Candu strike could threaten service to 34 units worldwide

(June 22, 2012) Even if the strike is not affecting Candu’s current business, and the engineers eventually return to work, Candu may end up primarily a servicing company for its old reactors. Meanwhile, skepticism regarding the completion of two new reactors planned for Darlington and the refurbishment of four existing units remains high. “The Darlington Refurbishment is like something from Alice and Wonderland,” says Energy Probe’s Norm Rubin.

By Gary A. Harki for Nuclear Intelligence Weekly

Canada’s Candu Energy continues to endure a strike by engineers that began Jun. 4 over pensions and pay — a strike their union, the Society of Professional Engineers and Associates (SPEA), says is threatening the Darlington reactor refurbishment project. Even if the work stoppage is not adversely affecting the company, as its parent company claims, it certainly isn’t helping prospects for the Enhanced Candu 6 (EC6) or the Advanced Candu (ACR-1000).

SNC-Lavalin, which purchased Atomic Energy of Canada Limited’s (AECL) Candu reactor division for C$15 million in July 2011, says the strike thus far involves only about 130
employees, or roughly 15% of its Candu workforce. While SNC says the impact so far is minimal, if the strike continues without a settlement, the threat of a massive walk-out could leave SNC without the expertise it needs to service 34 operating Candus worldwide, 22 of which are in Canada. (The others are in Argentina, Romania, India, China, Korea and Pakistan).

SPEA represents 860 scientists, engineers and technical staff at Candu, most of whom are currently focused on the EC6 and the C$600 million Darlington refurbishment and restart of two dormant reactors at Bruce power station (NIW Mar.30’12). SPEA called the strike to prevent SNC from cutting public sector benefits to its employees, which would effectively lower both pay and pension benefits, arguing that Candu was developed before the SNC purchase under public sector working conditions (NIW Jul.5’11). If Candu cuts too drastically, then the best (if not all) of its SPEA employees will simply find jobs elsewhere, leaving the company with an unfinished EC6 design and lack of design expertise on the company’s operating reactors, the union argues. It points out that most of Canada’s nuclear power industry, notably Ontario Power Generation (Darlington’s owner), is still in the public sector.

Michael Ivanco, SPEA’s vice president, declined to discuss the specifics of SNC’s proposed cuts but said, “Essentially … these guys are squeezing us to the point where we are going to have to leave. It is very much a decimation of the employee contract. The trouble is that everyone has a plan B.”

SPEA employees may not be the only party to this contentious negotiation with a plan B, however. Candu has implemented extensive contingency plans to meet client commitments during the strike, said Katherine Ward, Candu spokeswoman.

“To date there has been no meaningful impact to those (client) commitments,” she wrote to NIW in an e-mail. Several analysts contacted by NIW said they believed Candu was dug in for the long haul with the strike. “This has been coming since they (SNC) bought the company,” one analyst said. “They’ve had time to prepare and … SNC has a mandate to increase the profitability of the organization.”

A second analyst agreed that thus far the strike has not hurt Candu’s business. “They knew they would have to go through these negotiations with employees,” he said.

Candu and SPEA at least appear to remain committed to negotiations, which continued the week of Jun. 18, Ward said. “Candu needs collective agreements that make our workforce competitive, flexible, efficient, cost-effective and reflect current economic market realities,” she wrote to NIW.

Prospects Versus Sales

But even if the strike is not affecting Candu’s current business, and the engineers eventually return to work, prospects for the EC6, once completed, look sketchy. Candu may end up primarily a servicing company for its old reactors, and there remains skepticism that two new reactors planned for Darlington will be completed — or that refurbishment of four existing Candu 6 units will be finished.

“The Darlington Refurbishment is like something from Alice and Wonderland,” said Norman Rubin, research director at Canadian environmental group and nuclear watchdog Energy Probe.

The C$600 million contract with SNC is just for the planning phase of the refurbishment; neither Darlington plant owner Ontario Power nor SNC have released estimates of the overall project cost. Rubin said the two companies are estimating the refurbishment costs will have the plant producing power at between 6¢ and 8¢ per kilowatt hour, which Rubin claims is a gross underestimate of the costs.

It is possible that the Ontario Energy Board, which regulates how much Ontario Power can charge rate payers, may refuse a higher per-kilowatt price increase. The current estimates
are “extremely biased so that consumers pay as little as possible,” he said.

Candu is also flailing for new business. Its EC6 was taken out of the running in Jordan, which announced in May that it had pared the finalists down to Atomstroyexport’s
AES-92 VVER-1000 and the Atmea technology from Areva and Mitsubishi Heavy Industries (NIW May4’12). That leaves Argentina, Romania and Ukraine as the most likely prospects for a Canadian design, although decisions in Argentina and Ukraine aren’t expected until 2017 and 2015, respectively, and the timetable in Romania is unclear.

Meanwhile, the potential for additional newbuild inside Canada is shaky. The EC6 remains a contender, along with Westinghouse’s AP1000 PWR, for the two planned units at
Darlington. Candu would appear to have the upper hand, as the four other reactors at the plant are earlier generation Candus, although the EC6 still needs Canadian design approval. And by the time Ontario Power makes a decision (likely more than a year off) on technology, there will already be AP1000s in both the US and China from which to extract the first lessons-learned on construction, and that could bode well for Westinghouse.

Several sources contacted by NIW suggested that some of the projects Candu is being considered for, if not all of them, may never be built because of costs. “It’s hard to find investors willing to get into nuclear, the costs are so high,” said Rubin. “Candu is never short on prospects just short in sales.”

Ontario’s Energy Minister Chris Bentley wouldn’t comment when asked by a reporter for the Toronto Star whether new reactors would be built at Darlington, where estimates for two units range between $10 billion and $18 billion. “I hope to be in a position to speak more about that in the next couple of months,” he told the newspaper Jun. 8. “We’ve been working hard to try and put ourselves in a position to better make that  decision.”

Prior to the statement, Ontario politicians had been firm on plans to move forward with the project, wrote David Jackson, a former head of both the Canadian Nuclear Society and the
Canadian Nuclear Association who now teaches at McMaster University, in an e-mail to NIW. Decreased public support, a “cost-cutting atmosphere” due to provincial debt, static power growth, an ideological desire for renewable energy and political pressures are all taking their toll on political support for nuclear, Jackson said.

“It seems to me that support for nuclear power has declined in Canada both because of Fukushima and especially also because of the relatively new and growing realization/
perception that it’s just too expensive,” he said.

Uncertain expansion plans abroad and decreasing support at home may leave SNC, with or without its striking engineers, with a Candu division that has little to no new business.

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