The Canadian government is restructuring the Atomic Energy of Canada Ltd. (AECL) and may sell a stake of the company to the private sector to leverage the country’s long-term investment in nuclear energy.
The decision follows a comprehensive 18-month review of the Crown corporation to determine whether its current structure best equipped AECL and the Canadian nuclear industry to participate fully in the expanding global market, the Ministry of Natural Resources said on Thursday.
The review (PDF) revealed that AECL’s current mandate and structure “hampers its success and development,” and that it places “the execution of key projects under pressure, exposes the Government as shareholder to financial risk and potentially limits Canada’s participation in the global supply chain.”
Specifically, it recommends that the company be split into two halves, each with distinct mandates and resource and management needs: a commercial arm comprising the CANDU Reactor division and the Research Technology division.
The Research Technology division currently houses the National Research Unit at Chalk River, Ontario, an aging reactor that produces between 40% to 60% of the global supply of medical isotopes used to detect life-threatening conditions. That reactor was shut down after AECL discovered a heavy-water leak on May 15, causing a critical worldwide shortage of medical isotopes.
The review found, meanwhile, that the CANDU Reactor division was “too small to establish a strong presence globally in the high-growth markets that are key to its success,” but that it could benefit from “significant private sector interest in AECL’s commercial operations.”
Canada’s 22 nuclear reactors—all of which use AECL’s CANDU technology—produce 15% of the nation’s total power and more than 50% of Ontario’s supply. Like the U.S., Canada is looking closely at new nuclear generation for energy security and to reduce greenhouse gas emissions (see “Canada Moves to Rebalance Its Energy Portfolio,” POWER, June 2009). The Canadian Nuclear Safety Commission is currently reviewing three applications.
The Canadian government claims that the nation’s nuclear industry—which includes more than 120 private sector companies—is a significant contributor to the economy, generating around C$6.6 billion every year. Last year, AECL’s CANDU Reactor division generated C$558 million, while the commercial activities of the Research and Development Division provided a further C$41 million in revenues.
The government has assigned the task to develop a “restructuring plan” and provide financial advice to N.M. Rothschild and Sons, an independent investment banking organization.
Reactions to the government’s restructuring plan have been mixed. Last week, the Society of Professional Engineers and Associates (SPEA)—which represents the bulk of professional unionized employees working at AECL—said they welcomed the restructuring, but were opposed to the government selling off majority control in AECL.
“We believe that AECL can benefit from private sector involvement through investment and personnel who will help bring greater clarity and focus to AECL’s efforts,” SPEA Vice-President Dr. Michael Ivanco said. “Now is not the time, in this economic climate, to conduct a fire sale where the company’s assets will be severely under valued. Canadian taxpayers deserve to realize the full value of their investment.”
An editorial in the Toronto Star, on the other hand, called for a quick but careful handling of the sale, including ensuring that AECL’s third-generation nuclear reactor technology—the ACR-1000—would not be sold to a competitor who would “wind it down.”
Sources: AECL, Ministry of Natural Resources, CNSC, SPEA, Toronto Star