What’s the future of AECL under SNC-Lavalin control?

The deadline to submit purchase offers for Atomic Energy of Canada Ltd. was last week, and from what we’ve heard so far only SNC-Lavalin has made its bid public. We’ve had an interesting situation here in Canada: a federal government looking to sell the homegrown maker of heavy-water nuclear reactors, and an Ontario government looking to buy at least a couple of nuke reactors. Ontario says the price so far is too high and, besides, it doesn’t want to do any deals with AECL — its preferred partner, apparently — while its future is so uncertain. Only when the feds deal with AECL’s ownership issues will Ontario get back into serious discussions, so I’ve read. The feds, meanwhile, have blamed Ontario’s decision to delay a purchase on the difficulty of finding a private buyer for AECL. Who, after all, wants to buy a company that can’t sell it’s latest and greatest product on its home turf?

Now we know that Canadian engineering giant SNC-Lavalin wants to take control of AECL. Personally, I don’t care who owns the thing as long as taxpayers aren’t on the hook for its future losses and liabilities. The question, at least for the scientists who have built their careers at AECL, is whether the new controller cares about Candu intellectual property, advanced reactor designs, and staying in the game with the big boys of nuclear — i.e. Westinghouse, GE and Areva — or simply wants to milk the company’s pipeline of refurbishment opportunities as previously sold reactors around the world reach their mid-life crisis. SNC-Lavalin is an engineering company. It just wants work and it wants profits. It doesn’t really care, as a matter of national pride, if we build AECL’s next-generation Advanced Candu Reactor. It’s just as happy fixing up old Candu 6s and building new Candu 6s in developing countries just getting into nuclear and which don’t need the mammoth reactors being pitched by the competition.

Here’s a little anecdote: When Linda Keen, former head of the Canadian Nuclear Safety Commission, required that the Candu 6 design after 9/11 be improved to handle major impacts, like from an airplane, SNC-Lavalin had a shit-fit. Back in 2006, Ontario Power Generation was more interested in building a Candu 6 than an Advanced Candu Reactor. The Candu 6 was a known design, had previous approvals, so in the minds of SNC-Lavalin — which was part of the Team Candu build consortium — constructing a Candu 6 would be a cakewalk compared to getting approval for a new design. Keen apparently deflated those hopes. In her view, it was SNC-Lavalin more than AECL that was gunning for her dismissal. Here’s a quote from Keen from an interview I had with her in July 2009 in which she discusses SNC-Lavalin’s reaction to Keen’s decision. This part of my interview has never before been published:

 “What they had felt in October 06 was this (Candu 6 contract) is a sure deal; that we’re going to get this contract as part of the Candu group…. They were really upset, because this was money in the bank that they were going to get this.”

Keen said in early 2007 that SNC sent one of its vice-presidents to a Canadian Nuclear Association meeting to raise a storm over the regulatory uncertainty Keen was creating. Keen went to SNC-Lavalin’s board meeting in August 2007 to chat about it. “They were super furious. They said, ‘You’re not being patriotic. How could you do this? It’s being built in other places.’ ” What followed was “the Slaughter on Slater,” she said, with 280 Slater St. being the regulator’s address in Ottawa. Keen said SNC, with the help of lobbiest Hill & Knowlton, began to make life miserable for Keen and demand that she be replaced.

Let’s remember, SNC-Lavalin is an engineering firm. It doesn’t care whether it’s building bridges, refineries, desalination plants, or nuclear plants, and when building nuclear plants it doesn’t care what it’s building — as long as someone buys it and it gets built, because building is what they do. It has received plenty of business from AECL over the years, and it fears not getting as much in the future if someone else buys it. This proposal to purchase is about protecting its turf; it’s not about preserving AECL’s legacy and pushing forward on new technologies.

I’m not passing judgement. It’s a smart move on SNC’s part. I’m just offering some perspective on why it may want AECL.

3 thoughts on “What’s the future of AECL under SNC-Lavalin control?”

  1. You are right in terms of what will happen to AECL if it is sold to SNC-Lavalin. However, this is what will happen if AECL is sold to any other big boy in the nuclear business. On the other hand, who on earth will be willing to ask AECL to buld something after the MAPPLE fiasco, the Point Lepreau fiasco, he NRU affair, etc., etc…?

  2. The author writes a good article, but I think there is one jump in logic that he has missed (which I will get to in a bit). While he has pointed out the probable outcome of a company like SNC buying AECL ( i.e. the eventual stagnation and death of Canadian nuclear intellectual Property), he has not discussed the other probable outcomes of anyone buying AECL.

    Here are some others reasons why a company would be interested in buying AECL (and brief synopsis of probable outcomes):

    1) Access to market – Obviously should someone buy AECL for access to the Canadian market, this kills AECL and Canadian Nuclear. It either results in a single sale, or a bait and switch to the suitors own technology. This was likely Areva’s interest, and given that they have found another way to enter the Canadian market, they have withdrawn.
    2) Access to IP – Most suitor companies would be interested in buying certain parts of AECL IP to exploit and marketize. Few would be interested in buying it all. Should AECL’s IP be sold in pieces, it is effectively dismantling AECL and it’s the death of Canadian nuclear. Canada would no longer have all the pieces necessary to design a plant. Also, companies positioned to buy all of AECL’s IP likely already have their own nuclear designs, meaning no bid, OR, they just want access to the market. Those without their own nuclear designs, by definition, would essentially be new to the market, and less likely to succeed. Again, the death of AECL and nuclear in Canada.
    3) Access to workforce – AECL has one of the largest repositories of nuclear capable engineers and scientists in Canada (perhaps the world), and there is currently a demand. While not a probable motivation for bidding, it is possible that a company would wish to have access to those resources. However, again, they are buying staff, not a nuclear design, and AECL dies.
    4) Access to the services market – As described by the author, this does not likely lead to continued design of Canadian nuclear.
    5) To make money – Okay, this is an uncomfortable one, but AECL was not created to make money. It was created to secure Canadian independence in nuclear power and provide a service to the country. It was also created to be the foundations of a nuclear industry, where it’s the private companies who actually build and manufacturer the plants who make the money (AECL does not build plants per say, it designs them, and manages construction). So, if someone buys AECL to make money, chances are, this will not happen unless they also play ALL of the other roles in building a plant. This is mostly a dead end as maintaining the ability to design plants is a money sink, not a money source, so few will bid. Those that can do it all, by definition have their own designs, so buying AECL would be for one of the other reasons.

    So the jump of logic which I think the author has missed is that the sale of AECL, for any reason, leads to the same probable outcome. The death of Canadian nuclear.

    You can also turn it around and look at potential buyers of AECL. While some are good engineering companies, few or none have the deep pockets to sustain nuclear innovation. Few have a motivation which is compatible with a continued Canadian nuclear… None have a reason to sustain new Canadian nuclear….

    While it is impossible to put a real number to it, it feels like there is a 95% chance that all roads lead to CANDU designs ceasing to exist in around 20 years. Once that happens, Canada will no longer have a relevant design, and instead, we will turn to foreign companies to help meet our power needs. Universities will no longer teach heavy water technology and will have to retool. Other Canadian companies, currently supporting the CANDU fleet, will have to adapt to supporting foreign designs, and many facing new established competition, will die. Well paying high-tech jobs will evaporate or move to America. Sound similar to the infamous AVRO arrow story?

    So, in closing, the action the government is currently taking has only one probable outcome: The death of a unique Canadian nuclear industry. Somewhere out in the future, Canadians will wake up to a newspaper article proclaiming the start of a new nuclear plant build, and instead of saying CANDU, it will say something else. A few who remember will ask, what happened to AECL? Didn’t Canada have it’s own plant design?

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