AECL turns to Ottawa to cover $100-million overrun

OTTAWA, CANADA - In another damaging setback for the reputation of federally owned AECL Ltd., Ottawa has been forced to cough up $100-million in emergency funding to cover cost overruns incurred in the refurbishing of aging Candu reactors.

The financing - contained in supplemental spending estimates tabled recently - is another black eye for Canada's nuclear flagship company, coming just two weeks before it is due to submit a bid to build new reactors for Ontario.

The $100-million payment is in addition to the $351-million allocated in the federal budget two weeks ago to cover continued design work on the Advanced Candu Reactor (ACR) - which AECL hopes to sell to Ontario - and maintenance at its troubled Chalk River facility, where recent leaks of radioactive material into spill tanks raised concerns.

In documents tabled by Treasury Board President Vic Toews yesterday, the government said the $100-million subsidy "will be used to address a cash shortfall caused by unexpected technical challenges on Candu reactor refurbishment contracts."

AECL is working with Bruce Power to refurbish a Candu reactor at the Bruce complex near Lake Huron, and with New Brunswick Power to retool the 25-year-old Candu 6 unit at Point Lepreau. Both projects have run into delays and cost issues.

In New Brunswick, the provincial government has said it will incur $90-million in additional costs to replace the power lost as a result of delays in $1.4-billion project at the Point Lepreau reactor, the first Candu 6 that AECL has undertaken to refurbish. But a spokeswoman for the provincial Energy Department said the sharing of cost overruns are "a confidential matter."

An AECL spokeswoman said the work of retooling a nuclear reactor is "highly complex," and the company ran into "unforeseen technical challenges" but is working to get back on track.

Critics suggest AECL's track record should make the Ontario government wary about purchasing an untested design from the company, which is competing in the bid with French-based Areva Group and Japanese-owned Westinghouse.

Ontario has said it expects the nuclear vendors to accept the lion's share of the risk for delays and cost overruns, and wants a clear signal from the federal government that it is prepared to backstop AECL.

"These cost overruns on refurbishments - with the taxpayers footing the bill - served as a warning sign for new build," said Greenpeace nuclear campaigner Shawn-Patrick Stensil.

"Just as New Brunswick asked for the risk to be transferred to the taxpayer, Ontario is also asking for the risk to be transferred to the taxpayer."

AECL's Candu technology is unique in requiring major refurbishment after 25 years in service to extend its usefulness. Mr. Stensil said the Crown corporation has taken on huge risks - including more than $400-million in "off-balance-sheet liabilities - that could eventually land in the lap of its federal shareholder.

He said any new reactor sale will require Ottawa to backstop not only the construction risks, but potential cost overruns when the reactors have to be refurbished.

Mr. Stensil noted that Areva - AECL's main competitor in the Ontario bid - has also faced cost overruns and delays at the construction of its EPR reactor in Finland.