Every time the price of oil or natural gas increases, the smiles widen at Atomic Energy of Canada Ltd.

The maker of Canadian deuterium uranium-reactor power plants - better known as Candu 6 - says electricity generated by its reactors is already price competitive with fossil fuel plants.

And it believes that in a world confronting the dilemma of greenhouse-gas emissions, nuclear power is starting to lose its reputation as an environmental bogeyman.

While environmental advocates often disagree with both points, there is no disputing that nuclear power is a viable option for an energy-hungry world demanding competitive solutions.

Photo courtesy Atomic Energy of Canada
Sixty per cent of Atomic Energy's sales and service contracts are outside Canada, such as this Candu reactor in Shanghai.

"Improved technology has created a much greater recognition by the public of the benefits of nuclear power and it's led to a resurgence in the belief that it can deliver the electricity the world needs and still be environmentally attractive," says Ken Petrunik, Atomic Energy's senior vice'-president and chief operating officer.

"However, it's a market with a very long-term view and investment is subject to huge variations, both economic or political," he says.

That is one reason why Atomic Energy's balance sheet over the years has shown the peaks and troughs of a volatile industry.

Figures for the recently ended 2005 fiscal year have not yet been released. But in 2004 there was a significant drop in revenue - to $497 million from $580 million in 2003 when revenue and profit rose on prestige projects in China and Romania, as well as on plant-refurbishment contracts at home.

Atomic Energy's results depend completely on year-by-year demand for the company's three products - new power plants (72 per cent of 2004 revenue), renovations and refurbishment to existing Candu facilities (20 per cent) and eight per cent from medical isotopes for research and treatment distributed by MDS Nordion.

Since nuclear contracts tend to be huge, a single agreement can change annual revenue from minus to plus quickly. And there is no telling which country will serve up the next deal.

"Let's face it. There are parts of the world that can't afford to be without the nuclear option. Even the latest U.S. energy bill includes tax subsidies for it," says Danny Czamanski, senior vice-president of research for the Calgary-based Canadian Energy Research Institute (CERI).

Atomic Energy is working out financial details for four domestic refurbishments: Two 800-megawatt reactors on the Bruce Peninsula, a 700-megawatt unit at Gentilly in Quebec and a 700-megawatt plant in New Brunswick at Point Lepreau. Those projects cover three of the five operating sites in Canada; the other two are in Ontario at Pickering and Darlington.

Approximately 60 per cent of Atomic Energy's business is outside Canada, a market Petrunik believes offers bigger revenue potential than the local industry, especially as Ontario decides how to proceed with nuclear power following Ontario Power Generation's massive budgetary overruns during its Pickering plant refurbishment.

"The international market is one of big projects with a steady baseline of services. In the past there was no consistent pattern, but it's now in a phase where demand is ready to grow very fast," Petrunik says.

During the past 12 months, Atomic Energy started a second plant in Romania and negotiated more refurbishment contracts in Canada and internationally. With a new design ready for an improved plant - the Advanced Candu Reactor (ACR) - the company believes it is ready to ride what many analysts see as a significant market turn to nuclear power.

Atomic Energy executives recently returned from China where they continue to negotiate a program for a third Candu facility - possibly an ACR - near Shanghai. There are also discussions in Romania for a third company-built plant, as well as refurbishment projects in that country, Argentina and South Korea to extend existing reactor life by 25 years.

International contracts can quickly unravel, however, because of unforecastable political and economic winds. Atomic Energy suffered a setback early this year when Virginia-based Dominion Resources pulled out of a partnership that would license the company's ACR reactor in the United States.

"(That) decision caused us to rethink our marketing and where we should focus our (business efforts)," says Jerry Hopwood, Atomic Energy's general manager of reactor product applications. Hopwood has overseen the development of ACR, a smaller, more efficient version of Candu 6 that uses slightly enriched uranium, instead of natural uranium, and less heavy water to deliver up to 1,000 megawatts of electricity.

He says the unit is cheaper, faster to build, more reliable and has increased safety margins. Atomic Energy is one of three companies in the world capable of producing this kind of reactor.

While ACR's design phase is finished, orders may still be several years away. Markets include China, the United Kingdom and the U.S. as well as Canada, where Atomic Energy is eying its potential in the oilsands.

George Eynon, CERI's senior director for natural gas, sees the possibility of locating a reactor at Saskatchewan's Cree Lake, which could provide all the power for the oilsands.

"But producers are looking for self-sufficiency, so any (nuclear option) would have to be some sort of merchant system that allows for this level of competition," he says.

Marlo Raynolds, executive director of Calgary-based sustainable development consultancy The Pembina Institute, says this option is still too supply-side driven.

"The risk, both economic and political, is just too high for multiple producers (in the oilsands) to bear. The economics alone won't fly without major subsidies, and I don't think taxpayers will go for it when there are many other alternative power sources, like deep geothermal, available that don't have nuclear's risks," he says.

Costs associated with nuclear-waste management must also be factored into economic viability.

While the federal government says current technology can now guarantee safe containment of spent fuel rods through deep geological disposal, a report by the industry-led Nuclear Waste Management Organization claims this method would cost $24 billion and 60 further years of study and construction before the first rod was buried.

"Countries like Sweden and Finland are putting this kind of disposal into operation. We feel this issue is being well addressed, although politically I don't think we're at the point yet where we can go ahead with any specific method," Petrunik says.

(Mike Levin can be reached at levin@businessedge.ca)