Natural Resources Committee on Oct. 21st, 2009

[Paule Brunelle, Bloc, Trois-Rivières, QC]

Good afternoon, gentlemen, and thank you for being here.

My question is very simple. We are talking about privatizing AECL. How much is AECL worth? How much has the government invested in AECL over the past 25 years?

[Serge Dupont]

That is a very good question. How much is AECL worth? Mr. Chair, it may not surprise you that I do not have a figure as to AECL's worth. It is important to understand that there are two sides to Atomic Energy of Canada Limited. One side is more of a business, selling reactors and nuclear engineering services, while the other is basically a laboratory, with a lower market value at the end of the day. To be honest, it has no market value. There are no investors who would want to buy the lab with all of its infrastructure because its use is not strictly commercial.

Let us talk about the commercial side for a moment. When investors have an interest in it and they do not really want to see what is currently in place.... Of course, there are people, skills and intellectual property, as the member mentioned earlier. Those two things are relatively hard to assess. Ultimately, it is the market that determines their value, depending on negotiations.

The other value component gives rise to certain questions. How will it translate into various projects? What reactor redevelopment projects could this firm undertake in the future, and what would that mean in terms of profits? What is the potential for reactor sales? Various hypotheses can be used to calculate how many reactors will be sold or repaired. Then it is a matter of considering that figure in terms of the current value. The hypotheses can vary.

You also have to bear in mind that Atomic Energy of Canada Limited has certain debts and obligations that it has to meet. There is what we call waste, which is part of AECL's balance sheet and which represents one of its long-term obligations. So all of this ultimately affects the value of Atomic Energy of Canada Limited.

We know that it is an organization that interests investors in certain segments. It is not an organization that we could sell on the market tomorrow morning, taking it public, for example. The transaction is more complicated than that.

[Paule Brunelle, Bloc, Trois-Rivières, QC]

Is it possible that the government will carve up AECL, keeping the most costly components such as waste management and privatizing the profitable ones?

Given that AECL is struggling, that the industry is dying, that it cannot compete internationally, that it has few contracts and, above all, that it cannot get projects back on track—as evidenced by Pointe Lepreau—is this not the worst time to privatize AECL? Did your committee study the costs? I see that it is not very accurate. Lastly, is this the worst time to make this decision?

[Serge Dupont]

Well, you need to consider the global growth markets and the fact that the corporation does not necessarily have the resources at this time to showcase itself in the best possible light. It lacks risk capital, entrepreneurship, and the scale and skills needed to enter into markets. So, from the government's perspective, I think this is the right time. Atomic Energy of Canada Limited may not be any better off in five years, if we do not make some decisions now. I do not think that time is on AECL's or the industry's side, if we do not take steps to revive Canada's industry as far as technology and resources go, especially human resources, which are still strong.

[Paule Brunelle, Bloc, Trois-Rivières, QC]

Could you explain how the restructuring and those transactions will be undertaken? Is the government required to discuss its proposals with the House of Commons or the committee, for example? Who will have the final say?

[Serge Dupont]

The government is more than just required to consult the committee and the House of Commons, because when it comes to holding private capital in Atomic Energy of Canada Limited—and by that, I mean partial privatization of the commercial component—an act of Parliament is necessary. So, in that respect, the government cannot move forward with a transaction unless it again goes before Parliament and this committee with a bill.

[Paule Brunelle, Bloc, Trois-Rivières, QC]

In the case of Pointe Lepreau, we are seeing that the people developing the new generating station are asking the government for compensation. Does that mean that the government, through AECL, is still widely responsible and should pay for power generation in other provinces?

[Serge Dupont]

I am not sure if I fully understand your question.

Certainly, those contracts should be honoured. Then one of two things would happen. If there is an obligation on a corporation's balance sheet and a desire to sell that corporation, the buyer will ask us to continue meeting that obligation or will lower the price it is willing to pay by the value of that obligation. So we will see what happens, depending on how the negotiations are structured.

What is certain is that Atomic Energy of Canada Limited must and will honour its contractual commitments in Pointe Lepreau and elsewhere. AECL is fully owned by the government, and its obligations will be upheld.

[The Vice-Chair, Liberal, Alan Tonks]

Thank you, Madame Brunelle. You're out of time.

We'll go to Mr. Cullen now, please.

[Nathan Cullen, NDP, Skeena—Bulkley Valley, BC]

It's nice to see you again, Mr. Dupont.

Something that I think the committee is struggling with is trying to get an understanding or assessment of what the actual value of AECL is under the different scenarios of privatization that have been talked about, such as hiving off Chalk River or selling off the CANDU side entirely.

As you mentioned, one of the criteria was to maximize the return on investment for Canadian taxpayers. Do we know what that total investment has been over the life of AECL?

[Serge Dupont]

Thank you for reminding me, because the question was asked by the member, and I wasn't able to....

Would you have numbers, Tom, historically?

[Tom Wallace]

Historically, I think if you add it up, it exceeds $8 billion to the end of 2008-09. I don't have the precise figures, but it's in that order of magnitude.

[Nathan Cullen, NDP, Skeena—Bulkley Valley, BC]

Does that include any off-book liabilities that AECL has to keep ongoing?

[Tom Wallace]

No. I'll have to go back and look at the numbers, but I believe that it's from going back to the 1940s and just adding up all the numbers. It doesn't include the liabilities, in my understanding.

[Nathan Cullen, NDP, Skeena—Bulkley Valley, BC]

It's something that would be helpful for your office to provide, because as we ask other witnesses and we seek advice from folks who are in the industry--internationally, as well--we need to understand what the actual assets of AECL are as well as what things might actually end up costing a potential buyer something. I think the question Madame Brunelle was going on was what types of liabilities a potential buyer would pick up in such a sale.

How many contracts does AECL have right now for new builds and reactors globally?

[Serge Dupont]

There are no contracts at this time for new builds.

[Nathan Cullen, NDP, Skeena—Bulkley Valley, BC]

In the potential sale of a company, having contracts on the books would be seen as something helpful. I know that the push to have the sale of CANDU reactors in Ontario was.... I would imagine, if I were a prospective buyer, that contracts on the books would be seen as helpful.

There are well over 100 projects right now, calls for proposals. I'm a little mystified as to why there are none that AECL holds in any of those contracts.

[Serge Dupont]

It's a fair question. Obviously, AECL is participating in the Ontario process. There are different prospects internationally that may, at a point in time, crystallize--or they may not. There are no contracts at this time, in part because of what I mentioned earlier: many of those projects are in the United States. AECL is not competing in the United States at all at this time. That's a business decision the corporation took. The U.S. economy, and basically all utilities in the U.S., have decided to go to light-water reactor technology. Indeed, the world has decided, in majority, to go to light-water reactor technology.

[Nathan Cullen, NDP, Skeena—Bulkley Valley, BC]

Maybe that's what I'm trying to get at. The model we have for sale to the world uses heavy HEU--

[Serge Dupont]

Not HEU; that's highly enriched uranium, which is a different thing.

[Nathan Cullen, NDP, Skeena—Bulkley Valley, BC]

Sorry; yes.

[Serge Dupont]

So it's heavy water.

[Nathan Cullen, NDP, Skeena—Bulkley Valley, BC]

Right.

But there are some concerns with the uranium also applied through the CANDU system in terms of weapons proliferation. That's been raised by other witnesses at this committee before and not been denied by the government, so I assume that it is part of the consideration. I know the Obama administration has raised it, as well, in international negotiations.

[Serge Dupont]

Let me tread this one cautiously, Mr. Chair. It's an important question. I'm not the expert, so I really want to preface it that way.

I think there is certainly a counter-argument to this notion we hear that CANDU is a proliferating technology. CANDU technology is, in many ways, safer than other technologies. It does not require the enrichment of uranium. At least the CANDU reactors that have been sold to date--the CANDU 6, for example, is in Korea, China, Romania, and Argentina--do not require the enrichment of uranium. Through the process of enrichment there is a greater potential source of nuclear materials for military purposes.

The installations, obviously, are under IEA guidance and so forth. I think it would be worthwhile for the committee to hear from experts from the government in this regard. I agree with you; it's an important point. I think we actually have a good story to tell, better than what is maybe being told by some of the competitors.

[Nathan Cullen, NDP, Skeena—Bulkley Valley, BC]

That's helpful, as the committee is still building the agenda for this study. These questions, the question of proliferation, the question of enriched uranium, are important.

You mentioned that this technology has been applied in 48 projects we've built globally. Of the reactors that AECL actually builds, do any of them go ahead without a subsidy from the government? Does private money ever entirely make the project go, or does it require government subsidy as a general rule?