Plan to privatize AECL like dismantling Avro
Would jettison only most valuable portions, keep money-losers as Crown assets.
by Dr Duane Bratt
April 3, 2009 — In 1959 the Diefenbaker government shut down the Arrow, the world's most technologically advanced supersonic interceptor aircraft. Not only did it mean the demise of a uniquely Canadian high-tech invention, but it also forced thousands of highly skilled scientists and engineers to leave the country. In many cases these individuals eventually joined the NASA space program.
With AECL on the auction block, there are serious questions being raised about the future of the CANDU nuclear reactor, a uniquely Canadian high-tech invention, and the fate of its thousands of highly skilled scientists and engineers.
Natural Resources Canada commissioned a study by the National Bank to determine whether AECL should be privatized and, if so, through what type of process. Some of the details of this study have already leaked out.
In particular, it recommended that at least 51 percent of AECL's CANDU design and service departments be privatized. The design group is responsible for the ACR-1000 (its new advanced CANDU), and the service team does life-extension refurbishment of existing CANDUs.
With the global demand for new reactor construction (each worth several billion dollars) and a market of close to 20 old CANDUs eventually requiring refurbishment (at about $1.5 billion a pop), these are the most valuable parts of the company. Other parts of AECL, most notably its research division at Chalk River and its medical isotopes production at the NRU reactor, would remain as a crown corporation.
There are two competing groups eyeing AECL. The first is the French-owned Areva, which is the world's largest nuclear company and already has a Canadian presence. The second is a consortium of Canadian firms closely linked to the CANDU: General Electric, SNC-Lavalin and Bruce Power.
As mentioned, there are risks to pursuing AECL's privatization.
In particular, a sale to non-Canadian owners like Areva (partly owned by the French government) would be problematic. The nationality of ownership still matters when it comes to the nuclear industry. In an obvious example, there are issues of national security associated with nuclear technology.
The public recognizes the importance of Canadian ownership. In a major multinational survey of attitudes toward nuclear power conducted by Accenture, 75 per cent of Canadians are "not comfortable with the presence of non-Canadian nuclear plant manufacturers and plant operators in Canada."
The study also found that "contribution to the local economy and the use of Canadian technology are rated most important by respondents for the selection of a design and of a building vendor for a new nuclear site."
Critics question the splitting off of AECL's commercial activities from its research activities. It has been suggested that this means privatizing those elements that make money, but keeping nationalized those elements that lose money. As John Kenneth Galbraith would have said: "Private wealth and public squalor."
Will Ottawa be willing to properly invest in pure research at Chalk River knowing that any commercial application will only benefit the private sector? What about Areva's commitment to Canadian research? While Areva would use Canadian construction workers and reactor operators, where would it conduct its most important nuclear research: Canada or France?
It is not the overall number of jobs that would be gained or lost through privatization; it is the type of jobs. Maintaining and expanding high value-added scientific jobs is important, but doubly so in a country like Canada that has very few high-tech champions.
That being said, there are a number of arguments in favour of privatization. First, it is an opportunity to put money in Ottawa's coffers by selling off a key asset. With the world (and Canada) in the initial stages of a nuclear revival, the value of AECL is higher than it has been in more than a decade.
Second, Ottawa realizes that AECL requires a massive capital infusion and would also benefit from private sector management practices in order to compete with multinational behemoths like Areva, Westinghouse-Toshiba and General Electric-Hitachi.
In comparison to its competitors, AECL has been starved of cash, which, it is feared, has eroded some of its technological capacity. In contrast to other so-called Generation III+ reactors, the ACR-1000 is still in the prototype stage, while Areva's EPR is under construction in Finland and Westinghouse's AP1000 has been certified by the U.S. Nuclear Regulatory Commission. The fiasco of the MAPLE reactors has also led many government and industry people to question AECL's current competency.
Finally, the process of globalization has meant that the international nuclear market is no longer the national zero-sum game that it once was. After all, Westinghouse-Toshiba is an American-Japanese-British firm and Areva is a European consortium.
In addition, any major project also requires partnerships with local engineering, construction and supplier firms. This consolidation of the nuclear industry has meant that economic nationalism concerns may not be as prevalent. For instance, until recently Canada has benefited greatly from a consolidated auto sector even though there is no "Canadian" auto company.
In short, there are a host of economic, technological, environmental and political arguments that need to be weighed before any decision on AECL's privatization is made. The stakes are huge and the dollars are in the tens of billions.
Further complicating the decision over the privatization of AECL is that it is not entirely Ottawa's decision to make. It is difficult, if not impossible, to separate it from the Ontario government's decision on the winning vendor for two, and possibly four, new nuclear reactors.
Other nuclear provinces like New Brunswick, Saskatchewan, Quebec and Alberta can only sit back and watch as Ottawa and Toronto decide the fate of the Canadian nuclear industry.
Duane Bratt is Professor in the Department of Policy Studies, Mount Royal College, Calgary. This article originally appeared in the Toronto Star.
Posted: April 08, 2009
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