Candu or can’t? That’s the big question as AtkinsRéalis’ CEO pushes toward a nuclear future

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Ian Leslie Edwards shares a few numbers to reveal how the touted revival of the nuclear industry could turn the Canadian engineering company he leads, Montreal’s AtkinsRéalis ATRL-T, the former SNC-Lavalin Group Inc. and owner of the licence to Candu technology, into a global energy force.

“In the 70s and 80s, about 600 nuclear reactors were built around the world, of which 33 were Candu, say 5 per cent,” he says. “Most of these 600 reactors are near the end of their lives and need replacing. But the world needs double the amount of baseload electricity. So there is probably a market for 1,200 reactors. That’s a multitrillion-dollar market. If Candu does 5 per cent again, that’s 50 to 60 reactors.”

A single large nuclear reactor costs US$10-billion. So the math suggests that AtkinsRéalis potentially could snag contacts worth as much as US$600-billion. “This is a real opportunity for Canada and AtkinsRéalis, obviously, in a net-zero world,” he says.

Big, big if.

The last Candu reactor sold in Canada went into service in 1993; the last one to go into service internationally was Romania’s Cernadova-2 reactor, in 2007. But Mr. Edwards insists Candu is not an orphan despite its gruesome history of cost overruns and lavish government subsidies under its old guise as a division of Atomic Energy of Canada Ltd. (AECL), the Crown corporation that happily punted Candu to SNC for a pittance in 2011.

“Nuclear is 12 per cent of our revenues at the moment,” Mr. Edwards says. “I can see it being a considerable part of our business over the next decade.”

Will that mean AtkinsRéalis will endeavour to become a nuclear-focused company? Possibly. But the company is so much more than nukes. It is roads, bridges, rail, airports, renewable energy, ports, hospitals, water and waste treatment plants, even museum space and keeping pilot-training gliders airborne for the British Ministry of Defence.

Yakabuski: SNC-Lavalin stands ready as Hydro-Québec eyes renewed push into nuclear power

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It just no longer wants to be all things to all clients in all countries, a strategy that got it into trouble under previous chief executive officers and sent its shares plummeting from $60 to a low of $16 in the final years of the past decade. A series of corruption scandals that resulted in the arrest of SNC’s former CEO, Pierre Duhaime, in 2012, and the imprisonment in Switzerland of the company’s point man in North Africa, Riadh Ben Aissa, did not help.

SNC’s distress pushed Mr. Edwards into slimming down and refocusing the company, to the point that the new version is substantially different than the old one. The company signalled this month that the overhaul was largely complete by bidding au revoir to its name – which it had adopted in 1991, when SNC merged with rival Lavalin – and adopting AtkinsRéalis. “We needed a new name to go with what is essentially a new company,” Mr. Edwards says.

It is a somewhat awkward meld of its big-name British engineering subsidiary, WS Atkins, with a vaguely Latin-French name, Réalis, which evokes “realized,” as in “make happen.” Note the accent in Réalis. The company wanted to leave no doubt that it was still French Canadian and wedded to Quebec, whose pension fund, Caisse de dépôt et placement du Québec, owns almost 20 per cent of AtkinsRéalis.

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It is the last day of August and we are in Umbria, the landlocked central Italian region that could be called the un-Tuscany. With its charming medieval and Renaissance towns, and delicious wines and olive oils, Umbria is like Tuscany minus the madding crowds. Mr. Edwards, 61, his wife Karen and their two children, who both live in Hong Kong, have taken holidays in Umbria many times. He is an Italophile, but owns a holiday house in rural Quebec.

It is a scorcher of a day and Mr. Edwards, clad in a blue polo shirt and black jeans better suited to a cool autumn day, is sitting on the shaded terrace of the holiday villa. Coffee and water are served. Nearby is a pool – welcome in the savage heat.

Mr. Edwards appears relaxed for an executive who does not court the media and rarely gives interviews, though is now happy to come out of hiding to talk about the company’s “repositioning.” He seems affable, even garrulous.

Like his predecessor, Neil Bruce, Mr. Edwards was born in Britain. He was raised in Lancaster, in Northwest England, and his career was inspired by his father, Leslie, who was a member of the British merchant navy. Leslie’s first voyage at the end of the Second World War took him from Liverpool to Montreal. “I wanted to travel because he told me all these stories about his adventures all over the world,” Mr. Edwards says.

He studied civil engineering at the University of Central Lancashire and fled in 1994 to Hong Kong, where he lived on and off for 20 years, working for engineering firms Balfour Beattie, Gammon Construction and Leighton Asia. He says working on the new Hong Kong airport, which opened in 1998, was his most satisfying stint, though he had “intense” jobs in Iraq, on an oil pipeline, and in Mongolia, on a coal mine.

Mr. Edwards left Asia in 2014 to become SNC’S chief infrastructure officer. In early 2019, he was appointed chief operating officer. Later that year, when Mr. Bruce – whose purchase of Atkins in 2017 for $3.6-billion put SNC’s engineering and consultancy businesses on the world map – left the company, he became CEO.

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While the arrival of Atkins was billed by SNC as “transformative,” Mr. Edwards felt he had more transforming to do – with urgency. When he became boss, SNC shares were in free-fall because of severe losses at various dead-end projects and the company’s inability to secure a deferred prosecution agreement (DPA) from Ottawa because of the severity of the criminal allegations against it.

SNC was charged in 2015 with violating Canada’s Corruption of Foreign Officials Act and fraud related to Libyan contracts during the late years of the dictatorship of Moammar Ghadafi, which ended with his assassination in 2011. Criminal convictions against the company would probably kill off contracts funded by governments and international financial institutions such as the World Bank.

In 2019, SNC reportedly warned federal prosecutors that criminal convictions could break up the company and shift its remnants to United States. In a 2019 interview with The Globe and Mail, Mr. Bruce denied the scenario, insisting that SNC “never threatened anybody.”

Later that year, the company managed to secure a sort of DPA-lite that saw it plead guilty to a single count of fraud and pay a $280-million fine. The corruption charges were dropped.

With the legal Damocles sword over its head removed, Mr. Edwards put the final stages of SNC’s overhaul – some of which was started by Mr. Bruce – into overdrive. The shrinking exercise eliminated the oil and gas business, which Mr. Edwards describes as having been “unfocused, overextended and saddled with fixed-price contracts with cost overruns.”

Ditto much of the mining business, which took a big blow in Chile in 2019, when state mining company Codelco ripped up a US$260-million contract with SNC related to a copper project. Earlier this year, SNC sold its small and barely profitable Scandinavian business, whose specialty was public transport.

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He accelerated Mr. Bruce’s strategy of winding down the fixed-price contracts that had forced the company to eat overruns on faltering projects, such as the Toronto’s long-delayed, wildly overbudget Eglinton Crosstown light-rail transit line. SNC’s three light-rail projects in Canada – the other two are in Ottawa and Montreal – went sideways during the COVID-19 pandemic, forcing SNC to book hundreds of millions of dollars in losses.

At the same time, SNC abandoned more than a third of its 57 foreign markets – including Russia, South Africa, Tunisia and several European countries – where its projects were generally small, with scant growth prospects.

Today, the company is following the money in wealthy countries. About 80 per cent of its business is now in United States, Canada and Britain. Overall employment dropped to about 31,000 in 2021 from a peak of more than 52,000 in 2017.

The goal was to position the company as a lean engineering and project-management group, not construction, with emphasis on nuclear energy and infrastructure designed to accelerate the energy transition. Strategic direction was one thing; fixing the internal culture – damaged by years of scandals, sour contracts and the general lack of focus – was another.

“There was no pride in the company when I became CEO and everyone was working in silos,” Mr. Edwards says. “The culture was not where it needed to be.”

A fresh leadership team, the waning pandemic and the return to growth have restored morale, Mr. Edward says. Employment has climbed to about 36,000 as new projects are booked. In 2022, SNC’s revenues grew by 11 per cent, and 14 per cent in the first half of this year.

Share price – performance vs. peer group*

Year-to-date share price change (%)

70%

SNC-

Lavalin

64.5%

60

50

40

30

Peer

group

19.8%

20

10

S&P/TSX

Comp.

4.2%

0

-10

-20

Sept.

Nov.

Jan.

March

May

July

Sept.

2022

2023

*Includes: WSP, Stantec, AECOM, Tetra Tech, Jacobs, Wood and Arcadis

the globe and mail, source: atkinsréalis

Share price – performance vs. peer group*

Year-to-date share price change (%)

70%

SNC-

Lavalin

64.5%

60

50

40

30

Peer

group

19.8%

20

10

S&P/TSX

Comp.

4.2%

0

-10

-20

Sept.

Nov.

Jan.

March

May

July

Sept.

2022

2023

*Includes: WSP, Stantec, AECOM, Tetra Tech, Jacobs, Wood and Arcadis

the globe and mail, source: atkinsréalis

Share price – performance vs. peer group*

Year-to-date share price change (%)

70%

SNC-

Lavalin

64.5%

60

50

40

30

Peer

group

19.8%

20

10

S&P/TSX

Composite

4.2%

0

-10

-20

Nov.

Dec.

Jan.

Feb.

March

Sept.

Oct.

April

May

June

July

Aug.

Sept.

2023

2022

*Includes: WSP, Stantec, AECOM, Tetra Tech, Jacobs, Wood and Arcadis

the globe and mail, source: atkinsréalis

The Toronto-listed shares are up 87 per cent in the past 12 months, to about $45 – still well short of their 2018 peak – giving AtkinsRéalis a market value of $7.7-billion. The eight analysts who cover the stock give it an average recommendation of “moderate buy,” according to Bloomberg, suggesting they believe there is more upside, but not a lot, given the recent sharp run-up.

If there is one area that excites Mr. Edwards, it is nukes. He believes the drive to net-zero emissions will trigger a nuclear revival, with old reactors everywhere being rebuilt and new ones planned. The global electricity grid needs to expand by two to three times, he says, to wean sectors such as transportation off fossil fuels. “You just can’t get there without nukes,” he says, though a dwindling number of industrialized countries, notably Germany, take the opposite view and are ditching nuclear power.

But will Candu sell? Its technology relies on unenriched (natural) uranium, which is cheaper than the enriched fuel. Unenriched uranium is not suitable for making nuclear bombs, meaning the reactors that use it face an easier permitting process. Candu reactors can also produce medical isotopes for cancer treatments. But the cost of the heavy water required to operate Candus is high.

It is unlikely that the Americans will buy Candu, since they seem wedded to Westinghouse reactors, one of six types of nuclear technology used around the world (Canada’s Brookfield Business Partners bought Westinghouse Electric Co. in 2018 for US$4.6-billion).

Still, AtkinsRéalis believes Candu is competitive, though best potential for the construction of new ones lies in countries that already use it, including Canada, Romania, China and Argentina. Earlier this month, Mr. Edwards visited Romania, where the company is refurbishing one of the country’s two Candus. “We are in discussions for a new build,” he says.

This week, Ottawa revealed that it would provide up to $3-billion in export financing to help build two new Candu-6 reactors in Romania, should Bucharest opt for the Canadian technology. The financing would be directed at the Canadian providers of goods and services working on the project. It was not immediately clear which federal agencies would provide the assistance (an Export Development Canada spokesperson said the agency would not support the deal using its own account).

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Mr. Edwards has high hopes for Ontario, which gets more than half of its electricity from nukes and is home to 18 of Canada’s 19 commercial reactors. The province’s two Candu operators, Bruce Power Ltd. and Ontario Power Generation Inc., have each launched Candu refurbishment programs and commitments to build new reactors may be coming soon. In July, Ontario Energy Minister Todd Smith said “for the first time since 2005, Ontario’s electricity demand is rising, and it’s rising fast,” suggesting that new nukes were inevitable.

At its Darlington site, OPG, in partnership with GE Hitachi Nuclear Energy, SNC and Aecon Group Inc., is building an SMR – a small modular nuclear reactor. But for Mr. Edwards, the prize would be the sale of full-scale Candu to OPG or Bruce. Neither operator is compelled to go with Candu again, though it seems likely that the technology – a known commodity in Ontario – would enjoy a lead in any competition. “Ontario is absolutely committed to new reactors,” Mr. Edwards says. “And we are in discussions with both of them.”

Who would have thought that a company almost felled by scandals in Libya and elsewhere, and once determined to conquer the world’s engineering markets, would find salvation back in Canada? AtkinsRéalis may soon learn that there is no place like home – as long as home cherishes nuclear power.

Editor’s note: (Sept. 27, 2023): SNC-Lavalin Group Inc. purchased a licence to operate Candu Energy from the Canadian government in 2011. The government retained ownership of Candu’s intellectual property.