Feds keep lid on AECL sale report

AECL CANDU business sale signals Ottawa's nuclear privatization push, seeking a private partner as Chalk River's NRU reactor and medical isotopes program remain public; Rothschild advises amid limited bidder interest and niche market share.

The federal government said it had received a report it commissioned on the best way to break up and sell Atomic Energy Canada Ltd. — but refused to release the report's recommendations, citing "commercial confidentiality considerations."

Natural Resources Minister Lisa Raitt announced last spring that the government was prepared to break up AECL, a Crown corporation, into two parts.

One part would include the business responsible for selling and building CANDU reactors, where CANDU design promotion drew criticism, the large powerful machines that provide electricity at plants in New Brunswick, Quebec and Ontario. The government signaled its intention to a seek a private sector partner, with the outcome possibly hinging on an Ontario deal, to buy all or part of the CANDU business.

The other part would cover AECL's research function, centred around the Chalk River Laboratory in eastern Ontario, home to the National Research Universal (NRU) reactor. The NRU, the world's oldest reactor, is currently shut down and undergoing lengthy and costly repairs, highlighting a nuclear sector mess at the time. But as recently as the summer of 2008, it was producing nearly the entire world's supply of medical isotopes, after the MAPLE project was shelved by AECL, used to help diagnose and treat cancer and other diseases. The government has no plans to sell that research unit, although Raitt said she hoped to hire a private sector partner to manage that business.

Raitt commissioned investment bankers N.M. Rothschild and Sons Ltd. last spring to provide some recommendations, as Ottawa was being urged to sell controlling interest, on how to proceed with that restructuring.

An industry source, who works for a private sector competitor of AECL's power business, said the Rothschild review was a difficult one, mostly because there appeared to be little appetite in the private sector to invest in AECL's CANDU technology, with some arguing it is time to sell AECL outright. That lack of interest is partly a result of the economic downturn — which has made it more difficult for companies to find investment capital — but it is also partly due to the fact that the CANDU technology is largely seen as a niche product with a worldwide market share of less than five per cent.

Although the federal government has sunk billions of tax dollars into AECL over more than 50 years, the industry source said Ottawa would be lucky to receive $300 million in any sale of the business.

The likely list of bidders for AECL is a short one and includes Areva Group, Westinghouse Electric Co., General Electric, and Montreal-based SNC-Lavalin, even as a New Brunswick move threatens the AECL sale process.

Raitt issued a brief statement saying it had received the report and had started its own review. At the same time she hired Rothschild, Raitt also named David Leith, a former deputy chairman at CIBC World Markets, as her adviser on the restructuring.

Raitt said the Rothschild report would not be made public "due to commercial confidentiality considerations."

"Our commitment to move forward with the restructuring of AECL remains very much at the heart of our nuclear agenda," Raitt said.

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