Ontario Suspends Multibillion Dollar Nuclear Projects Amid AECL Uncertainties

The Ontario government has suspended a 10-year multibillion dollar nuclear upgrade project to replace two reactors at the Darlington site, citing pricing and uncertainty regarding the future of Atomic Energy of Canada Ltd. (AECL), Canada’s sole bidder.

Deputy Premier and Minister of Energy and Infrastructure George Smitherman said on Monday that the government would continue its commitment to the “modernization of Ontario’s nuclear fleet,” but that the “competitive bidding process has not provided Ontario with a suitable option.”

In March 2008, the provincial government undertook a two-phase competitive procurement process to select a nuclear vendor to build a two-unit nuclear power plant at Darlington. Submissions in response to a request for proposals (RFP) were received from France’s AREVA, Westinghouse, and AECL, but only AECL’s was compliant with terms of the RFP, Smitherman said. “However, concern about pricing and uncertainty regarding the company’s future prevented Ontario from continuing with the procurement at this time.”

AECL was willing to accept terms and conditions of the project agreement, and it had the most risk transfer—but at an unacceptable price. A more critical consideration, Smitherman said, involved the Canadian government’s plans to restructure AECL. The federal government had announced in May that it could sell a stake of the company to the private sector following an 18-month review of the Crown corporation. The review revealed that, as it stood, the 57-year-old AECL’s 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.”

Fifty percent of Ontario’s electricity is produced by nuclear power, and the Ontario government has promoted its nuclear energy policy alongside its determination to close the province’s coal-fired power plants by 2014 to cut carbon emissions.

Without the Ontario government’s support, AECL faces a bleak future, The Globe and Mail speculated, noting that the company will find it difficult to persuade potential foreign reactor customers to purchase its untested third-generation ACR-1000 reactor if it cannot win a sale in its home province. The newspaper also pointed out that investors could be reluctant to buy the federal entity for the same reason.

In a statement on Monday, AECL said that it was “pleased” that its bid proposal was determined to be the best among the group of “world-class vendors.” “This is a true testament to the strength, hard work and dedication of our employees and suppliers in developing the new ACR-1000 CANDU nuclear reactor design,” AECL President and CEO Hugh MacDiarmid said.

“We look forward to the next phase of the process beginning at the earliest possible time, and we will work diligently to negotiate a contract that supports Ontario’s clean air electricity needs on a competitive basis,” he added. “Building CANDU in Ontario will keep thousands of engineers and scientists in Ontario, give our skilled trades people a future, support and grow one of our most innovative, research-based energy industries and deliver the best jobs and socio-economic benefits to the province.”

Sources: Government of Ontario, The Globe and Mail, AECL

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