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UPDATE 2-Canada set to sell AECL unit to SNC-Lavalin-report
June 28, 2011 / 3:02 PM / 6 years ago

UPDATE 2-Canada set to sell AECL unit to SNC-Lavalin-report

* Deal could be announced later this week, paper says

* No details yet but analyst sees modest purchase price

* SNC-Lavalin’s stock rises 2.4 pct (Adds federal government, Ontario energy minister’s response, SNC stock price)

TORONTO, June 28 (Reuters) - The Canadian government is set to announce the sale of Atomic Energy of Canada Ltd to SNC-Lavalin Group Inc (SNC.TO), the Globe and Mail newspaper said on Tuesday.

SNC-Lavalin, Canada’s biggest engineering and construction firm, was the sole bidder for AECL’s commercial nuclear power division and had said it was still interested in the deal despite losing its bidding partner in May.

The sale of the AECL division could come as early as this week, although negotiators are still working out the final details, the paper said, citing sources close to the talks.

A spokeswoman for Montreal-based SNC-Lavalin said the company “was not in a position to respond to any of the information that is circulating”.

A spokeswoman for Natural Resources Minister Joe Oliver said the federal government is “is continuing its process towards the divestiture of the Candu reactor division”.

AECL’s commercial division designs and builds Candu reactors for nuclear power stations. The government put the unit up for sale in 2009 after years of subsidies and poor financial performance. It plans to retain ownership of the research business and place it under private management.

Little is known about SNC’s bid, including the price, although analysts expect the company’s offer to be modest, especially in the wake of negative sentiment globally toward nuclear energy after the Fukushima disaster.

SNC’s bid is likely to give no value to AECL’s reactor-building business and only price in its refurbishment operations, Northland NCP analyst Maxim Sytchev said.

“While the timing of AECL’s acquisition is not ideal in the context of anti-nuclear sentiment, we believe that the asset will be priced to reflect the current reality,” Sytchev said in an email to clients.

SNC-Lavalin’s shares were up C$1.36, or 2.4 percent, at C$57.13 on the Toronto Stock Exchange.

AECL’s reactor division posted a loss of C$104 million ($106 million) last year on revenue of C$428 million.

The province of Ontario, which put plans to buy two reactors from AECL on hold two years ago because of spiraling costs and uncertainty about the nuclear firm’s future, welcomed reports that the sale process was drawing to a close.

Ontario Energy Minister Brad Duguid told Reuters he expects the federal government will invest in the province’s nuclear sector even if it no longer holds a stake in AECL’s reactor business.

The province, Canada’s biggest electricity consumer, plans to keep 50 percent of its power coming from nuclear generating stations over the next 20 years.

In April, Ontario’s municipal employee pension fund pulled out of talks with SNC-Lavalin to buy AECL.

Negotiations were slow while the Conservative government held only a minority in Parliament. The Conservatives won a majority in the May 2 election, which was expected to speed up the sale.

The Globe said the sale completes Ottawa’s plans to get out of the nuclear energy business. AECL has had billions of dollars of government support and faced major cost overruns at key projects in recent years, while failing to find an international partner in sale talks.

The Candu reactor sales and service division will be split from the Chalk River laboratory and its research reactor, which produces isotopes for medical imaging and diagnostic procedures. The federal government will continue to own that unit, but it will be managed via an outside contract.

SNC-Lavalin has assured Ottawa that it is buying AECL with the expectation that it will boost reactor sales and servicing, the Globe and Mail said.

$1=$0.98 Canadian Reporting by Andrea Hopkins, Nicole Mordant in Vancouver and Randall Palmer in Ottawa; editing by Rob Wilson

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