Natural Resources Committee on March 3rd, 2011

[Kent Harris, Senior Vice-President and Chief Financial Officer, Atomic Energy of Canada Limited]

Those would primarily be commitments that we would make when we enter contracts. LDs are an example where we have a commitment going forward if there's a financial issue that we're deemed to be responsible for.

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

It's essentially money that you're setting aside or you potentially need to set aside if things go wrong or if the project takes longer than it should.

[Kent Harris]

Yes.

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

Mr. MacDiarmid, in your opening statement, you painted what I would argue is a relatively rosy picture of how things have been going at Lepreau. You said something to the effect that its somewhat on schedule or maybe even ahead of schedule.

But this past fall, there were more delays in the calandria tubes. Between December 2009 and April 2010, 380 new tubes were inserted, but dozens of them didn't pass the air-tightness tests and all of them had to then be taken out, thereby extending the delay. There are some estimates that it's $1 million a day in cost overruns for every day the project goes on.

Are both of those statements true?

[Hugh MacDiarmid]

The $1 million a day is a number that is often used to represent New Brunswick's cost. I would not necessarily accept that without some challenge, but it's a matter for others.

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

Okay.

[Hugh MacDiarmid]

We certainly have an ongoing cost that is hundreds of thousands of dollars per day to continue our work. It's certainly an expensive project by any measure in terms of what it costs us to keep it going.

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

Here's the concern that I have. I've looked at the projects, the main ones. We talked about Chalk River, Lepreau, Bruce, and South Korea. This is expensive stuff. The minister said it himself. He said he's angry. He said the money goes fast. It does in the nuclear business. When things don't go right, it's expensive. We saw it at Chalk, and we've seen it at the other projects that have been named.

If what the government is trying to do is sell this, is the value of AECL not downgraded as these things mount up? Any potential buyer is going to look at this and say you've been running over costs. It's been very expensive, but it's all been on the backs of Canadian taxpayers up to this point.

If that had occurred in private industry, they would have been run out of business years ago. You can't sustain those losses in the private sector unless you have unbelievably deep pockets, such as a federal government.

[Hugh MacDiarmid]

Very clearly, our belief is that we are going to apply the lessons. They've been very expensive lessons, but they're lessons nonetheless. Lessons were learned during the first wave of the life extension project to become substantially more efficient and to deliver the projects on schedule and on budget for the second wave, which is G2 and Embalse. The third wave then comes right back here to Canada. After those projects are complete or under way, the next reactors to be life extended will be at Darlington and Bruce.

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

Let's go to Argentina for a second, because this is an example of something I find very confusing, or perhaps problematic, with this long, painful sale process that's going on.

The Argentinians seem to want to sign a deal for this refurbishment. It's a $500 million contract, give or take. They have also said to us that they're willing to take on some of the liabilities if there are cost overruns. They're at the point, and we've heard this from them, where they are considering suing the Canadian government to do the contract.

I've never seen a situation like this, for someone who wants to hire you guys. I can't help but believe that you're under some sort of restriction; unable to sign a contract that would make you a lot of money, make you more profitable, and make you a better sale. Would it not? I mean, having this thing on the contracts, having those good folks working on the Argentina project, most of this $500 million would be spent on Canadians, a bunch of it in Canada.

Why not sign the contract? The minister says there's no restriction on you guys signing this thing. Argentina wants to sign; they're willing to take the liability. My goodness, do they have to actually sue us in order to get this contract off the ground?

[Hugh MacDiarmid]

Well, this project is indeed one that I believe is caught up in the restructuring process.

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

Okay. So when you say “caught up”—because AECL is for sale and we don't know who the buyer's going to be—it's muddied the waters around our ability to actually sign the contract and put people to work on it.

[Hugh MacDiarmid]

I think there's certainly that dimension, and I believe the Government of Canada has taken a pretty clear picture. They do not wish to negotiate a multi-year agreement on behalf of a future shareholder. And equally they have...the minister's comments, I think, indicated that material financial risk is being avoided, and they see that this contract might have some of that element.

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

So help me out on that point, because the minister kept using that term, “material financial risk”. It sounds like the Argentinians are willing to take the risk. Is that incorrect? Are they telling us something that's not true?

[Hugh MacDiarmid]

I think there are many, many perspectives on this situation, and it is indeed complex. I basically feel that, at this point, I take direction from the shareholder, in terms of how we approach these matters.

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

The one that was just sitting at the table? The minister.

[Hugh MacDiarmid]

That's correct.

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

Okay.

That's what we're trying to understand as a committee, and I think that's what Canadians are trying to understand.

The government has said a couple of things that sound contradictory to their actions. One is that they want to get out of the isotope business. That's what the Prime Minister said. The minister has said, and the previous minister, for a long time, that we want to sell AECL, and we want to sell it for the most that we can get--meanwhile inhibiting you from signing contracts that would make the sale of a higher value to Canadians.

We've put in $22 billion in adjusted 2009 dollars in AECL over 60 years. That's a significant investment. We're hoping to get some kind of return on that. Holding you guys up from signing contracts seems totally contrary to the purposes of getting value for the Canadian taxpayer.

[Hugh MacDiarmid]

I think the minister is the right person to speak on those decisions.

[The Chair, Conservative, Leon Benoit]

Thank you, Mr. Cullen. Your time is up.

We'll go to Mr. Harris, for up to seven minutes.

[Dick Harris, Conservative, Cariboo—Prince George, BC]

Thank you, Mr. Chair.

It's nice to see you again. Thank you again for that great tour you gave us last year out at the Chalk River facility.

[Hugh MacDiarmid]

[Inaudible--Editor]

[Dick Harris, Conservative, Cariboo—Prince George, BC]

Yes.

I want to ask you a question about the Chalk River facility, but also I just want to wish you the best of luck, trying to make up that loss on those three projects.

Just to be clear, you said that there was about $839 million, if I have the number right, lost to the anticipated profit? Does that mean the net loss was about $500 million, or is it the anticipated, plus the $800 million?

[Hugh MacDiarmid]

We're going to get into rounding numbers here—

[Dick Harris, Conservative, Cariboo—Prince George, BC]

Yes, sure.