Robert Van Adel
Financial Post
January 26, 2005

Tom Adams is once again completely and utterly wrong in his Jan. 14 rant (New Nuke Sinkholes). I certainly welcome a dialogue with our industry critics, but it is not helpful when those critics simply refuse to acknowledge the facts. The facts are that:

# AECL has shared the risk with the private sector via fixed-price contracts (e.g. 50%) and has used this model in delivering successful projects over the past decade.

# AECL has completed six CANDU power projects in three countries over the past decade – all on time and on budget.

# AECL’s commercial CANDU business is profitable for AECL and the hundreds of leading-edge companies making up the Canadian nuclear industry supply chain.

# AECL has never had to pay out contractual penalties for being late on delivering CANDU reactor projects.

# Sophisticated business analysts recognize that risk-sharing contracts assumed by AECL are in line with other market-based, private-sector commercial ventures.

# AECL constructed and delivered the one-off MAPLE radioisotope reactors for MDS Nordion on time; AECL is expediting a lengthy and complex commissioning process with the parties involved.

# AECL is operating under a cost-recoverable contract with MDS Nordion. The government has no exposure, as it is not party to the contract.

# AECL’s CANDU 6 reactor ranks among the best in the world. CANDU 6 reactors in New Brunswick, Quebec, South Korea, China, Romania and Argentina have been on line, safely producing electricity 86% of the time since 1983.

AECL and Canadian nuclear power technology are outstanding commercial success stories and hardly a "taxpayer sinkhole." The industry has generated more than $170-billion in GDP benefit to Canada via power production, R&D, CANDU exports, uranium, medical radioisotopes and professional services. At the same time, CANDU plants have avoided well over a billion tonnes of greenhouse gas pollution.

Robert Van Adel, president and chief executive officer, Atomic Energy of Canada Limited.

TOM ADAMS RESPONDS

Robert Van Adel describes Atomic Energy of Canada Limited, the Crown corporation he heads, as an "outstanding commercial success." AECL certainly does stand out, but not for any commercial success. AECL is utterly dependent upon government subsidies to keep itself afloat.

In the period 1997 to 2004, for example, AECL received $1.24-billion in direct parliamentary appropriations. In addition, the federal government indirectly assisted AECL by granting aid to AECL customers that agreed to purchase AECL’s CANDU reactors. In 1997, the Chinese government received a subsidized loan of $1.5-billion under the government’s Canada Account program to enable it to purchase two reactors from AECL. In January, 2003, the Romanian government received a $328-million Canada Account loan to support the eventual completion of a second of the five reactors ordered in the 1970s. The Canada Account is a pot of money dispensed by the federal Cabinet, entirely at its discretion for purposes that are "in the national interest."

AECL’s domestic customers – Ontario Power Generation and New Brunswick Power – also benefit from provincial subsidies. In 1998, Ontario Power Generation’s predecessor received a provincial bailout of $21-billion, overwhelmingly for nuclear writedowns. In 1999, provincially-owned NB Power wrote off $450-million against its AECL-constructed reactor, resulting in a hit to the province’s books of more than $400-million. All considered, Bombardier’s federal and provincial subsidies are tiny compared with those received by AECL.

Mr. Adel claims that six CANDU power projects have been completed on time in three countries over the past decade. He overstates. The Cernavoda I reactor in Romania required almost 20 years from the point that it was committed in 1977. First concrete was poured in October, 1980. Originally intended to be completed in the early 1980s, it was actually completed in December, 1996, more than 10 years behind the original schedule.

CANDU power plants aside – these are immense undertakings with correspondingly immense logistical challenges – AECL claims to have constructed and delivered the MAPLE radioisotope reactors for MDS Nordion on time. The only reactor based on AECL’s MAPLE technology that is now in operation was built by the Koreans, who completed it in 1995. AECL’s own MAPLE reactors have not seen completion. Two were ordered in 1996 by the medical firm MDS Inc. – MDS Nordion’s parent – for completion in 1999 and 2000. Neither of these two reactors is now working – they are both plagued by safety problems that the Koreans had previously discovered. MDS is threatening to litigate its dispute with AECL.

Mr. Adel assures us that the federal government has no exposure for the business failures of this wholly owned subsidiary of the federal government. This claim is the opposite of what AECL told the NB Public Utilities Board in 2002. When this provincial regulator formally asked AECL at a public hearing whether AECL could live up to the commercial guarantees it was offering, AECL assured the NB Public Utilities Board that the federal government stood behind AECL’s promises. In its written decision, the provincial regulator then noted: "Upon review, the Board is satisfied that the contractual obligations incurred by AECL in its contracts with NB Power will be adequately supported by the Government of Canada due to the statutory principal-agent relationship created in the Nuclear Energy Act."

Tom Adams is executive director of Energy Probe, a national think-tank on energy issues.