such a manner as to protect the economic interests of the government of Canada and potential investors," a department official said Thursday in an email.
amayeda@postmedia.com
Twitter.com/amayeda
© Copyright (c) Postmedia News
