Canada privatizes nuclear unit; sells to SNC

Wed Jun 29, 2011 7:35pm EDT
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By Julie Gordon and Nicole Mordant

TORONTO/VANCOUVER (Reuters) - The Canadian government is selling the nuclear reactor division of AECL to SNC-Lavalin Group, ending the flood of money it has pumped into the loss-making unit over the past six decades.

In a long-awaited announcement, the two parties said on Wednesday SNC-Lavalin will pay state-owned Atomic Energy of Canada (AECL) C$15 million ($15.4 million) plus royalties for the unit, which designs and builds nuclear reactors for generating electricity.

Reactions to the sale price and the announcement that AECL will retain past liabilities, which includes billions of dollars to cover cost overruns on reactor projects that taxpayers will have to fund, were swift and at times angry.

"I predicted AECL would go for a 'fire sale, bargain basement' price -- but C$15 million? I never thought it would go that cheap," said Green Party leader Elizabeth May in a message on Twitter.

Investors in SNC-Lavalin, Canada's biggest engineering company, will "breathe a sigh of relief" at the acquisition cost, said Maxim Sytchev, an equities analyst at NCP Northland Capital Partners.

After decades of government funding -- estimates run into the C$20 billions -- Ottawa announced in 2009 that it planned to sell off AECL's commercial reactor operations. The division suffered a net loss of C$435 million over the past two years.

The auction drew tepid interest even before the Fukushima nuclear disaster in Japan this past March, which punctured interest in nuclear power stations around the globe.

A handful of potential suitors and financiers, including Canadian nuclear power operator Bruce Power and Canada's OMERS pension fund, stepped up briefly in what was an ultra-secretive sales process, but all except SNC-Lavalin dropped out.   Continued...