Taking AECL to the Bank

A reporter called me last week to ask if I had an advance copy of the National Bank Financial’s study of AECL. I don’t and it has only resurfaced in the press in the last few days who say it is now completed.  

Why has a bank been commissioned to do a study of a nuclear organization? To me it’s like the Toronto Maple Leaf organization investigating wheat exports or Wal-Mart studying the national needs for chamber music groups. Perhaps, I’m out of touch and some sort of “fresh eyes for a fresh look” policy now prevails in government. I’m sure National Bank Financial is a worthy organization and maybe, the explanation is simply that money is involved. However, no amount of financial wizardry can change the basic facts.

There have been many studies of AECL over the years and I can guess like all the others this new one is focussed on the possibilities for selling all or part of AECL. Let’s consider how this might go. AECL’s business can be roughly divided into four groups.

Legacy – This is a cute name sometimes used for all the radioactive junk (facilities and materials) left over from decades of research at AECL’s Chalk River and Whiteshell laboratories. Chalk River is also responsible for storing the waste from nuclear medicine across the country.  Many varieties of wastes have to be processed, managed and monitored. Buildings and facilities including reactors have to be decommissioned and put into safe condition. This is a formidable task that will require a great deal of cash and some large fraction of this century to accomplish. In my opinion no private business would want to buy into these huge historic liabilities. 

Isotopes – The NRU regulatory imbroglio and the MAPLE reactor farce have put AECL’s role in isotope production in doubt. With the NRU reactor rapidly nearing the end of its life and the construction of replacement facilities (the MAPLEs) abandoned, it seems that in a few years Chalk River will no longer be able to make medical isotopes. This appears to be the basis of a lawsuit MDS has brought against AECL. I’d suggest the transfer of the isotope business from AECL to MDS-Nordion in the late 1980’s is a case study in how not to privatize a government activity. The government of the day removed AECL’s only profitable operation and forced it to substantially subsidize MDS by means of a long-term low-cost isotope supply contract. To say the least this caused a lot of problems. I view the current isotope situation as an unavoidable consequence of this bungled privatization. Under these circumstances, I can’t see anyone wanting to buy the isotope business.

Reactor Sales – In other posts on this blog I haven’t been optimistic about the chances of AECL selling its ACR-1000 as the new reactor type for Ontario. You may not agree with me but less controversial is that the export prospects for this reactor aren’t very rosy. China and Korea have already purchased CANDUs and although they have performed well, neither country shows any sign of wanting more of them. India has been building its own version of the CANDU, sometimes jokingly called the “INDU”, for many years. So it would appear the three fastest growing Asian markets are unlikely. AECL made an abortive foray into the US market a few years ago and last year withdrew itself from the competition for new UK reactors to concentrate on domestic sales. Maybe the ACR has prospects in places like Jordan and Indonesia? I believe this part of AECL’s business can only find a private buyer if AECL wins in Ontario.   

Reactor Repairs – This sector of AECL’s business is thriving. CANDU reactors need extensive refurbishment including retubing after 25 to 30 years of operation. Right now, AECL is involved in the refurbishment of two reactors at Bruce Power, one in New Brunswick, the first CANDU in Korea and most likely the Gentilly II reactor in Quebec. Each reactor refurbishment is an engineering job worth $1-2 billion.  CANDUs due for refurbishment in the next five years include four in Pickering B, four in Bruce B, four at Darlington  and perhaps a few of the exported reactors. The potential order book looks to be worth $15-30 billion. Clearly this is the piece of AECL private investors would want to have.

 As I see it, the big mistake would be to sever the profitable Repair business from the rest in order to claim some degree of privatization for ideological reasons.  This was the dumb approach taken with the isotope business and it “ended in tears” as a former boss of mine liked to say.

The issue of whether AECL has a future and what it will be is being watched very closely by graduating students. Is this a good time to join AECL? My advice to them is that we need nuclear power but we need to do it right.  

By the way, does anyone know on whose behalf Compas is doing its survey of expert opinions about AECL? Questions such as “Is AECL safe?” make it somewhat strange.  It can’t be the National Bank if their report is indeed completed.  Is yet another study of AECL underway?