BUSINESS/ECONOMY

Nuclear deal-making

November 23 1987
BUSINESS/ECONOMY

Nuclear deal-making

November 23 1987

Nuclear deal-making

It was an unusual day’s work for research scientists at the Chalk River installation of Atomic Energy of Canada Ltd. (AECL), 200 km northwest of Ottawa. On Nov. 10., instead of grappling with problems in their laboratories, they were meeting with a group of 85 businessmen in the company cafeteria. The goal of the 60 scientists was to convince their invited guests that the expensive technology developed in conjunction with AECL’s Canadian deuterium uranium reactor (CANDU) program had a commercial use. At 24 booths set up in the cafeteria, AECL staff displayed wares ranging from a device that detects metal particles in lubricants to tiny test dishes made of thorium, which can withstand temperatures of up to 3,300°C. Physical chemist James Halliday, who helped to develop the dishes, said that the Crown corporation’s decision to manufacture and sell such products was a departure from “pure research.” But Halliday added that he supports the new commercial bent.

Declared the scientist:

“AECL has got to diversify if we want to keep our jobs.”

Indeed, two events have accelerated the research division’s search for com-

mercial opportunities. A drastic budget reduction by the federal government announced in the May, 1985, budget would cut the level of funding to the research arm in half—to $100 million in 1990 from $200 million a year. As well, there have been no sales of the CANDU reactor, which costs roughly $1 billion, since 1979 because of growing opposition in the Western world to nuclear electrical generation and because of surplus generating capacity in many countries. Before that AECL had sold seven of the reactors abroad—one each to South Korea, Pakistan and Argentina, two each to India and Romania. AECL also designed and built 16 CANDU

electrical generating reactors in Ontario, and four more are under construction in that province, New Brunswick and Quebec.

Stanley Hatcher, president of the 3,000-member research unit since February, 1986, said that the market for CANDU reactors is now “dormant” rather than dead. As well, he predicted that more reactors will be sold when electricity demand catches up with supply in three or four years. But in the meantime, in order to keep a core group of scientists, technicians and support staff together at Chalk River, money must be found from outside sources. Hatcher said that the government had made it clear during the past

two years that it wanted the nuclear group to become more “commercially minded.” As a result, the budget cut was not entirely a surprise. Said Hatcher: “We could see the writing on the wall.”

According to Hatcher, the budget problems have led to a fundamental realignment in the corporate thinking at AECL. Now, when technology is developed in conjunction with the nuclear program, scientists are asked to think of possible commercial applications that could lead to joint ventures or licensing arrangements. In one case, a device originally used to detect iron particles in heavy water has been adapted to fit into engines as a maintenance monitor. By detecting impurities in lubricants, it can gauge engine wear and warn of impending failure. Sensys, a division of AECL’s research department based in Nepean, Ont., has already taken advantage of the technology by purchasing licences from AECL to produce a machine called Ferroscan, which was on display at the trade fair.

In other instances, the scientists are actively seeking outside work. AECL recently landed a contract with Chicagobased Morton Thiokol Inc., an important supplier of parts to the U.S. space program, including the controversial O-rings that failed during the disastrous explosion of the Challenger shuttle shortly after takeoff on Jan. 28,

1986. The rings were de-

signed to hold synthetic rubber seals in place between joints in the solidfuel booster rocket, but they allowed fuel to escape in the seconds before the explosion that killed all seven astronauts on board. AECL mechanical engineer Norm Pothier told Maclean’s that a group of fellow researchers realized that work they had done on seals for nuclear reactors could be applied to the shuttle O-rings, and they got in touch with Morton Thiokol. Several meetings later the Crown corporation won a contract to help test materials used in the rings for Morton Thiokol.

Most of the businessmen attending the one-day fair last week were clearly impressed with AECL’s inventions. But at the same time, some had complaints about its forays into the business world. Ernest Card, vice-president of Wardrop Engineering Inc. of Winnipeg, said that his firm occasionally faces competition for jobs against an AECL team that offers engineering advice. That service was part of an earlier tentative step toward commercialization in 1982. The fair, however, is part of a more strenuous effort to capitalize on AECL’s abilities. And, said Card, there are some people in the private sector who view such competition from a Crown corporation as unfair. But for his part, Hatcher said that, instead of offering direct competition, AECL is simply trying to complement private sector know-how through joint ventures and licences. He added that AECL views those complaints as proof that it is being aggressive enough.

Still, commercial income will have to grow swiftly if AECL is to avoid layoffs in the coming years. Currently, the corporation raises about $33 million a year on a contract basis providing research and development in AECL laboratories for private companies. As much as $400,000 annually has been raised through technology licensing and joint ventures. Hatcher said he hopes that within the next 12 months there will be at least one major spin-off product on the market created by the reactor’s original development. For his part, George Fells, president of the Toronto venture capital firm SB Capital Corp. Ltd., said that he was leaving the fair with seven or eight ideas for possible new products. Fells said that it would take some time for AECL’s commercial side to develop. But in the end, the non-nuclear business may overtake the nuclear work in importance. Declared Fells: “It may well be that the tail begins to wag the dog.”

—MADELAINE DROH AN in Chalk River