Nuclear suppliers don’t need Candus

Richard Foot
The Ottawa Citizen
July 11, 1998

The Canadian Press / Critics of Canada’s nuclear industry say the sale of Candu reactors, such as the one above, to foreign countries does more harm than good to Canadians because such sales are heavily subsidized by Canada.

TORONTO – Across the country today thousands of Canadians are beavering away, building valves and turbines and electronic systems for two Candu nuclear reactors bound for China. Critics of the atomic energy business say the work is a waste of time and taxpayers’ money. They say the people making parts for Candus could just as easily be building products for some other industry — one that isn’t fuelled by billions of dollars of public cash.

And many of the private companies that supply parts for reactors say that the nuclear industry isn’t what keeps their factories ticking. They don’t need Candu contracts to survive, and aren’t dependent, most say, on the $3-billion worth of federal loans earmarked to support the sale of Candu reactors overseas.

But in the last two years, the federal government has embarked on an ambitious, taxpayer-funded campaign to market and finance Candu reactors abroad. In 1996, the federal government and its Crown agency, Atomic Energy of Canada Limited, convinced China to buy two Candus with the help of a $1.5-billion federal loan, Canada’s biggest export loan ever.

Today, the government is offering Turkey the same amount in exchange for buying two Candus. Prime Minister Jean Chretien has defended these loans by saying that Canadian jobs are at stake. Candu sales overseas, he says, translate into valuable contracts for Canadian suppliers.

But suppliers across Ontario and Quebec say he is only partly right: If the federal government quit flogging reactors tomorrow, it’s unlikely that thousands of jobs would disappear or that firms would flee the country.

The demand for Canadian-made reactors has remained too low over the decades to keep manufacturers here dedicated to the Candu cause. The engineers and marketers who manage private nuclear suppliers have found business outside the atomic field to sustain their plants and workforces, getting contracts with companies that make everything from perfumes and petrochemicals to flight simulators.

Consider Sulzer Canada Inc. The Toronto company is the primary supplier of heavy water upgraders, a major piece of equipment that Sulzer has designed and installed in almost every one of the 32 Candus around the world.

Last month, Sulzer also got the contract to build two more upgraders for the Candu reactors being assembled in China. Sulzer sales manager Chuck Boddy said his company appreciates every bit of work it gets on the Candu program. But “if the Candu business didn’t come, we could get by without it. We’d carry on and we’d continue to be profitable,” said Mr. Boddy, who arranges subcontract work now, mostly for the U.S. chemical industry.

“All of the nuclear companies in Canada, including ourselves, we’re all healthy not because of Candu, but because of both Candu plus all the other activities we do in other areas,” he said. “The ones who are not healthy have probably failed because they did not make the transition out of the nuclear business into other fields.”

Of the roughly 150 suppliers across Canada that AECL pays to design and build Candu reactors, only about five are dedicated nuclear firms that are solely dependent on Candu’s business. Those companies either mine uranium, manufacture fuel bundles for Candu owners, or manage AECL’s construction projects.

Still, the Canadian Nuclear Association says the atomic industry has a big impact on Canada’s economy. The nuclear-energy business contributes about $6 billion a year to the country’s Gross Domestic Product, it says, and accounts for about 40,000 direct and indirect jobs, many of them highly skilled engineering and scientific jobs.

“Certainly the nuclear sector for a number of these companies is not the focus of their business and it’s not the core,” agreed AECL spokesman David Lisle. “However, while there may be other things these companies could pursue, a multibillion-dollar (Candu) export sale does create real jobs, and it creates high-paying, high-technology jobs.”

The Chinese deal, said Mr. Lisle, is creating “27,000 person-years of effort.”

The problem, say critics such as Norm Rubin of Toronto-based Energy Probe, is that this activity exists thanks to government money loaned at lower rates rates than commercial banks would provide, and because AECL depends on federal funding of at least $100 million a year. That means the construction of Candus bleeds wealth from Canada instead of creating it, Mr. Rubin said.

He said if Canada weren’t supporting companies to build Candus, these firms would search for other work — without public subsidies.

“There’s lots of business for companies like Babcock and Wilcocks. It’s just not in building nuclear generating stations. That’s a sideline they could do without,” Mr. Rubin said. “The Candu thing is becoming a kind of diversion from a set of sensible economic activities, from companies that can do different things.”

But Mr. Lisle scoffed at that argument. He said Candu construction doesn’t prevent companies from making other products and seeking new opportunities.

“The fact that the Candu business exists and creates economic wealth is great. And if other work in other industries is readily available, geez, go get it.”

He also disputed the notion that Candu contracts are subsidized. He calls the $1.5-billion loan to China a commercial deal, to be repayed to the government at 7.49 per cent. And he defended government support of the nuclear industry, saying it pays to invest public money in the development of Canadian high technology.

Jim MacLean, who directs the construction of reactor cores at the GEC Alsthom Energies plant near Montreal, believes Candus are a strong product and will bring further foreign sales. But Mr. MacLean, whose company has made most of the internal cores for Candus around the world, says exporting reactors has turned into a business of diminishing returns for Canadian suppliers.

AECL must sweeten every foreign sale by promising to transfer technology to buyers — by teaching customers how to build sections of the reactor themselves. In Korea, where Canada has sold a number of reactors, each subsequent sale brings less and less work to Canadian companies, as the Koreans get more ownership of Canadian technology and do more of their own engineering.

If AECL sells Candus to Turkey, Mr. MacLean will likely have to allow Turkish engineers into his plant and let them watch how the company makes the reactor cores.

“That’s the trend that’s happening now,” he said. “You get to build the first two or three units and after that they want to build it themselves.”

That’s no reason not to pursue overseas Candu sales, said David Anderson of Canatom NPM, which manages the construction of Candu plants abroad. Mr. Anderson said the more Candus get built around the world, even partly by foreigners, the more exposure the reactors get and the more customers there’ll be.

Nuclear work represents less than 10 per cent of the business at the GEC Alsthom plant near Montreal. When nuclear contracts come in, the company hires a few dozen more workers, but many of its engineers design and build both Candu and non-nuclear equipment. Mr. MacLean said if the Candu business disappeared, the factory that’s now busy building the new Chinese reactor would retool slightly, and find work elsewhere.

That’s proof, said Mr. Rubin, that the federal government is wrong to offer loans and subsidies to the nuclear industry, in the belief that jobs and plants require federal cash.

Mr. Rubin said that money comes at a high price — the risk of nuclear proliferation in countries that build atomic weapons out of Candu fuel, such as India, and the risk of nuclear accidents such as the one at Chernobyl.

“Most of Canada’s nuclear suppliers will have no trouble doing something, building something, that adds to human welfare,” Mr. Rubin said, “if we stop paying them to do something that subtracts from human welfare.”

 

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