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Chalk River’s problems result from unsustainably low prices for medical isotopes.

Don’t throw out the valuable Candu baby with the AECL privatization bathwater

By Jan Carr

Canadians have a lot riding on the impending privatization of Atomic Energy Canada Ltd. (AECL). We need to wind down our ownership in a fashion that ensures we continue to benefit from AECL’s unique CANDU technology and that requires distinguishing the institutional history of the nuclear industry from its accomplishments and potential.

It is hard to imagine a more difficult company for shareholders to love than AECL. It has been dogged by a long and continuing series of commercial disappointments from cost overruns on power plants to spectacular failures in the production of medical isotopes. It has become a thorn in government’s side through its sometimes ill-timed requests for substantial funding. But much of this results from flaws in AECL’s mandate and the way it is financed.

The common element of the cost overruns is that they all occurred in Canada, while AECL projects overseas have been completed early and under budget. It is reasonable to ask therefore whether the Canadian model of having provincially owned utilities using public money as the developer-owner of nuclear power stations is part of the problem. After all, these same utilities encounter similar scheduling and budget problems on non-nuclear projects, such as the delays and almost doubling in cost of the new diversion tunnel now under construction at Niagara Falls.

The medical isotope business clearly has problems bigger than AECL. While Chalk River’s 50-year-old reactor has accounted for half the world’s isotope supply, it should be noted that the other half came from reactors that are just as old. The price of medical isotopes on the world market must be unsustainably low — what else can explain several decades of no investment in new production facilities anywhere in the world? Somehow in the distant past, AECL seems to have got stuck in the role of a charity — subsidizing the cost of half of the world’s nuclear medical procedures, courtesy of Canadian taxpayers.

There are problems of AECL’s making, to be sure, but many for which it is blamed result from the environment in which it works. It has a dysfunctional corporate structure — basically that of a government department attempting to undertake three disparate businesses. AECL’s responsibilities include operating a public research laboratory, manufacturing medical isotopes and engineering electrical generating equipment, all within a budgeting process synched to government, and not business, timetables.

Institutional issues can be fixed through reorganization and privatization, which the government has committed to doing, by splitting off the power reactor business from the balance of AECL and privatizing it under the working name of CANDU Inc. This business has significant potential for Canada’s industrial and economic policies, and also our standing in the world as a nation contributing to global peace and stability.

CANDU Inc. anchors an industry of some 150 individual companies collectively employing 30,000 people. This is the Canadian nuclear industry — a major employer of skilled men and women that is already in place and includes not only prized manufacturing jobs, but also encompasses the high-tech and knowledge industries in which we see our future. While some of these companies and jobs could survive the migration of CANDU Inc. overseas, more will be gained by privatizing in a fashion that keeps the anchor company here at home.

AECL’s unique reactor technology provides Canada with geopolitical leverage that supports all our instincts as a nation that works for global harmony. CANDU nuclear technology is less fussy than others about the type of fuel it uses. Its usual fuel is natural uranium, which avoids the need for the nuclear enrichment process all other reactor designs require. Enrichment is the key step en route from peaceful nuclear uses to military uses and is central to international non-proliferation efforts. CANDU technology facilitates the use of nuclear energy in a way that does not enhance military involvement and in so doing reduces polarization in global politics.

CANDU reactors can also be designed to use thorium instead of uranium. Compared with uranium, thorium is more plentiful and more evenly distributed throughout the world. Chasing scarce and distant oil to fuel local economies has contributed to many armed conflicts and much international friction. India and China in particular have large quantities of thorium that might allow those enormous and rapidly developing economies to meet some of their burgeoning energy requirements from local non-emitting sources. Indian and Chinese success in this can only have a positive impact on global security in the decades ahead.

Canada’s nuclear technology is an asset that can benefit the world while contributing to our national industrial and economic strategies. For this to happen, AECL needs to be reorganized and privatized in a thoughtful and strategic manner, and not in frustration by a disenchanted owner.

Financial Post
Jan Carr is a corporate director and former chief executive of the Ontario Power Authority.