Atomic Energy of Canada Limited

Atomic Energy of Canada Limited
Atomic Energy of Canada Limited
2 010 A N N U A L F I N A N C I A L R E P O R T
What’s inside
2 The CANDU Solution
6 2009–2010 Overview
8 Message from the Chair
10 Message from the President
12 Management’s Discussion and Analysis
35 Management’s Responsibility
36 Auditors’ Report
37 Consolidated Financial Statements
58 Board of Directors and Officers
60 Corporate Governance
62 Five-Year Consolidated Financial Summary
IBC Corporate Information
Front cover:
Upper level interior view –
CANDU reactor building
Atomic Energy of Canada Limited is an agent Crown corporation that provides full service nuclear
technology to nuclear utilities around the world on a commercial basis while meeting strategic
science and innovation policy objectives for Canada. Established in 1952, AECL is the designer and
builder of Canadian-made CANDUU technology, including the Generation III+ Advanced CANDU ReactorU
(ACR-1000U); the CANDU 6, one of the world’s top-performing reactors; and the Enhanced
CANDU 6™ (EC6™).
AECL’s 5,000 full-time employees deliver cutting-edge world-class nuclear services, research and
development support, design and engineering, construction management, specialized technology, life
extension, waste management and decommissioning expertise in support of CANDU reactor products.
Mandate
• To be Canada’s nuclear platform for nuclear
science and technological expertise.
• To operate a commercially viable, selfsustaining business designing, building and
servicing CANDU nuclear power reactors.
W H O W E A RE
Who we are
Vision/Mission
• To be the best nuclear energy company.
• To provide safe, reliable, economical and
sustainable nuclear energy solutions worldwide.
The Generation III+
Advanced CANDU Reactor
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The CANDU Solution
T H E CA NDU S O LUT I O N
CANDU reactors have earned international acclaim for providing safe, clean and reliable
electricity for more than 40 years. AECL’s continued goal is to create superior designs,
produced to the highest customer and licensing standards, delivered on time and on budget.
AECL designs and builds world-class nuclear reactors and offers a full suite of products,
services and engineering support to global nuclear utilities.
The CANDU design features on-power fuelling and maintenance; horizontal pressure tube
design; heavy water moderation; and dual independent fast-acting safety shutdown systems.
CANDU technology is also being developed to have the unique ability to use alternate fuel
cycles, such as thorium, mixed oxide, and recovered uranium from light water reactors.
The design’s high neutron efficiency and on-power refuelling uniquely positions CANDU as the
solution for customers exploring the use of alternate fuels in order to extend fuel resources
and minimize spent fuel volume.
The company distinguishes itself with two world-class
new-build product lines. This offers customers a reactor
product best suited to their distinct needs and drivers.
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ATO MI C ENERGY OF CANADA LIMITED
By incorporating maintenance-based
design strategy and an optimized
outage maintenance schedule, the
ACR-1000 has a target year-to-year
capacity factor of 95%.
The Advanced CANDU Reactor
(ACR-1000), a Generation III+ reactor,
builds upon the proven features of the
original CANDU design and is focused on
meeting market demand for competitive
pricing with state-of-the-art safety,
operability and maintainability standards.
Its design bridges heavy and light water
reactor technologies and is competitive,
in a head-to-head technical and economic
comparison, with other leading global
designs.
The neutron efficiency of the heavy water
moderator design is combined with the
economic advantages of light water
cooling. These units are designed to have
a 60-year operating life (including life
extension) and a lifetime average annual
capacity factor of more than 90%.
More than 85% of the ACR-1000 basic
engineering program had been completed
by fiscal year-end. A pre-project design
review of the ACR-1000 by the Canadian
Nuclear Safety Commission (CNSC) found
no fundamental barriers to licensing the
product in Canada. In addition, a Generic
Preliminary Safety Analysis Report used in
the Commission’s licensing process was
completed and a Preliminary Safety
Analysis Report Supplemental was being
finalized for completion in June 2010.
This gives the ACR-1000 a competitive
domestic advantage over other designs,
which, at fiscal year-end, had not sought
or received the same assurances from
the CNSC.
Enhanced
Technology
AECL’s Enhanced CANDU 6 (EC6) has
Generation III features and uses natural
uranium. It is an enhanced version of the
highly successful CANDU 6, the wellproven workhorse of the CANDU fleet.
The EC6 is the only medium-sized reactor
available for markets with a smaller grid. It
is being developed to offer customers the
option of using alternate fuels such as
thorium or recovered uranium from light
water reactors. Use of recovered uranium
from three light water reactors can keep a
CANDU reactor running over its operational
life. CANDU fuel flexibility is very significant
for countries seeking extension of fuel
resources, reduction in used fuel and
fuel independence.
T H E CA NDU S O LUT I O N
Evolutionary
Technology
Building on the renowned fuel efficiency of
CANDU 6 reactors operating today, the EC6
is designed to be the most fuel efficient
nuclear reactor in the world, requiring just
17 tons of natural uranium fuel per terawatt
hour of electricity produced.
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T H E CA NDU S O LUT I O N
The EC6 maintains all of the proven
features of the CANDU 6 reactor while
delivering a higher plant output and
increased safety and security attributes.
The EC6 also builds on the CANDU 6’s
demonstrated track record for world-class
performance.
AECL’s life extension business allows for
the safe extension of the CANDU
reactor’s operating life by up to 30 years.
This is an intricate and highly technical
operation, which involves removing and
replacing all fuel channels, calandria
tubes and associated parts. AECL’s
Services business, meanwhile, provides
parts and services to CANDU plants as
well as to a growing market of nonCANDU customers. With 439 active
nuclear facilities in 31 countries
worldwide, there is much opportunity for
further and significant growth in the sale
of this business’ global nuclear products.
The Generation III
Enhanced CANDU 6 reactor
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ATO MI C ENERGY OF CANADA LIMITED
Market Opportunities
at a Glance
• According to the International Atomic
Energy Agency’s Department of Nuclear
Energy, worldwide installed nuclear
generation capacity is expected to
increase from approximately 370 GW to
upwards of 691 GW by 2030. Market
experts forecast that new-build nuclear
revenues from this growth could
exceed $1,000 billion. With successful
international experience constructing
CANDU reactors, AECL is poised to
increase its market share of that
business.
• New-build market opportunities include
Canada, China, India, Romania and
Argentina, where there is an existing
installed base of CANDU technology
and a track record of strong
technology performance. In India
alone, the Department of Atomic
Energy and Nuclear Power Corporation
of India Limited has set a target of
about 20 GW of nuclear power by the
year 2020, increasing to 63 GW by
2032. India’s nuclear fleet is based on
pressurized heavy water reactors and
is similar to CANDU technology. Other
market opportunities include Ukraine,
Lithuania and Jordan.
• With CANDU reactors around the world
approaching the end of their initial
pressure tube design life, there will be a
large market for reactor life extensions –
some 15 possible projects to 2028, with
revenue up to $3 billion. Similarly, steady
growth is expected on the horizon for
AECL’s profitable Services business,
driven by maturing CANDU reactors and
anticipated life extension and new-build
projects. There is also opportunity to
build market share through new
products and services for CANDU and
non-CANDU customers. With 439 active
nuclear facilities worldwide, growth can
be achieved in Services’ sales of global
nuclear products, such as emergency
core cooling strainers, reactor coolant
pump seals and passive autocatalytic
recombiners. These have been
successfully introduced in recent years
in non-CANDU markets in Europe, Asia
and the United States.
Global Success
New Brunswick,
Canada
1 unit, undergoing
life extension
Ontario, Canada
20 units, 2 of which are
undergoing life extensions
India
2 CANDU units;
14 pressurized heavy water
reactor units constructed
and 2 under construction
South Korea
4 units, including
1 life extension
China
2 units
AECL Head Office
Mississauga, Canada
T H E CA NDU S O LUT I O N
Quebec, Canada
1 unit, contracted
to undergo life
extension
Pakistan
1 unit
Romania
2 units
Argentina
1 unit
34 CANDU reactors, along with 16 other heavy water reactors based
on the CANDU design, have been built or are under construction on
four continents.
CANDU’s global success is attributed to seven international reactor
projects, all built to meet or exceed customer schedule and budget
expectations. The CANDU 6 reactor is one of the top performing
reactor designs in the world, with an 88.9% lifetime capacity factor.
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2009–2010 Overview
2 0 0 9 – 2 010 OV E RV I E W
Health and Safety
AECL’s number one priority is to
protect the health and safety of its
employees, the public and the
environment. In doing so, AECL
reinforces a performance culture that
provides a safe workplace for
employees and meets the expectations
and requirements of its key stakeholders, including the CNSC,
customers and the public.
• AECL achieved a 50% decrease in
the frequency of recordable lost-time
injuries over 2009, AECL’s best result
in the last 10 years. The severity of
recordable lost-time injuries declined
by approximately 20%, reflecting the
company’s best performance over
the last three years.
• The Government-funded Isotope
Supply Reliability Program was
established in 2008–2009 to
strengthen the people, processes
and facilities required to facilitate the
licence renewal of the National
Research Universal (NRU) reactor to
2016, upon its expiration in 2011. Last
year, while the NRU was shut down
for repairs, AECL continued to
address these program activities to
ensure a reliable supply of medical
isotopes upon the NRU’s return to
service, expected in July 2010.
a high level of quality and compliance
with regulatory requirements.
• Significant progress has been made
toward ACR-1000 licensing in
Canada. A Pre-Project Design
Review by the CNSC concluded
there are no fundamental barriers to
licensing the ACR-1000 design in
Canada. The Generic Preliminary
Safety Analysis Report was
completed in September 2009, to be
followed by the release of the
Preliminary Safety Analysis Report
Supplemental in June 2010.
• The CNSC completed its Phase 1
Pre-Project Design Review of the
EC6 nuclear reactor in March,
concluding that, at an overall level,
the design intent is compliant with
CNSC regulatory requirements and
meets the expectations for new
nuclear power plant designs
in Canada.
• Life extension projects made advancements in meeting contractual milestones. Several projects completed
the removal phase and advanced to
the installation phase. However, firstof-a-kind technical challenges
discovered toward the end of the
fiscal year resulted in significant
further delays to schedule and cost
increases. While AECL continues to
actively manage technical risks,
uncertainties remain regarding the
resolution of these challenges.
Projects
AECL’s CANDU Reactor Division is
committed to securing a major role in
the global nuclear renaissance and
financial self-sufficiency through
leading-edge technology, services and
engineering support to nuclear utilities
around the world. This includes
delivering the ACR-1000 and EC6
reactors as its flagship products;
undertaking life extensions on CANDU
reactors approaching their mid-life; and
providing services to support the
CANDU fleet. This is accomplished at
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ATO MI C ENERGY OF CANADA LIMITED
Business and
Operations
AECL’s CANDU Reactor Division and
Research and Technology Division
business and operations focus on
providing nuclear technology-related
products and services to utilities, as
well as managing nuclear-related
facilities and technology capability to
support commercial and Government
requirements. These activities include
nuclear-related research and development, products and services, and waste
management and decommissioning.
• In December, the Government invited
investors to submit proposals for the
commercial CANDU Reactor
Division. At fiscal year-end, a number
of investors had submitted nonbinding bids for the business and no
decision had been announced on the
management structure for the
Research and Technology Division.
The Government plans to complete
the restructuring process in
2010–2011. Effective April 2010,
AECL realigned its business to
facilitate this initiative.
• A heavy water leak was discovered in
the NRU reactor vessel in May 2009,
resulting in an extended shutdown of
the reactor. The repair involves highly
technical, first-of-a-kind solutions.
Efforts by AECL and its suppliers to
safely repair the reactor and return it
to service for medical isotope
production continued through the
remainder of the year. The reactor is
planned to be returned to service in
fiscal 2010–2011.
• The Dedicated Isotope Facilities,
including the MAPLE 1 and 2
reactors, New Processing Facility
and Calcined Waste Storage
Canisters, were safely ramped down
to an extended shutdown state in
June 2009. The CNSC granted a
licence in March 2010 to formalize
the status of the facilities.
• Construction of the second of six
Shielded Modular Above-Ground
Storage buildings began at Chalk
River Laboratories, with completion
slated for February 2011. Part of an
infrastructure renewal program, the
buildings are used to safely store
low-level radioactive waste, in
keeping with safety, regulatory and
operational requirements.
AECL’s marketing and business
development efforts are focused on
domestic and international marketing of
CANDU new build projects, life extension
projects and delivery of CANDU and
non-CANDU products and services. With
the goal of improving competitiveness
and meeting emerging market needs,
AECL explores opportunities for strategic
partnerships which complement
existing areas of expertise.
• SC EnergoNuclear SA, the project
company for Cernavoda Units 3 and
4 in Romania, contracted AECL to
define the project scope for
completing the reactors. The contract
represents a major step toward the
launch of a full project. CANDU is
considered the preferred technology
to complete the project.
• Negotiations on an international life
extension contract progressed.
• The company penetrated the
Japanese market with its groundbreaking sale of two pump seals and
related services to the Tokyo Electric
Power Company for use on their
boiling water reactors. The sale is a
significant growth opportunity, further
expanding AECL’s business outside
the traditional CANDU base.
• AECL focused on building relationships
with Indian nuclear counterparts.
This included manufacturer Larsen
and Toubro, party to a Memorandum
of Understanding signed with AECL
in early 2008–2009 to develop a
competitive cost model for the
ACR-1000 and upon completion,
begin discussions on developing
nuclear power plants in India. Over
the past year, Canada and India have
been working together to finalize a
nuclear cooperation agreement.
• In a joint effort, AECL and Ukrainian
nuclear utility Energoatom worked on
a technical and economic evaluation
for the application of CANDU technology in Ukraine. The evaluation
was completed in May 2010.
• AECL and Chinese partners advanced
a first-ever commercial demonstration
irradiation of recovered uranium in a
Qinshan CANDU 6 reactor. The option
being deployed blends recovered
uranium from light water reactors
with depleted uranium.
• In collaboration with Chinese experts
and partners, major progress was
made in assessing the technical and
commercial viability of a new build
thorium-capable CANDU reactor. An
expert panel appointed by the China
National Nuclear Corporation
recommended that China consider
building two CANDU units to take
advantage of these unique alternative
fuel capabilities, including thorium
and recovered uranium.
Financial
As a Crown corporation, AECL
generates commercial revenue and
receives Government funding to support
its operations. Commercial activities,
which include major nuclear projects
and related services, are managed
based on profitability and growth, while
Government-funded activities are
managed based on meeting planned
costs and deliverables. AECL is required
to submit a Corporate Plan annually to
the Government.
• AECL’s financial performance last
year was driven mainly by the need
to: complete life extension projects
safely and to a high level of quality;
modernize Chalk River Laboratories
operations to address regulatory,
health, safety and environmental
needs; and safely return the NRU to
service following a May shutdown
that extended beyond year-end.
AECL recognized Government
funding of $948 million in support of
these and other efforts.
• AECL expended $115 million toward
fulfilling decommissioning and waste
management obligations under the
Government-funded Nuclear Legacy
Liabilities Program for the Government
of Canada. This included ongoing
decommissioning and waste
management activities at Chalk River,
Whiteshell and the Underground
Research Laboratories, as well as the
development of enabling facilities,
such as a Fuel Packaging and
Storage Facility at Chalk River. More
than one third of the Program’s
expenditures are related to monitoring and maintenance costs.
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Marketing & Sales
• Consolidated commercial revenues
of $472 million were higher by 18% in
2009–2010. This improvement was
largely due to increased activity on
the CANDU Reactor Division’s life
extension projects. Revenue from the
Services business in 2009–2010
remained relatively consistent with
the previous year.
• Increased cash costs on several life
extension projects contributed to the
need for additional funding support
from the Government. The impact of
these higher costs on net income of
the current year was mitigated by
provisions taken in 2008–2009.
• The consolidated net loss reported
in 2009–2010 was $80 million
(2008–2009: $413 million net loss).
The improvement from the previous
year resulted from an increased
level of Government funding, and a
significant non-cash adjustment
resulting from revised expenditure
estimates relating to the decommissioning and waste management
provision.
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Message from the Chair
Governing During
a Sea Change
n 2009–2010, AECL’s Board undertook to provide sound corporate governance during an
I
MESSAGE FRO M T H E CH A I R
extraordinary year of change and anticipated development.
The magnitude and strategic importance of these changes required an unprecedented level
of Board engagement with our Shareholder – the Government of Canada – the regulator,
Management, customers, partners and stakeholders during the year.
Of particular urgency, the Board, working with management and independent advisors,
provided diligent oversight to ensure all appropriate measures were taken to safely repair the
GLENNA CARR
Chair of the Board
NRU and restore a reliable supply of medical isotopes. Board Directors met with the return-toservice team at Chalk River, visited the reactor and repair sites, maintained a high level of
awareness of critical issues at hand, and since July have held bi-weekly meetings of the
Science, Technology & Nuclear Oversight Committee with regular reports to the Board.
We strengthened relations with local community leaders through outreach initiatives and
established tools to communicate transparently AECL’s progress with all of our stakeholders
and interested parties worldwide.
Last year, the Board undertook extensive due diligence and outreach efforts with regard to
new build and life extension proposals and bids in Ontario, Argentina and Romania. Directors
invested significant time and effort to strengthen relationships with customers and
stakeholders, visiting various project sites, including New Brunswick, Quebec and Port Hope.
Significant decisions were taken to invest in the ACR-1000 and EC6 reactor development
programs, with particular focus on fuel development and adding to potential commercial
value of AECL by assessing its intellectual property. Directors were active in fostering
partnerships with communities, suppliers and post-secondary institutions to sustain and grow
the CANDU nuclear industry in Canada and abroad.
Hugh MacDiarmid, our President and CEO, and I both invested much time in shareholder
relations with the Minister of Natural Resources Canada, staff and senior public servants and
addressing business groups, municipal and provincial governments, private sector
companies and nuclear industry organizations. Our Board members were also visible and
engaged in our industry and with partners, speaking at or participating in nuclear-related
conferences and public events.
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ATO MI C ENERGY OF CANADA LIMITED
ii) That the Government must protect the
These changes and other initiatives
improve its governance practices,
interests of taxpayers and maximize
required significant focus and time on the
conducting independent reviews and
the return on its investment in the
part of the Directors, of Management
evaluation of board performance and risk
industry; and,
working with the Board, and of the Chair.
oversight. This year, the Board undertook
decisive measures to improve the efficient
Our Board and its Committees continued
iii) That the structure of AECL and its
to meet regularly and with increasing
and effective delivery of life extension
activities should position Canada’s
frequency, with 11 Board and 60
projects. The Project Risk Review and
nuclear industry and its workforce to
Committee meetings held in 2009–2010 –
Audit Committees used independent
seize domestic and global
more than twice the number of committee
expertise to review financial controls and
opportunities.
meetings held the previous year, an
project management of the current
MESSAGE FRO M T H E CH A I R
The Board continues to evaluate and
extraordinary effort on the part of the
projects. Management is implementing
As a liaison between the Board, the
the recommendations from the reviews;
Shareholder and the Government’s
ensuring lessons learned are applied to
restructuring consultants, NM Rothschild
I would like to pay tribute to my Director
current and future life extension projects.
and Sons, the Board established a
colleagues for their high level of
Directors.
Special Advisory Committee. The
engagement during the year and the time
And, to enhance our ability to govern
Committee includes Directors with
and effort committed to ensuring that our
AECL during this period of significant
significant business acumen and
top priorities have been appropriately
change and challenge, the Directors have
experience in corporate restructuring,
addressed.
engaged two Special Advisors to the
who, on behalf of the Board, consider the
Board who bring additional skills and
best interests of the Corporation during
I would also like to express my
expertise to the fore.
the restructuring process.
appreciation to the Government of
Canada for its support, as well as to AECL
Certainly one of the most profound
The Special Advisory Committee has
changes introduced last year was the
oversight of AECL engagement and
Government’s plan to restructure AECL.
cooperation by the Board and
We are on the cusp of a far-reaching
The Board supports the Government’s
Management with our Shareholder and
transformation of AECL’s history. We look
objectives in guiding the restructuring
their restructuring consultants. During the
forward to your ongoing support during
process:
restructuring process, the Board will
this period of transition.
employees for their dedicated service.
focus on management maintaining AECL
i) That Canada requires safe, reliable
as a going concern, including the
and economic options to address its
retention of key human resources, and
energy and environmental needs, and
the delivery of ongoing AECL projects and
in meeting these needs, nuclear
commitments.
energy is an important part of
Canada’s future energy mix and is key
In December, the Government invited
to achieving the objective of becoming
investors to submit proposals for the
a clean energy superpower;
commercial CANDU Reactor Division. The
Government plans to complete the
Glenna Carr
restructuring process in 2010–2011.
Chair of the Board
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Message from the President
Deliberate Steps,
Measured Progress
009–2010 was a year in which AECL made steady progress toward its goal of being a
2
competitive international vendor of CANDU nuclear reactors and meeting its national
MESSAGE FROM T H E PRE S I DE NT
nuclear laboratory obligations.
AECL’s commitment to safety remained our number one priority, and our diligent attention to
it resulted in a significant drop in lost-time injuries last year. We will endeavour to continue this
trend by further improving our health and safety initiatives to ensure that our employees, in
our offices and at our project sites, are safe and sound upon leaving their workplace.
AECL’s two distinct organizations, the Research and Technology Division, comprising our
HUGH MacDIARMID
nuclear laboratories, and the CANDU Reactor Division, comprising our commercial operations,
President and Chief Executive Officer
continued to pursue their respective objectives to bring long-term value to our Shareholder.
Nuclear Laboratories
Following the successful expansion of medical isotope production in 2008–2009 to compensate
for a global supply disruption, the discovery in May 2009 of a heavy water leak in the NRU reactor
resulted in an extended shutdown of the NRU at our Chalk River Laboratories. Returning the
reactor to service safely and as quickly as possible has since been our top priority.
Staff and suppliers have worked around the clock to repair the reactor – a highly technical
endeavour that has involved remote controlled, state-of-the-art welding processes. The NRU
shutdown extended beyond the end of the fiscal year and the reactor is expected to restart
in July 2010. During the year, and concurrently with the shutdown, AECL continued its Isotope
Supply Reliability Program efforts that will enable the renewal of the NRU reactor licence,
which expires in October 2011.
In conjunction with AECL’s CANDU Reactor Division, the Nuclear Laboratories’ Research and
Development group continued to play a key role in supporting ACR-1000 development and
made progress in areas such as CANDU fuel, nuclear waste reduction and safety.
Project New Lease infrastructure renewal activities achieved significant milestones with the
completion of a waste management facility, administration building and other upgrades to
address safety, security and viability of the Chalk River operations.
AECL also continued advancing solutions for the immediate, near-term and long-term
management of legacy, historic and ongoing operational wastes. This included leading
activities for the Port Hope Area Initiative Transition Phase and progressing Whiteshell
Laboratories decommissioning activities.
Commercial Operations
AECL invested significant resources into building its commercial operations, comprised of its
New Build, Life Extension and Services businesses.
Our New Build business focused on developing the ACR-1000 and EC6 as its leading nuclear
technologies for anticipated deployment in Canada and internationally.
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ATO MI C ENERGY OF CANADA LIMITED
Last year, our Marketing and Business
and remain confident that we have taken
continued to have significant challenges in
Development group efforts focused on
appropriate steps toward delivering long-
2009–2010. AECL actively worked toward
domestic and international marketing of
term value for our Shareholder.
addressing these challenges to complete
CANDU new build and life extension
the projects. Despite these challenges, life
projects. The Ontario government’s
extension continues to be an important
suspension of the Request for Proposals
business for the future.
new build process was disappointing,
The Services business made steady
progress and some significant gains,
including with their non-CANDU product
line, which expanded into Japan.
These business lines were supported by
functional groups dedicated to developing
our products, selling them and delivering
them to our customers; Technology,
Marketing and Business Development,
and Operations.
but, deemed the most responsive bid,
we remain confident that Ontario will
complete this process and award AECL
and consortium partner SNC-Lavalin
Nuclear the procurement contract.
Internationally, we built strategic partnerships in incumbent and new markets.
Discussions on specific projects in
Argentina and Romania continued to
advance and, with the prospect of a
finalized Canada–India nuclear coopera-
Our Technology group made great strides
tion agreement in the near future, AECL is
in advancing our flagship products.
positioned to gain access to India.
ACR-1000 development remained on track
and on schedule, with basic engineering
more than 85 per cent completed. The
CNSC’s Pre-Project Design Review
confirmed no fundamental barriers to
licensing in Canada and we completed a
key safety analysis report used in the
licensing process.
Likewise, the CNSC’s Phase 1 Pre-Project
Design Review of the EC6 concluded that,
at an overall level, the design intent is
In anticipation of new projects in the near
future, our Operations group, which
supports and delivers new build and life
extension projects, advanced work on
strategies and processes to meet
expected resource needs; ACR-1000
execution; and knowledge management
and project management resources and
capabilities.
Our Results and the Path Forward
To ensure a robust organization, we
welcomed four new senior executives to
fill key positions and redeployed two
others; one to strengthen our strategic
contracting capabilities, the other to coordinate AECL restructuring activities.
Additionally, we continued to build a
sound human resources plan for project
execution.
AECL worked closely with the Government
in support of their plan to restructure the
company. We will continue to participate
fully in this process and take the necessary
measures to ensure that AECL performs
at a high level through the transition
period. We expect this initiative will make
AECL a more formidable player in the
global marketplace.
I would like to thank those who have
supported AECL’s efforts in the past
year: Our Directors, our Shareholder,
suppliers, partners in Team CANDU and
our employees for their commitment
to excellence.
The path forward will be an exciting one:
an evolution of our business; a new
chapter in our history. Together, I’m
compliant with regulatory requirements
AECL’s financial performance last year
confident that we will achieve the
and meets the expectations for new
was mainly driven by the need to
success to which we aspire.
nuclear power plants in Canada.
complete our life extension projects safely
Gains were also made in establishing
CANDU’s ability to utilize alternative fuel
cycles, a unique differentiator from our
competitors. This included a first-of-a-kind
commercial demonstration of recovered
uranium fuel in a Qinshan CANDU 6 reactor.
MESSAGE FROM T H E PRE S I DE NT
Our first-of-a-kind life extension projects
and to a high level of quality; modernize
Chalk River Laboratories operations to
address regulatory, health, safety and
environmental needs; and safely return the
NRU to service. Despite our challenges,
we continue to see ongoing improvements
Hugh MacDiarmid
President and Chief Executive Officer
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MANAGEMENT’S DISCUSSION AND A NA LYS I S
Management’s Discussion and Analysis
12
What’s inside the MD&A
13 Forward-Looking Statements
13 Organization
15 Key Success Drivers and Capability to Deliver Results
16 Consolidated Financial Review
19 Operating Review
28 Consolidated Cash Flow and Working Capital
28 Off-Balance Sheet Arrangements
29 Management of Risks and Uncertainties
33 Accounting Changes
34 Critical Accounting Estimates and Policies
ATO MI C ENERGY OF CANADA LIMITED
Forward-Looking Statements
This Management’s Discussion and Analysis (MD&A) has been reviewed by AECL’s Audit Committee and approved by AECL’s Board of
Directors. It provides comments on the performance of the Corporation for the year ended March 31, 2010 and should be read in
conjunction with the consolidated financial statements and accompanying notes included in this Annual Report.
This MD&A contains forward-looking statements with respect to AECL based on assumptions that management considers reasonable at
the time of preparation. These forward-looking statements, by their nature, necessarily involve risks and uncertainties that could cause
future results to differ materially from current expectations. We caution the reader that the assumptions regarding future events, many of
which are difficult to predict, may ultimately require revision.
Organization
Management organizes its business activities and evaluates its financial results through two distinct business divisions: CANDU Reactor,
and Research and Technology. Each division is responsible for achieving its business goals as established in the Corporate Plan.
The corporate services function has traditionally supported these divisions.
Life Extension: Reactor life extensions,
including the replacement of major reactor
components, allow utilities to extend the life
of CANDU reactors for up to 30 years as
opposed to decommissioning existing
reactors and building replacements.
CANDU
REAC TOR
DIVISION
RESEARCH AND TECHNOLOGY D I V I SI ON
RESEARCH AND
TECHNOLOGY
OPERATIONS
• New Build
• Life Extension
• Services
LIA B I L I T Y
MAN AGE M E N T
UN I T (L M U)
• Research and
Development
a
b
• Isotope Production
• Historic Waste
Management
a
b
• Legacy Waste
Management
• Laboratory
Operations
a
b
New Build: Activities related to the
development and commercialization of the
ACR-1000 and EC6 as leading nuclear
technologies, and project management of all
new-build contracts in Canada and around
the world.
AECL Organization as of March 31, 2010
a
b
The CANDU Reactor Division, based in
Mississauga, Ontario, employs
approximately 2,000 people and operates
on a commercial basis providing nuclear
products and related services. It generates
value for nuclear utilities worldwide through
its three core business lines:
a
b
CANDU Reactor Division
MANAGEMENT’S DISCUSSION AND A NA LYS I S
AECL is an agent Crown corporation reporting to Parliament through the Minister of Natural Resources Canada.
C O R P O R AT E
Services: The Services business provides a full range of engineering and technical products and services, including engineering,
production, component supply, inspection and field services. The business supports operating CANDU plants by extending their lives
through upgrades and improving customer productivity and competitiveness. The Services business also offers parts and services,
including global nuclear products, to a growing market of non-CANDU customers.
These business lines are supported by the groups dedicated to developing the Division’s products, selling them and delivering them to
customers: Technology, Marketing and Business Development, and Operations.
• Technology: Focuses on the development and commercialization of the ACR-1000 and EC6, as well as providing nuclear-related goods
and services to utilities.
• Marketing and Business Development: Sells CANDU technology and services worldwide.
• Operations: Delivers CANDU technology and services to commercial customers. The new-build business manages reactor construction
projects, while the life extension business allows utilities to extend the life of their CANDU reactors for up to 30 years.
2 010 A NNUA L FI NA NCI A L RE PO RT
13
Research and Technology Division
AECL’s Research and Technology Division employs approximately 3,000 people and is principally centred at Chalk River Laboratories,
Canada’s largest federal laboratory. Almost 400 of those staff members are employed in other locations, including the Whiteshell
Laboratories in Manitoba.
The Research and Technology Division’s value is expressed in national terms, which is characteristic of national laboratories worldwide.
An ongoing investment of federal funds results in a healthy nuclear sector in Canada that contributes to jobs, economic activity and quality
of life for the country.
MANAGEMENT’S DISCUSSION AND A NA LYS I S
Activities within the Division are aligned with the federal Science & Technology strategy, Mobilizing Science and Technology to Canada’s
Advantage. Through alignment with this strategy, the Division makes a significant contribution to three of the Government’s Outcome
Areas: an innovative and knowledge-based economy, a clean and healthy environment, and healthy Canadians.
The Division maintains facilities and research and development capabilities that are leveraged to benefit Canada and the nuclear industry.
These benefits include isotope production capabilities; research themes that are focused on maintaining and improving safety; and
nuclear-related products and services. Through innovation and engineering services, the Division supports the safe and efficient operation
of CANDU nuclear generating stations and helps customers meet their regulatory requirements.
The Division is largely supported by the Government. It also generates revenue from the sale of products and/or services, including
isotopes, research contracts for the CANDU Owners Group, and commercial waste management services for hospitals and universities.
This additional activity contributed $33 million to revenues in the year.
The Division also supports the CANDU Reactor Division in performing research, technical support and testing in the development of new
commercial products, such as the ACR-1000.
The Division reports its financial performance under Research and Technology Operations and the Liability Management Unit.
Research and Technology Operations
The Research and Technology Operations organization manages the Division’s nuclear research and development capability and
related facilities. Expenditures are managed to specific targets based on committed funding levels and commercial revenues.
Funding is largely derived from federal appropriations and is used to support operations and infrastructure initiatives.
The organization undertakes commercial activities that include the production of medical isotopes, CANDU technology and
research and development services, as well as waste management and decommissioning services. It also provides essential
technology, nuclear research and development services in support of the CANDU Reactor Division.
In addition, Research and Technology Operations manages historic waste and decommissioning liabilities. The Low-Level
Radioactive Waste Management Office was established in 1982 to carry out federal low-level radioactive waste management
responsibilities in Canada. The organization’s main activities are to resolve historic waste problems and address general public
information needs about low-level radioactive wastes. On behalf of the Government, the organization cleans up radioactivecontaminated sites across Canada for which the original owner is no longer known and where the current owner cannot
reasonably be held responsible. In 2009, the Port Hope Area Initiative Management Office was established to clean up industrial
radioactive residues in the Port Hope area and act as the proponent for the environmental assessment for the Port Hope and
Port Granby long-term waste management projects.
The above activities utilize nuclear and non-nuclear facilities at Chalk River and Whiteshell.
Liability Management Unit
The Liability Management Unit accounts for two streams of waste and decommissioning liabilities on behalf of the Government of
Canada and AECL: nuclear legacy liabilities and waste from ongoing operations. This is managed in accordance with CNSC
regulations and in the best interests of Canadians. Research and Technology Operations and private sector contractors perform
the waste and decommissioning work.
Nuclear Legacy Liabilities
The Government of Canada introduced the Nuclear Legacy Liabilities Program, a long-term strategy to reduce and eliminate
federal nuclear liabilities on AECL sites generated prior to March 31, 2006. These liabilities include obligations associated with
AECL’s existing infrastructure, those stemming from activities before AECL was incorporated in 1952, third-party radioactive
waste from across Canada, and research and development waste in support of Canada’s nuclear program.
The program is governed through a Memorandum of Understanding between AECL and Natural Resources Canada. Under this
agreement, AECL is responsible for carrying out the work in a safe, compliant and cost-effective manner.
14
ATO MI C ENERGY OF CANADA LIMITED
The Government approved $513 million for activities to be implemented over an initial five-year start-up phase, ending in
March 2011.
Waste from Ongoing Operations
The Liability Management Unit accounts for ongoing operational waste from AECL’s operations in addition to commercial radioactive waste received for long-term management from universities, medical facilities, government and industry from across Canada.
Key Success Drivers and Capability to Deliver Results
Safety
These efforts resulted in very positive results in 2009–2010. AECL experienced a 50% decline last year in the recordable lost-time injury
frequency rate (number of events by person hours) over 2008–2009 – its best performance in this category in the last 10 years.
The recordable lost-time injury severity rate (days lost due to workplace injury by person hours) also declined by approximately 20%,
representing AECL’s best result in the last three years.
The company attributes this success to its increased emphasis on a proactive Occupational Health & Safety program, increased
communications with employees to heighten safety awareness, leveraging resources and the creation of improvement plans. Further work
on improvement plan projects, such as improved incident management and implementation of a scorecard and audit tool, are all targeted
activities to improve and sustain these results.
An important part of AECL’s safety-first priority has been the commitment to apply best practices and achieve industry leadership in the
company’s safety programs. To that end, AECL’s Health and Safety policy – the foundation of AECL’s health and safety programs – was
updated to set out common goals and standards to ensure that the requirements of applicable legislation for health and safety matters as
they relate to AECL are met.
The policy outlines employees’ responsibilities to comply with the Health and Safety policy, as well as key roles in establishing and
maintaining healthy workplaces.
MANAGEMENT’S DISCUSSION AND A NA LYS I S
By placing safety first, AECL reinforces a performance culture that provides a safe workplace for employees and meets the expectations
and requirements of its key stakeholders, including the CNSC, customers and the public.
Customer Commitment
AECL recognizes that customer satisfaction is crucial to its ongoing success and is continuing its efforts to further evolve AECL into a
customer-driven technology company. Customer feedback mechanisms continue to provide AECL with valuable insight into meeting and
exceeding customers’ expectations. AECL has been working cooperatively with customers to provide high-quality products and services
in a timely and cost-effective manner.
Research and Development
The success of the Canadian nuclear program is founded on its broad research and development capability. AECL generates substantial
intellectual capital and maintains a significant research and development infrastructure through its nuclear laboratories. It enhances the
safety and performance of the existing CANDU fleet, develops new technologies and advances the next generation of reactors and fuels
with the goal of exceeding international standards.
AECL provides support to meet Canada’s international nuclear policy commitments, including participation in the International Atomic
Energy Agency and the Generation IV International Forum. AECL’s research and development capability contributes to the advancement
of science in Canada through its support of the academic community – more than 200 academic researchers use the unique facilities and
more than 20 Canadian universities collaborate on research projects. These initiatives drive innovation and technology advancement
and contribute to the training of highly qualified personnel for the future, in both nuclear and non-nuclear sectors.
These capabilities support a knowledge-based, entrepreneurial Canadian economy.
Project Management Skills
In the last 13 years, AECL has achieved global success in delivering seven international new-build projects which met or exceeded
customer schedule and budget expectations. Delays to schedule and cost increases continued on AECL’s major reactor life extension
projects, due to challenges related to their technical complexity and first-of-a-kind nature. Lessons learned on the initial projects
contributed in part to schedule efficiencies on one of the more recent projects last year. With ongoing life extension projects and
expected new-build in the near future, AECL continued to enhance its project management processes, tools and practices to ensure
the completion of all projects.
2 010 A NNUA L FI NA NCI A L RE PO RT
15
Supply Chain
AECL’s ability to meet its commercial commitments is dependent upon maintaining a strong supply chain. AECL is supported by more
than 120 Canadian member-companies of the Organization of CANDU Industries, and continues to develop essential alliances with key
international suppliers to promote CANDU technology.
The company has strengthened its supply chain through its life extension projects. Over the past year, the organization enhanced its ability
to ensure supply is available globally and locally in anticipation of new-build projects. To encourage growth in the supply chain, AECL also
supports existing suppliers in expanding their service provision and new suppliers in attaining nuclear qualifications.
Government of Canada Support
Government of Canada support is essential to AECL’s long-term commercial success as Canada’s national nuclear reactor vendor and to
the fulfillment of AECL’s public policy mandate. During 2009–2010, Government support for AECL included funding for:
MANAGEMENT’S DISCUSSION AND A NA LYS I S
• The ACR-1000 development program.
• Operational requirements related to advancing commercial commitments.
• The nuclear research and development program, Chalk River Laboratories infrastructure renewal (Project New Lease) and ongoing
operations (base operations and Isotope Supply Reliability Program).
• The Nuclear Legacy Liabilities Program. AECL worked with Natural Resources Canada on the development of the next phase of this
program to extend funding beyond March 2011 – the final year of the first phase of the program.
AECL receives the Government of Canada’s support of its activities through the approval of its Corporate Plan by the Governor in Council.
The 2009–2010 Corporate Plan was approved in May 2010. Funding of $535 million has been approved for use in 2010–2011.
Skilled Human Resources
AECL’s highly educated and skilled workforce is the primary resource for ensuring its current and future success. Changing workforce
demographics and global talent trends influence the development of AECL strategies on recruiting, engaging, deploying and retaining
talent. The advancement of skills and leadership to help enhance company opportunities is achieved through a wide range of learning
events and ongoing programs.
In 2009–2010, AECL marginally increased its full-time staff by 1% to 4,957 employees (4,891 in 2008–2009), including more than 3,400
highly skilled engineers, scientists, technical professionals and operations personnel in a wide range of technical disciplines.
Consolidated Financial Review
Key Financial Information
($ millions)
16
2009–10
2008–09
Revenue
CANDU Reactor
Research and Technology
Total revenue
$ 439
33
$ 472
$ 336
65
$ 401
Funding
Operating
Capital
Cost recovery from third parties and other
Total funding
$ 810
126
12
$ 948
$ 485
148
9
$ 642
Net income (loss) by business division
CANDU Reactor after Parliamentary appropriations
Research and Technology Operations
Liability Management Unit
Net loss
$ (104)
(5)
29
$ (80)
$ (331)
(5)
(77)
$ (413)
ATO MI C ENERGY OF CANADA LIMITED
Revenue by Division ($ millions)
Consolidated commercial revenues increased 18% to $472 million
in 2009–2010. This improvement mainly resulted from increased
activity on the CANDU Reactor Division’s life extension projects.
Revenue from the Services business in 2009–2010 remained
consistent with the previous year.
Research and Technology commercial revenue decreased by
49% to $33 million, reflecting lower isotope sales. This decline
resulted from the extended shutdown of the NRU in May 2009 to
repair a heavy water leak. The shutdown extended beyond the
end of the fiscal year.
$33
CANDU Reactor
$439
400
200
100
2009–10
Projects
Services
Projects
$83
$823
Orders-on-hand by Region
March 2010 – $909 million
• $154 million for research and development, mainly supporting
ongoing Chalk River site operations.
Orders-on-hand by Region
March 2009 – $1,006 million
International
Canada
$152
• $120 million to address regulatory, health, safety and
environmental needs. The funding supported the Project New
Lease (infrastructure renewal) and Isotope Supply Reliability
Program (NRU operations and licence renewal) initiatives, at
AECL’s Chalk River site. Capital funding totalled $47 million.
Services
$183
$826
Canada
0
2008–09
Orders-on-hand by Business
March 2009 – $1,006 million
Orders-on-hand by Business
March 2010 – $909 million
• $108 million for the ACR-1000 program. $29 million was used
for research and overhead costs, while $79 million was
capitalized on the Consolidated Balance Sheet in accordance
with accounting standards.
International
$238
$768
$757
Funding 2009–2010
Funding $948 million
(Operating $822 million;
Capital $126 million)
Funding 2008–2009
Funding $642 million
(Operating $494 million;
Capital $148 million)
ACR-1000 ($108)
ACR-1000 ($120)
Life Extension Projects ($346)
Life Extension Projects ($100)
Research and
Development ($154)
Research and
Development ($132)
Chalk River Regulatory,
Health, Safety, Security
and Environment ($120)
Chalk River Regulatory,
Health, Safety, Security
and Environment ($109)
Cost Recoveries from
Third Parties and Other ($12)
Cost Recoveries from
Third Parties and Other ($9)
Decommissioning ($115)
Decommissioning ($105)
Dedicated Isotope Facilities
($21)
Dedicated Isotope Facilities
($67)
• Funding of $21 million for the Dedicated Isotope Facilities,
which include the MAPLE 1 and 2 reactors, the New Processing
Facility and the Calcined Waste Storage Canisters. Operational
costs have been significantly reduced since the facilities were
placed in an extended shutdown state in June 2009. The CNSC
granted a licence in March to formalize the status of the
facilities. Funding was also used to meet contractual
obligations.
NRU Restart ($72)
• Decommissioning and waste management activities recognized
increased funding of $115 million from $105 million in 2008–
2009. Funding is provided through Natural Resources Canada
and is based on AECL’s expenditures.
$21
$72
$67
$108
$115
$120
$105
$12
• Specific funding of $72 million was provided to support NRU
return-to-service activities. The NRU was shut down in May
2009 to allow for repairs to the reactor vessel.
$65
300
Total funding recognized in 2009–2010 for operating and capital
activities was $948 million (2008–2009: $642 million). This
included:
• Cost recoveries and other funding totalled $12 million. This
includes amortization of deferred capital funding related to
Government-funded infrastructure, mainly at Chalk River. In
addition, cost recoveries include support for activities under the
Low-Level Radioactive Waste Management Office, reported
under the Research and Technology Division.
500
$401
$336
Funding
• A $346 million cash infusion to support reactor life extension
projects within the CANDU Reactor Division and meet
contractual obligations. Three life extension projects are
planned to be completed in 2010–2011.
$472
Research and Technology
MANAGEMENT’S DISCUSSION AND A NA LYS I S
Revenue
$346
$120
$100
$9
$109
$154
$132
2 010 A NNUA L FI NA NCI A L RE PO RT
17
Net Income/Loss by Division
The CANDU Reactor Division reported a net loss of $104 million (2008–2009: $331 million net loss) after Parliamentary appropriations.
This improvement was a result of increased Government funding for life extension projects provided during the year.
Under the Research and Technology Division, Research and Technology Operations reported a net loss of $5 million (2008–2009:
$5 million net loss). Increased program expenditures and curtailed isotope sales as a result of the NRU extended shutdown were offset by
increased Government funding. The Liability Management Unit reported a net income of $29 million in 2009–2010 (2008–2009: $77 million
net loss). This increase was largely the result of a change in the implementation strategy for the remediation of stored liquid waste that
reduced the corresponding provision for decommissioning liabilities.
MANAGEMENT’S DISCUSSION AND A NA LYS I S
Overall, AECL reported a net loss of $80 million in 2009–2010, compared to a net loss of $413 million in 2008–2009. The improvement
was driven by a higher level of Government funding, increased revenue generated within the CANDU Reactor Division, and a significant
decrease in the decommissioning and waste management provision.
2009–2010 Results Compared to Corporate Plan
Year ended March 31 ($ millions)
CANDU Reactor Division
Revenue
Funding – Operating
Net (loss) income
Research and Technology Division
Research and Technology Operations
Revenue
Funding – Operating
Cost recovery from third parties and other
Net (loss) income
Liability Management Unit
Decommissioning funding
Net income (loss)
Consolidated net (loss) income
2009–10
Actual
2009–10
Corporate Plan
$ 439
375
$ (104)
$ 536
340
$ 66
$
33
325
7
$ (5)
$ 33
331
7
$ 9
$ 115
$ 29
$ (80)
$ 115
$ (42)
$ 33
The CANDU Reactor Division reported a net loss of $104 million, which was worse than planned net income as a result of schedule delays
and increased costs on the life extension projects.
Under the Research and Technology Division, Research and Technology Operations revenues were consistent with the Corporate Plan.
A reallocation of funding to the life extension projects resulted in operating funding that was lower than planned and also contributed to a
net loss in Research and Technology Operations.
The Liability Management Unit reported funding of $115 million, consistent with the Corporate Plan. Funding is recognized based on
completed work packages and invoices are submitted to Natural Resources Canada for reimbursement. Net income was higher than
planned due to changes in estimates pertaining to the decommissioning and waste management provision.
Overall, AECL recorded a net loss of $80 million compared to planned net income of $33 million. The decrease was mainly attributable to
increased costs on the life extension projects, offset in part by significant estimate revisions within the Liability Management Unit.
18
ATO MI C ENERGY OF CANADA LIMITED
Operating Review
CANDU Reactor Division
Business Lines
• New build, including reactor technology development and commercialization
• Reactor life extension
• Services
•
•
•
•
•
•
Continuous recognition of the importance of a safe and healthy workplace through a commitment to the Division’s Safety Charter.
Achieve sustainable, profitable, long-term growth (financial self-sufficiency).
Maintain CANDU as the nuclear technology of choice in Canada.
Expand the international CANDU fleet.
Deliver on project commitments.
Increase public support and seek continued Shareholder support for CANDU technology.
2009–2010 Priorities
•
•
•
•
•
Meet the requirements for new nuclear plant construction in its primary market, Canada.
Grow the life extension business.
Leverage partnerships.
Achieve consistently high customer satisfaction levels.
Ensure CANDU plants are the safest and highest performing plants in the world.
2009–2010 Measures
• Sign at least one major commercial contract by end of 2009–2010
(life extension).
• Services projects on budget/on schedule (90%).
• Commercial revenue ($603 million).
• Achieve significant progress on the Point Lepreau and Bruce life extension
projects.
• Meet ACR-1000 milestone commitments.
2009–2010 Significant Achievements and Progress
• Discussions are underway for a major contract, expected in early
2010–2011.
• Services projects on budget/on schedule (87%).
• Increased life extension cost estimates reduced revenue to $439 million.
• The Point Lepreau and Bruce projects progressed to the installation
phase.
• ACR-1000 planned milestones have been substantially completed. More
than 85% of the ACR-1000 basic engineering program completed.
MANAGEMENT’S DISCUSSION AND A NA LYS I S
2009–2010 Goals
Strategic Initiatives
The CANDU Reactor Division’s long-term growth is anchored around successful development and implementation of its leading
nuclear technologies – the ACR-1000 and the EC6. The Division is committed to delivering the two products safely, reliably and
economically, to the highest quality, as products of choice for nuclear new-build customers in Canada and around the world. The
Division’s two-product strategy enables it to market the reactor product that is most suited to the distinct needs and drivers of a
particular purchaser.
The company’s current focus for the ACR-1000 is Ontario, as this will provide a solid product development and licensing platform
from which to develop ACR-1000 technology elsewhere in Canada. Success in Ontario will help facilitate business opportunities for
this product internationally. Significant progress has been made in acquiring licensing for the ACR-1000 and EC6 through the CNSC
in Canada.
While business development for the ACR-1000 will initially focus on Canada and India, CANDU 6 and EC6 development will focus
primarily on the markets of Argentina, Romania, Jordan, Ukraine and China. Strong market interest for the EC6 has been expressed
by countries that prefer a natural uranium reactor; a mid-sized reactor due to grid size and interconnect limitations; or those
planning a transition to alternative fuel cycles, such as recovered uranium and thorium.
There are approximately 30 operating CANDU reactors around the world that may require life extension in the future. The delivery
of the Division’s current life extension projects will help secure future business. Ongoing efforts are being made to address
first-of-a-kind challenges, enhance project management processes and apply lessons learned to more recently-awarded projects.
The CANDU Reactor Division’s Services business is viewed as a preferred supplier by many of its utility customers due to its role as
original CANDU designer and its solid CANDU knowledge and expertise. To improve its position in the marketplace, the Services
business has developed innovative and strategic approaches to marketing, customized for its key customers. The organization is
also building market share by introducing new products and strategies, such as bundling of services, and leveraging strategic
partnerships to mitigate competition and provide a broader range of solutions to its customers.
2 010 A NNUA L FI NA NCI A L RE PO RT
19
Operations
The CANDU Reactor Division continued to make progress on its two leading products under development, the ACR-1000 and
EC6. During the year, ACR-1000 development activities included advancements in fuel design, the reactor control centre and
validation activities related to the design and safety analysis (reactor physics code suite). The Division completed the Generic
Preliminary Safety Analysis Report and the CNSC completed Phase 2 of the ACR-1000 Pre-Project Design Review, signalling there
are no fundamental barriers to licensing the product in Canada. The ACR-1000 basic engineering was more than 85% completed
at year-end.
MANAGEMENT’S DISCUSSION AND A NA LYS I S
The CNSC’s Phase 1 Pre-Project Design Review of the EC6 (completed in March), concluded that, at an overall level, the design
intent is compliant with CNSC regulatory requirements and meets the expectations for new nuclear reactor power plants in Canada.
The CANDU Reactor Division continued to focus on major ongoing life extension projects. Both the Bruce and Point Lepreau life
extension projects progressed to the installation phase. However, first-of-a-kind technical challenges discovered toward the end of
the fiscal year resulted in significant further delays to schedule and cost increases. While AECL continues to actively manage
technical risks, uncertainties remain regarding the resolution of these challenges. Financial forecasts are based on best estimates
of the financial impact of these uncertainties. The more recently-awarded life extension projects, Wolsong in Korea, and Gentilly-2
in Quebec, ramped up project activity. The Wolsong project completed its removal phase ahead of schedule, which was in part
attributable to lessons learned on the earlier projects. Engineering and procurement activities continued on Gentilly-2, with the
reactor outage expected in fiscal 2011–2012.
The Services business line expanded its business, including breaking into the new market of Japan, where sales of nuclear pump
seals, spare parts, training and consulting were made to a non-CANDU reactor utility.
In June 2009, the Ontario government suspended its Request for Proposals process for the construction of two nuclear reactors in
Darlington, Ontario. AECL’s submission was deemed to be “the best” proposal. The Ontario government has since indicated it
remains committed to new nuclear build and AECL, through its CANDU Reactor Division, remains an interested party to this process
upon its resumption.
The Division continued to pursue marketing efforts in Western Canada and arrangements with several countries, including India,
China and Romania, to develop technologies and mobilize resources to facilitate new-build CANDU reactor projects. In Romania,
AECL entered into a contract to assess the viability and planning of two CANDU reactor units at the Cernavoda Nuclear Power
Plant, in advance of an expected project contract being awarded. With respect to its life extension business, the Division
progressed negotiations on an international life extension contract.
The Division and its Chinese partners advanced a first-ever commercial demonstration irradiation of recovered uranium in a Qinshan
CANDU 6 reactor. The option being deployed blends recovered uranium from light water reactors with depleted uranium.
Similarly, in collaboration with Chinese experts and partners, major progress was made in assessing the technical and commercial
viability of a new-build thorium-capable CANDU reactor. An expert panel, appointed by the China National Nuclear Corporation,
recommended that China consider building two CANDU units to take advantage of these unique alternative fuel capabilities,
including thorium and recovered uranium.
Financial Review
CANDU REACTOR DIVISION
($ millions)
Revenue
Reactor life extension
Services
Interest
Total revenue
Research and development costs
Net loss before Parliamentary appropriations
Funding – Operating
Net loss
Non-financial information
New build and life extension projects
20
ATO MI C ENERGY OF CANADA LIMITED
Actual Results
2009–10
$ 294
134
11
439
29
(479)
375
$ (104)
4
2008–09
$ 183
139
14
336
24
(455)
124
$ (331)
4
Revenues
Revenues from reactor life extensions increased to $294 million (2008–2009: $183 million). This 61% increase largely reflects
higher activity levels on the life extension projects during the year.
The Services business generated $134 million (2008–2009: $139 million) in revenue, largely in line with prior year results and
estimates for the year.
Funding
Net Loss
The net loss before Parliamentary appropriations increased to $479 million (2008–2009: $455 million net loss). Due to additional
technical challenges encountered and corresponding schedule delays on the life extension projects, cost estimates to complete
the projects and related loss provisions have increased.
The Services business’ contribution to net income remained consistent with the previous year and contributed to the recovery of
divisional costs. The net loss after Parliamentary appropriations improved to $104 million (2008–2009: $331 million loss), reflecting
increased funding to support costs incurred on major ongoing life extension projects.
Outlook
In 2008–2009, the Government announced its decision to restructure AECL. In December, investors were invited to submit
proposals for AECL’s commercial CANDU Reactor Division. The outcome of this initiative may significantly impact the prospective
information below. The Government plans to complete the restructuring process in 2010–2011.
Life Extension
MANAGEMENT’S DISCUSSION AND A NA LYS I S
The CANDU Reactor Division received funding of $346 million (2008–2009: $100 million) to support the ongoing life extension
projects, which experienced additional schedule delays and cost increases in 2009–2010. The Division also received $108 million
to support ACR-1000 development costs. Of this total, $79 million funded costs that met accounting requirements to be capitalized
on AECL’s Consolidated Balance Sheet, while the remaining $29 million in funding supported research and development costs
that were expensed in the Consolidated Statement of Operations.
Despite experiencing challenges on several life extension projects, the CANDU Reactor Division is at advanced stages on these
projects. The outlook for life extension activities is promising, as utilities seek to extend the service life of existing reactors as a
means of maintaining electricity generation capacity. Key business development goals in the Division’s 2010–2011 to 2014–2015
Corporate Plan include securing new CANDU reactor life extension contracts, domestically and internationally.
AECL expects revenue from this business to decline in 2010–2011 as several life extension projects progress toward completion.
During the year, progress was made on negotiations relating to an international life extension contract. While it is difficult to
predict the precise timing for life extension projects, the Division expects to secure one major contract in 2010–2011. The
CANDU Reactor Division believes that life extension is an important business line for the future and is, in the mid-term and
beyond, financially sound.
2 010 A NNUA L FI NA NCI A L RE PO RT
21
New Build
The CANDU Reactor Division’s primary focus for new-build
development remains on its domestic market, where CANDUbased nuclear energy continues to be an important part of
Canada’s electricity generating fuel mix.
During the year, the Ontario government suspended its process for
the construction of two nuclear reactors at Darlington, Ontario. The
CANDU Reactor Division continues to be a supportive and
interested party in the resolution of this process. Beyond Canada,
future market opportunities for the ACR-1000 include China and
India, where there is an existing installed base of CANDU
technology and a track record of strong technology performance.
CANDU Reactor Division Revenue
($ millions)
2000
1500
1000
500
0
2009–10
2010–11
2011–12
2012–13
2013–14
2014–15
Year
MANAGEMENT’S DISCUSSION AND A NA LYS I S
The EC6, meanwhile, is attracting significant interest in a number of
markets around the world, including, but not limited to, Romania, Argentina, Ukraine, Lithuania, Jordan and China. The Division
expects a minimum of three sales of its EC6 technology over the next five years.
AECL is optimistic about the future of the new-build business and expects revenues from this business to gradually increase over
the next five years.
Services
The outlook for recurring service work is promising as utilities seek to enhance reliability, extend service life and optimize plant
operations. Competitive pricing, improved execution, enhanced customer relationship management and expected new-build and
life extension projects in Canada and abroad will strengthen the Services business, which will continue to provide a steady
source of income to the Division. Services will be working to expand its market reach for its CANDU and non-CANDU products
and services, including the potentially large market of India. Revenues over the next five years are now expected to remain at
approximately current levels. The Services business had orders on hand of $83 million at the end of March 2010, and continues
to retain its status as a preferred supplier for many customers.
Government Support
The CANDU Reactor Division will continue to require Government funding in 2010–2011 to support several life extension projects
and to advance its technology development program. Thereafter, the level of funding required is expected to be reduced.
2010–2011 Major Priorities and Deliverables
While delivering a safety first and high performance culture, the CANDU Reactor Division will focus on the following priorities and
deliverables in 2010–2011:
•
•
•
•
•
•
•
22
Progress several life extension projects toward completion.
Sign one major commercial contract.
Generate Services revenue of $127 million.
Meet deliverable and financial performance targets on corporate programs and commercial projects.
Sign a joint advanced fuel development agreement with China.
Expand global marketing efforts in India, China, Ukraine and Jordan.
Improve on occupational, health and safety metrics.
ATO MI C ENERGY OF CANADA LIMITED
Research and Technology Division
Research and Technology Operations
Business Lines
•
•
•
•
Research and development
Isotope production
Historic waste management
Laboratory operations
2009–2010 Goals
Protect the health and safety of employees, the public and the environment.
Develop and deliver competitively superior products and services.
Demonstrate leadership in organization and management effectiveness.
Fulfill public policy goals and continue support for the CANDU Reactor Division to assist in its commercial viability.
2009–2010 Priorities
•
•
•
•
•
•
•
Research and development support for the ACR-1000 development program.
Maintain design and licensing basis for CANDU reactor technology and develop advanced nuclear concepts.
Manage the Isotope Supply Reliability Program, and Project New Lease commitments.
Develop and commercially exploit expertise and facilities in support of commercial products and services.
Develop/sustain core competencies for a nuclear Science and Technology Centre of Excellence.
NRU Repair and Return to Service.
In cooperation with Natural Resources Canada, Public Works and Government Services Canada, leading Transition Phase activities within the
governance model for the next phase of the Port Hope Area Initiative, including obtaining a CNSC licence for the Port Hope Project.
• Completing current research and development studies regarding the long-term management of used fuel as per the commercial contract with the
Nuclear Waste Management Organization.
2009–2010 Measures
•
•
•
•
•
•
Project New Lease deliverable performance of 90%.
Isotope Supply Reliability Program deliverable performance of 90%.
Technology deliverable performance of 96%.
Research and Development commercial performance of 95%.
Research and Development support for ACR-1000 at 90%.
Port Hope Area Initiative deliverable performance of 90%.
2009–2010 Significant Achievements and Progress
•
•
•
•
•
•
Project New Lease deliverable performance was 89%.
Isotope Supply Reliability Program deliverable performance was 83%.
Technology deliverable performance was 97%.
Research and Development commercial performance was 100%.
Research and Development support for ACR-1000 was 94%.
Port Hope Area Initiative deliverable performance was 90%.
MANAGEMENT’S DISCUSSION AND A NA LYS I S
•
•
•
•
Strategic Initiatives
Over the past 60 years, Research and Technology Operations has made substantial contributions to Canada’s economy and
environment, largely as a result of the initial investment in its infrastructure: research reactors, laboratories and offices. The
following renewal programs, which are dependent on the availability of Government funding, are underway:
• Project New Lease is a 10-year plan developed in 2006 to address the safe, secure and viable operation of Chalk River
Laboratories. This includes the implementation of program improvements to meet industry standards in operations and the
capital investment required to revitalize the aging site infrastructure. The requirements, which were defined and categorized
based on known risks, involve addressing operational performance; regulatory requirements; health, safety, security and the
environment issues; demographic issues of an aging workforce; and nuclear industry best practices, including replacement of
strategic research and development facilities. With this investment, the laboratory will help Canada attain and maintain a
position as a world leader in nuclear science and technology.
• The Isotope Supply Reliability Program involves renewing facilities, equipment and staff capabilities that are required for
reliable, long-term isotope production. A key objective is an Integrated Safety Review of the NRU reactor to allow its continued
operation past the next licence renewal for Chalk River Laboratories in October 2011. Other priorities include the provision of
sufficient waste management facilities to allow isotope production to continue and improvements to the management of
tritium, a potential hazard.
• Research and Development. AECL maintains and operates significant infrastructure and maintains an extensive research
capability at its Chalk River site to support CANDU reactor development and scientific research. This infrastructure includes
the NRU reactor and various facilities at the Chalk River site.
• Delivering the national low-level radioactive waste management program for Canada’s historic radioactive wastes through the
Low-Level Radioactive Waste Management Office and delivering the federally-committed Port Hope Area Initiative construction
of new long-term waste management facilities through the Port Hope Area Initiative Management Office.
2 010 A NNUA L FI NA NCI A L RE PO RT
23
Operations
In 2009–2010, as part of Research and Technology Operations’ ongoing operations, a $59 million research and development
program was continued. This program, which is planned in conjunction with industry partners, supports activities in areas
such as fuel, safety, health and control instrumentation. A smaller but significant activity within the organization focuses on
advanced concepts that will lead to a commercial application to reduce volumes of nuclear waste and increase the amount of
electricity generated.
In support of the CANDU Reactor Division, a development program to advance the ACR-1000 was also undertaken. Research
and Technology Operations also engaged in commercial services, with customers including the Nuclear Waste Management
Organization, the Department of National Defence, the CNSC, Canadian universities and hospitals, and the European Union.
MANAGEMENT’S DISCUSSION AND A NA LYS I S
Beyond providing support for the nuclear industry, Research and Technology Operations has played a role in an anti-terrorism
initiative led by Defence Research and Development Canada. As part of this initiative, the organization has developed a new
device to assess health effects in an emergency response to any radiological threat. It has also developed technology to track
contraband nuclear material at international borders.
Work organization and management is a key driver of a cost-effective operation. During the year, a third party reviewer was
engaged to assess the effectiveness of the Isotope Supply Reliability Program and identify areas for improved performance.
This program achieved 83% of its objectives for the year.
A key component of the Isotope Supply Reliability Program is the Integrated Safety Review of the NRU, an activity that supports
the renewal of the Chalk River Laboratories’ operating licence. The work, divided into four phases, is described in a protocol
document agreed upon by AECL and the CNSC. Phase I was completed in 2008–2009. Phase II, which involves a systematic
assessment of the safe operation of the NRU, is progressing well, with all milestones to fiscal year-end met on schedule.
In May 2009, a heavy water leak was discovered in the NRU reactor vessel, resulting in an extended shutdown of the reactor to
undergo repairs. The NRU, which is also instrumental in isotope production, remained out of service beyond the fiscal year-end.
Operational activities were carried out to safely bring the Dedicated Isotope Facilities to an extended shutdown state. The facility
will continue to be preserved with routine surveillance and monitoring to reduce degradation.
Significant programs and projects operated by the Low-Level Radioactive Waste Management Office last year included: oversight
of historic low-level radioactive waste national mounds and contaminated sites at various locations throughout Canada; delivery of
interim waste management programs at Port Hope and Scarborough; operation of the Canada-wide Artefact Recovery Program;
and consultations with communities along the Northern Transportation route regarding resolution of contamination issues. The
LLRWMO operates base facilities in Ottawa and Port Hope and delivers national information programs.
Financial Review
RESEARCH AND TECHNOLOGY OPERATIONS
($ millions)
Actual Results
2009–10
2008–09
Revenue and Funding
Revenue
Parliamentary appropriations – Operating
Amortization of deferred capital funding
Cost recoveries from third parties and other
Total revenue and funding
$ 33
321
5
7
$ 366
$ 65
256
3
6
$ 330
Expenses
Facilities
Research and development
Other
Dedicated Isotope Facilities operations costs
Total expenses
Net loss
$ 302
59
—
9
370
$ (5)
$ 218
58
1
58
335
$ (5)
Revenues
Commercial revenue, which includes isotope sales, commercial technology sales, nuclear waste management and research
and development activities performed for the CANDU Owners Group, decreased to $33 million (2008–2009: $65 million).
While the decline reflected an overall decrease in commercial activity, the cessation of isotope sales with the extended
shutdown of the NRU reactor from May 2009 to beyond year-end was a primary contributor to this decline.
24
ATO MI C ENERGY OF CANADA LIMITED
In providing research and development support to the CANDU Owners Group, Research and Technology Operations
contributes to fulfilling its mandate to maintain the CANDU safety, licensing and design basis for Canadian utilities.
Revenues from these activities increased to $20 million in 2009–2010 (2008–2009: $19 million).
Funding
The increase in overall funding in 2009–2010 also reflects incremental funds provided by the Government in response to the
insufficiency of the Research and Technology Operations’ reference level funding to meet existing base requirements. Base
costs have continued to rise as a result of inflation, more stringent regulatory standards and a greater need for security over
the last 10 years.
Program funding includes renewal of Chalk River infrastructure (Project New Lease), infrastructure and operational support for
improvement of the isotope production process (Isotope Supply Reliability Program) and site regulatory and operational
requirements. This amount excludes $47 million designated for site infrastructure requirements, accounted for as capital
funding. Funding of $45 million was provided to support Project New Lease capital activities, including the completion of an
administrative building, a waste management facility, electricity infrastructure upgrades, design and refurbishment of several
facilities (hydrogen laboratory, research facilities) and several operational improvement programs.
Research and Technology Operations manages historic wastes through the Low-Level Radioactive Waste Management Office
and Port Hope Area Initiative Management Office on a cost recovery basis for Natural Resources Canada. Funding of $7 million
(2008–2009: $6 million) was provided through Natural Resources Canada to support both the Low-Level Radioactive Waste
Management Office and Port Hope Area Initiative Management Office.
MANAGEMENT’S DISCUSSION AND A NA LYS I S
Parliamentary appropriations for operations and amortization of deferred capital funding increased to $326 million (2008–
2009: $259 million). This amount includes funding of $321 million (2008–2009: $256 million) from the Government of Canada
for activities associated with the Research and Technology Operations, as well as $5 million (2008–2009: $3 million) related to
amortization of deferred capital funding. An increased level of funding was used to support all major initiatives underway
within the organization, with the exception of the Dedicated Isotope Facilities, which saw a decline in funding to $21 million
(2008–2009: $67 million) as the facilities were placed in an extended shutdown state in June 2009. Specific one-time funding
of $72 million was received during the year to support repair activities and replace lost margin associated with the extended
shutdown of the NRU.
Expenses
Total expenses within Research and Technology Operations were $370 million compared to $335 million in 2008–2009.
Driving this increase in funded costs were NRU repair activities and related refurbishment and supporting activities under the
Isotope Supply Reliability Program. This increase was partially offset by a decline in isotope production costs resulting from
the NRU extended shutdown. Costs also increased over 2008–2009 as a result of a ramp up in project management activity
related to preparations for the construction of a waste-enabling facility under the Port Hope Area Initiative Management
Office. Low-Level Radioactive Waste Management Office costs incurred during the year were lower compared to 2008–2009
due to the transition of the Port Hope Area Initiative Project to a separate organization and reduced work related to the
Northern Transportation route.
Net Loss
Research and Technology Operations reported a net loss of $5 million (2008–2009: net loss $5 million), as expenses and
funding both increased.
Outlook
Research and Development activities planned for 2010–2011 will include safety, licensing and design research for the CANDU
Reactor Division; commercially contracted work for the CANDU Owners Group; and product and services development.
Ongoing work related to the NRU repair is expected to be completed in 2010–2011, and will provide for a return to safe, reliable
isotope production. Current actions being undertaken to repair the NRU and to address technical challenges are necessary for
the reactor to remain licensed to operate under the Nuclear Safety and Control Act. These activities are intended to allow the
reactor to operate until at least 2016. The organization will also continue to focus on renewing infrastructure at the Chalk River
site, as well as on activities relating to the Integrated Safety Review of the NRU, an activity that supports the renewal of the
Chalk River Laboratories’ operating licence. The site licence is to expire in October 2011.
Revenues in 2010–2011 from the CANDU Owners Group to address safety, reliability and component integrity for the CANDU
fleet are expected to remain consistent with those in 2009–2010. However, revenues from isotope production are expected to
increase with the NRU’s return to service. Government funding is planned to be lower, largely as a result of one-time funding
provided in 2009–2010 to support NRU repair activities.
2 010 A NNUA L FI NA NCI A L RE PO RT
25
Overall, Research and Technology Operations plans to continue its progress with infrastructure and operational improvement
initiatives in 2010–2011 and beyond. This will require the organization to maintain an increased level of funding in 2010–2011.
The planned restructuring of the CANDU Reactor Division, slated for 2010–2011, and an expected decision by the Government
on management of the Research and Technology Division may impact the financial position and planned needs of Research and
Technology Operations.
2010–2011 Major Priorities and Deliverables
Research and Technology Operations will focus on the following priorities and deliverables in 2010–2011:
• Meet deliverable and financial performance targets on corporate (Research and Technology and Liability Management Unit)
programs and commercial projects.
• Improve occupational, health and safety metrics.
MANAGEMENT’S DISCUSSION AND A NA LYS I S
Liability Management Unit
Business Lines
• Legacy Waste Management
2009–2010 Goals
• To manage nuclear legacy liabilities on behalf of the Government of Canada on AECL and other sites to ensure the safety of Canadians and
protect the environment.
2009–2010 Priorities
• Advancing decommissioning activities at the Whiteshell site to reduce liabilities and operational costs.
• Continuing to reduce health, safety and environmental risks at the Chalk River site through environmental remediation activities and removal of
redundant buildings, as specified in operating plan commitments.
• Advancing solutions for the immediate, near-term and long-term management of legacy and ongoing operational wastes.
2009–2010 Measures
• Nuclear Legacy Liabilities Program deliverable performance of 90%.
2009–2010 Significant Achievements and Progress
• Nuclear Legacy Liabilities Program deliverable performance was 87%.
Strategic Initiatives
Key Liability Management Unit strategic initiatives are:
• Ensure that necessary core competencies are available and robust.
• Establish and maintain integrated plans and facilities that support waste management requirements at Chalk River. This ensures
that facilities are in place to support business activities and ensure continued compliance with the Chalk River site licence.
• Achieve excellence in operations and capabilities by ensuring that the Liability Management Unit processes for Nuclear
Legacy Liabilities Program planning and delivery meet the Government’s needs and planned schedules and costs.
Operations
Major activities at Chalk River during the year included the decommissioning of various structures and monitoring and
surveillance of a number of facilities, buildings and waste management areas. A new approach was adopted for dealing with
radioactive liquids in aging tanks, which has reduced the decommissioning and waste management provision. As well, steady
progress was made in constructing a facility to retrieve historic corroded used research reactor fuels from aging storage
facilities; package and vacuum dry them; and store them in a new storage facility. The dismantling and removal of the
remaining foundations of a large wood-framed building containing several radiochemical laboratories was completed, as well
as the removal of several small buildings.
At Whiteshell, work continued on decommissioning the part of the shielded facilities that are no longer needed to support
decommissioning activities, and closure of the Underground Research Laboratory reached an advanced stage. The shaft seal at
the main subsurface fracture zone and the lower portion of the ventilation raise seal were installed. All redundant surface
boreholes were sealed.
26
ATO MI C ENERGY OF CANADA LIMITED
Financial Review
LIABILITY MANAGEMENT UNIT
($ millions)
Decommissioning funding
Expenses
Net income (loss)
Actual Results
2009–10
2008–09
$ 115
86
$ 29
$ 105
182
$ (77)
Decommissioning Funding
The Nuclear Legacy Liabilities Program entered its fourth year of activities to reduce the federal liabilities associated with
redundant shutdown buildings and environmental contamination.
The Liability Management Unit continued to make expenditures for ongoing decommissioning and waste management
activities at the Chalk River site. These expenditures increased over the previous year, largely as a result of planning
expenditures, projects related to groundwater treatment systems, and legacy lands.
Whiteshell decommissioning expenditures increased over the previous year as a result of site maintenance expenditures.
Decommissioning expenditures related primarily to site operations and the Underground Research Laboratories, which is
expected to be closed in March 2011.
The ongoing development of enabling facilities continued to comprise a significant portion of funded activities. Expenditures
remained consistent with the previous year, and progress was made on several initiatives during the year, including a Fuel
Packaging and Storage Facility. This facility allows for remediation of old storage areas and improves the management and
storage of fuel wastes, and various other enabling facilities at the Chalk River and Whiteshell sites that facilitate processing
and storage of nuclear waste.
Expenses
Expenses decreased to $86 million (2008–2009: $182 million), mainly as a result of
significant adjustments to the decommissioning and waste management provision
related to a change in the implementation strategy for the remediation of stored liquid
waste. The liability is reviewed annually and adjusted to reflect revised costs and
schedules. Accretion and other expenses of $158 million was relatively consistent
with the previous year (2008–2009: $155 million). Overall, the Liability Management
Unit reported a net income of $29 million (2008–2009: $77 million net loss).
Decommissioning Liability
2009–2010
$3,085 million
Chalk River Decommissioning (27%)
Whiteshell Decommissioning (14%)
Reactors (5%)
Enabling Facilities (51%)
Support and Other Costs (3%)
3%
Outlook
The Liability Management Unit manages decommissioning and waste management
liabilities on behalf of the Government of Canada. Government funding for the initial
$513 million five-year start-up phase of the long-term (70-year) strategy will end in
March 2011. Major activities underway and continuing through 2010–2011 include
continued remediation of radioactive liquid and research fuel wastes stored in aging
structures, and the ongoing decommissioning of Whiteshell Laboratories and aging
infrastructure at the Chalk River site. The Liability Management Unit management has
begun consultations with Natural Resources Canada to understand the requirements for
the next phase of the program, which will require a funding commitment from
the Government.
MANAGEMENT’S DISCUSSION AND A NA LYS I S
Funding recognized for the Liability Management Unit during the year was $115 million, compared to $105 million the previous
year. Associated expenditures reduced the decommissioning and waste management liability.
27%
51%
14%
5%
2010–2011 Major Priorities and Deliverables
The Liability Management Unit will continue to progress with program schedules as agreed with Natural Resources Canada.
Ongoing activities include construction of enabling facilities, various waste monitoring and remediation activities, long-term
planning related to decommissioning of buildings, program funding renewal, and storage facilities.
2 010 A NNUA L FI NA NCI A L RE PO RT
27
Consolidated Cash Flow and Working Capital
SOURCE AND USES OF CASH
($ millions)
Cash from (used in) operating activities
Cash used in investing activities
Cash from financing activities
MANAGEMENT’S DISCUSSION AND A NA LYS I S
Cash and cash equivalents
Increase (decrease)
Balance at beginning of the year
Balance at end of the year
Actual Results
2009–10
$
1
(129)
143
15
33
$ 48
2008–09
$ (39)
(138)
155
(22)
55
$ 33
Operating Activities
Operating activities resulted in a net cash inflow of $1 million compared to a net cash outflow of $39 million in 2008–2009. AECL received
funding of $915 million in 2009–2010, representing an increased level of Government support from prior years. The increased level of
funding was required to support a number of activities including the ongoing commercial life extension projects within the CANDU Reactor
Division and the Research and Technology Division’s NRU return-to-service project.
Investing Activities
Investing activities involved a net outlay of $129 million compared to $138 million in the previous year. Continued investment in the ACR-1000
program largely contributed to this outflow, which was down from the previous year as Government funding was reallocated to the ongoing
life extension projects. Project New Lease undertook significant investments, including the completion of an administrative building and
various site refurbishment and equipment purchases. The investment program, which is ongoing, aims to renew infrastructure at the Chalk
River site and ensure safe operations at the nuclear facility.
Financing Activities
Financing activities generated proceeds of $143 million (2008–2009: $155 million), consisting of Parliamentary appropriations for capital
expenditures associated with ACR-1000 development and infrastructure development at the Chalk River site, including Project New Lease
and the Isotope Supply Reliability Program.
Overall, AECL’s year-end closing cash position increased to $48 million from the previous year’s level of $33 million.
Off-Balance Sheet Arrangements
In the normal course of business, AECL enters into the following Off-Balance Sheet arrangements:
Bank Guarantees and Standby Letters of Credit
These instruments are used in connection with performance guarantees on major contracts. The guarantees generally relate to project
and product performance and advance payments. In addition, AECL guarantees that certain projects will be completed within a
specified time, and if the Corporation does not fulfill its obligations, it will assume responsibility for liquidated damages. The aggregate
amount of AECL’s potential exposure through liquidated damages ($99 million) and guarantees ($500 million) as at March 2010 was
$599 million (2008–2009: $639 million). Management has assessed the impact of liquidated damages penalties on the active life
extension projects and incorporated it in the calculation of liabilities in the financial statements.
Indemnification Arrangements
These arrangements are part of the standard contractual terms to counterparties in transactions such as service agreements, sale and
purchase contracts. These indemnification agreements may require AECL to compensate the counterparties for costs incurred as a result
of certain events. The nature of these indemnification agreements prevents AECL from making a reasonable estimate of the likely
maximum amount to be paid out by the Corporation. Management does not expect these arrangements to have a material current or
future effect on the consolidated financial statements of the Corporation.
28
ATO MI C ENERGY OF CANADA LIMITED
Management of Risks and Uncertainties
AECL recognizes risk management as an integral part of sound strategic planning and corporate governance.
AECL’s Board of Directors is responsible for overseeing the management of risks at AECL. The Chief Executive Officer is accountable to
the Board of Directors for all risk-taking activities and risk management programs. The Corporation’s internal and independent auditors
report directly to the Audit Committee, in line with best practices. AECL has established processes to facilitate wrongdoing disclosure
company-wide.
The Risk Management Oversight Council, reporting to the CEO and Audit Committee, is tasked with identifying and prioritizing significant
risks and opportunities, as well as directing action to mitigate or exploit these events. This group is also responsible for the periodic review
and updating of all risk management procedures, including those related to pursuing new business and managing major projects.
AECL has classified risks in the following categories:
RISK CATEGORIES
LIQUIDITY
PERFORMANCE
TECHNOLOGY
SUPPLY CHAIN
HUMAN RESOURCES
LICENSING
COMPLIANCE
MARKET
BUSINESS INTERRUPTION
SECURITY
IMPACT
FINANCIAL
SAFETY
QUALITY
R E P U TAT I O N
Liquidity
Liquidity risk relates to AECL’s ability to fund capital improvement projects and growth opportunities, and to meet contractual and
regulatory compliance obligations.
MANAGEMENT’S DISCUSSION AND A NA LYS I S
AECL’s Risk Framework
Long-Term Government of Canada Funding
A major risk facing the Corporation is related to securing a sustainable source of funds to safely maintain Canada’s nuclear
capabilities and increase commercial value.
Working Capital Requirements
Major Contracts
A significant portion of AECL’s commercial revenue is derived from project management and product development activities that
span several years from inception to completion. Life extension and new build are mega-infrastructure projects and the
complexity and timing of negotiations creates challenges to achieving estimated contract-effective dates, and can significantly
impact working capital requirements.
AECL reduces these risks by negotiating contracts that maintain positive cash flow throughout the project. AECL’s Services
business also provides a consistent stream of income.
Heavy Water Funds
Under an agreement with the Government of Canada, AECL is required to return a portion of heavy water funds to the
Government. This issue remains unresolved, and AECL currently retains annual proceeds related to the sale or lease of heavy
water and uses these proceeds to support operational requirements, as indicated in the Corporate Plan that was approved for
the 2009–2010 planning period. If these proceeds must be returned to the Government of Canada, a new source of long-term
funding will be needed.
Payment Delays
AECL’s cash position can be significantly affected by the timing of payments on major projects, and is dependent on a mix of
business activity. Major project payments are triggered by the attainment of milestones and if delays or disputes arise, payments
can be withheld, but the project must continue. While AECL mitigates this risk by negotiating an appropriate payment structure
within contracts, the Corporation operationally requires responsive funding mechanisms to better address this risk.
2 010 A NNUA L FI NA NCI A L RE PO RT
29
Operational and Capital Costs
AECL manages large projects that are susceptible to increased costs, and consequently may severely affect AECL’s working
capital position. AECL has a history of operating with current liabilities in excess of current assets, and short-term needs are
addressed through funding.
AECL continued to experience increased costs on several major projects, including its fixed price projects, ACR-1000 development
and health, safety, security and environmental requirements at Chalk River, which, at times, negatively impacted its cash position.
During 2009–2010, AECL received an increased level of funding to stabilize its working capital position.
Performance
MANAGEMENT’S DISCUSSION AND A NA LYS I S
Performance risk relates to meeting contractual requirements, cost, schedule and stakeholder expectations.
There are considerable risks in managing AECL’s major projects, which include ensuring that project execution is in accordance with the
client’s contractual requirements and changes are managed as a result of economic factors and Government decisions. Failure to meet
contractual requirements may result in legal and financial implications. In addition, products and services may require special guarantees
or acceptance of completion, which could ultimately result in unplanned costs.
AECL seeks to manage these risks through project control mechanisms, rigorous review of contracts and ongoing monitoring and
evaluation of progress. In addition, maintaining comprehensive insurance coverage for various aspects of a given project and developing
effective relationships with related stakeholders are key components to a successful project management process.
During the year, AECL continued to experience significant financial setbacks on several life extension projects, arising from technical and
operational challenges. Consequently, maintaining original cost and schedule targets has not been possible, and additional Government
funding was requested to support the CANDU Reactor Division. Mitigation strategies have been put in place for known risks, lessons
learned are being applied to more recently-awarded projects and AECL has increased its oversight on all of its projects. The Corporation
remains committed to standing behind its technology and delivering on its contractual commitments.
The Project New Lease and Nuclear Legacy Liabilities Program are susceptible to performance risk. As with any project, there is a risk that
these projects could experience increased schedule delays, supply chain performance issues and challenges relating to timely access to
human resources. These risks are being mitigated through the implementation of project management best practices, enhanced risk
management practices, and increased emphasis on outsourced supply.
Technology
Technology risk relates to the ability to advance technology and deliver our product and services to meet functional, economic or licensing
requirements.
Commercialization of the ACR-1000 and EC6
Timely completion of the ACR-1000 and EC6 development programs is crucial to AECL meeting the new-build market window. To be
successful, the products must meet functionality, cost and performance parameters as well as licensing requirements. Furthermore,
market timing, continued support from the federal government and customers, licensing preparation and an appropriate financing
model and delivery structure are critical success factors.
AECL manages the associated risks by closely monitoring progress and carefully managing available resources in accordance with
market conditions.
AECL continues to focus its commercialization effort for the ACR-1000 in Canada, as international success with a new reactor is
optimal when based on a solid market position in the home country. The support of the Shareholder is crucial to successfully
completing the ACR-1000 development program and possibly being chosen as Ontario’s preferred nuclear vendor.
AECL is focusing its commercialization effort for the EC6 on international markets that prefer a natural uranium reactor, a mid-sized
reactor, and/or alternative fuel cycles. Support of the Shareholder is crucial to successfully complete the EC6 technology
development to meet delivery requirements.
While the ACR-1000 and EC6 are an evolution of the CANDU 6, the extent to which the reactors meet construction and operating
performance goals will only be known with certainty once the reactors are completed and operational. There is also a risk that
actual performance will not meet expectations and costs will escalate beyond budget. AECL’s competitors face the same risk.
30
ATO MI C ENERGY OF CANADA LIMITED
Supply Chain
Supply chain risk relates to the availability of qualified suppliers to support AECL’s activities, work stoppage, or failure by other
subcontractors or suppliers to perform according to contractual terms.
AECL’s ability to build upon its supply chain is crucial to its ability to meet contractual requirements. In the context of major commercial
contracts, unstable supply could result in contractual penalties, legal implications and associated costs that could affect project margins
and AECL’s financial position. AECL also subcontracts a portion of its work to third parties. As a result, third party performance issues
may affect AECL’s ability to perform and achieve anticipated profitability on a project.
AECL manages these risks by developing strategic alliances, adhering to stringent procurement and management practices, and obtaining
performance guarantees.
Human Resources
This risk relates to labour disruptions, access to skilled resources at various locations and maintaining adequate levels of skilled human
resources to meet customer requirements and advance technology capability.
Considerable resources are required to execute the Isotope Supply Reliability Program, Project New Lease, the Nuclear Legacy Liabilities
Program and existing and anticipated new-build and life extension projects. The human resource risk stems from an increasing demand for
resources in the nuclear industry worldwide and changing demographics of scientific and technical resources industry-wide. Insufficient
personnel and technical capability could affect AECL’s business objectives and financial results.
To help mitigate these risks, AECL is enhancing its resource planning and development processes, focusing on the development of staff in
required technical and managerial disciplines. AECL has put in place integrated training programs; established links with post-secondary
institutions to encourage careers in the nuclear industry; is creating relationships with partners to provide complementary skills; and is
recruiting in all fields to ensure sufficient skilled resources are available to deliver on commitments.
Licensing
MANAGEMENT’S DISCUSSION AND A NA LYS I S
A strong supply chain is present in Canada through the Organization of CANDU Industries. AECL continues to develop a robust supply
chain by enhancing its organizational capabilities to ensure competitive supply is available globally.
The Licensing risk relates to obtaining and maintaining licences for nuclear facilities and new technologies.
The stringent licensing requirements contribute to the safe and secure operation of nuclear facilities in Canada. However, they also
contribute to an increased project timeframe and associated compliance and administrative costs.
AECL’s nuclear facilities at its Chalk River site require nuclear related licences. Any inability to acquire licences for new technologies (such
as the ACR-1000) and/or existing technologies, such as the NRU, would severely affect AECL’s business prospects.
AECL mitigates licensing risk through extensive monitoring of all licensing activities on an ongoing basis.
A significant investment in AECL’s Chalk River nuclear programs and facilities is required to reduce operational and commercial risks,
in addition to increased CNSC oversight and licence conditions. The Government has provided funding during 2009–2010 and has
committed funding for 2010–2011 to support infrastructure development and related activities through the Project New Lease program.
AECL is working proactively with the CNSC to expedite the pre-licensing process for its reactor technology. The CNSC has completed its
Pre-Project Design Review of the ACR-1000, concluding that there are no fundamental barriers to licensing the ACR-1000 in Canada. The
Generic Preliminary Safety Analysis Report was completed in September 2009, to be followed by the release of the Preliminary Safety
Analysis Report Supplemental in June 2010. The CNSC completed Phase 1 of the EC6 Pre-Project Design Review in March, concluding
that, at an overall level, the design intent is compliant with CNSC regulatory requirements and meets the expectations for new nuclear
power plant designs in Canada.
Compliance
Compliance risk relates to maintaining compliance with applicable laws, regulations and standards.
Applicable Laws and Regulations Related to Nuclear Facilities and Technologies
AECL is subject to stringent regulations in the areas of health, safety, security and environment. Failure to comply with regulations
could result in significant financial penalties and ultimately lead to licence suspension, thereby affecting AECL’s ability to operate its
nuclear facilities.
2 010 A NNUA L FI NA NCI A L RE PO RT
31
AECL manages this risk by ensuring and assessing compliance with all applicable national and international technical quality
assurance standards and the relevant aspects of the Nuclear Safety and Control Act and its regulations.
Furthermore, AECL has implemented several nuclear compliance programs that specifically address the deployment of due
diligence processes and associated resources necessary to comply with all applicable laws and regulations.
Capability of Research Facilities
AECL’s research laboratories operate major facilities, including reactors, experimental loops, shielded facilities and waste
management plants. These are used to conduct research and support commercial activities, including the isotope business.
Facilities are subject to applicable laws and regulations relating to safety and environmental matters.
MANAGEMENT’S DISCUSSION AND A NA LYS I S
AECL seeks to manage the safety and environmental risks associated with its facilities through its Safety Management System,
which includes numerous program controls, such as stringent safety reviews and audits. Where a shortfall is identified, appropriate
corrective action plans are put in place. These controls provide assurance of compliance with all applicable laws and regulations.
In May 2009, AECL shut down the NRU for repairs, which impacted the production of medical isotopes. During the year, AECL
embarked on a Government-funded program to repair and return the NRU to service. Work under the Isotope Supply Reliability
Program, introduced in 2008–2009, continued to address the Integrated Safety Review of the NRU, an activity that supports the
renewal of the Chalk River Laboratories operating licence beyond its October 2011 expiry date. The NRU is expected to be returned
to service in 2010–2011. As with any technology, the NRU’s advanced age creates challenges for reliable operation. A rigorous
program of maintenance is in place to reduce the likelihood of future service disruptions.
AECL’s Chalk River site infrastructure is aging and various related risks and hazards have been identified. During the year, funding
was provided for Project New Lease, which is a long-term plan specifically designed to support the safe, secure and viable operation
of AECL’s Chalk River site. The plan is subject to continued Government funding.
Market
Market risk relates to factors such as competition, political stability, public acceptance, offshore operations and third party credit.
Decision Cycles and Competitor Size
One of the major business risks faced by the nuclear industry is the very long decision cycle for new major projects. Furthermore,
demand levels for AECL’s products and services are affected by factors such as technology development, economic and social
trends, and government policy initiatives.
In the project and services businesses, AECL also competes with publicly traded corporations that have large non-contestable
home markets and the ability to raise debt and form equity partnerships.
To minimize competitive threats, AECL is establishing new strategic business alliances, increasing its full service capability, pursuing
the reactor life extension business, commercializing newly-developed technologies and carefully managing its portfolio of existing
product lines. With regard to human resources, AECL has programs in place to retain and build core competencies to support
AECL’s corporate objectives and business opportunities.
In 2009–2010, AECL established and further developed strategic technology and business alliances, with the intention of expanding
its global reach. These alliances allow AECL to better meet the technology and business requirements of markets in countries such
as China and India.
Last year, the Ontario government suspended its Request for Proposals process for the construction of two nuclear reactors in
Darlington, Ontario. While Ontario’s decision delays the potential first sale of an ACR-1000 and increases market risk, AECL is
focused on its development program, managing its skilled resources and continuing its marketing efforts in Canada as an initial
step to entering the global market.
Public Perception of Nuclear Technology
Public perception is a risk that has the potential to impact AECL’s nuclear-related activities and hinder the attainment of strategic
objectives. Adverse public perception could result in AECL’s delaying or ceasing certain business activities and could affect AECL’s
reputation. In Canada, public consultations are a mandatory part of the environmental assessment process. Nuclear-related
environmental assessments are generally initiated through CNSC licensing requirements.
AECL mitigates this risk through proactive information programs that inform the public about safety measures and risks associated
with nuclear activities. Also, AECL and organizations with which it has affiliations, such as the Canadian Nuclear Association, inform
the public, through various means, about nuclear energy benefits and conduct surveys to obtain public feedback.
32
ATO MI C ENERGY OF CANADA LIMITED
To reassure the public that AECL places the highest priority on the health and safety of its workers and the Canadian public, and on
protecting the environment, AECL maintains an Environmental Stewardship Council to enhance communications with key area
stakeholders and the communities surrounding its operations near Chalk River, Ontario. The Corporation has also enhanced its
voluntary public disclosure of events relating to its Chalk River Laboratories, including routine emissions and non-routine items or
events that may periodically occur.
Enhanced communication procedures also include the implementation of policies addressing business conduct and ethics,
developing business recovery plans, ensuring transparency and practicing good corporate governance.
Isotope Supply
Business Interruptions
AECL is subject to risks associated with operations disruptions. These risks may arise from a number of circumstances, such as regulatory
obligations, labour disputes, fire, weather, facility malfunction and other risks associated with facilities and business operations. AECL
reduces these risks by using an extensive management system and conducting regular audits.
A prudent program of equipment and facility maintenance supports ongoing operation of AECL’s facilities. The NRU is a 50-plus-year-old
reactor operating beyond its expected lifespan. In May 2009, a heavy water leak was discovered in the NRU reactor vessel, resulting in an
extended shutdown of the NRU to undergo repairs. As a result, isotope production and various research and development activities were
curtailed. Repairs were ongoing at year-end and the NRU is expected to be returned to service in 2010–2011. AECL’s Project New Lease
and the Isotope Supply Reliability Program initiatives were designed to support the renewal of facilities, equipment and staff capabilities,
including those relating to the NRU. These initiatives will help mitigate further risks to the NRU and elsewhere on site. Government funding
for both programs has been committed to cover planned expenditures for 2010–2011.
Security
MANAGEMENT’S DISCUSSION AND A NA LYS I S
AECL placed the Dedicated Isotope Facilities, including the MAPLE reactors, in an extended shutdown state in June 2009. The
CNSC granted a licence in March 2010 to formalize the status of the facilities. Legal proceedings by MDS (Canada) Inc. against
AECL and the Government of Canada related to these facilities are ongoing and liabilities associated with this, if any, are not
determinable at this time.
This risk relates to the potential breach in security of AECL sites, facilities, physical assets, personnel and information.
Nuclear technology and facilities are subject to higher than normal levels of security. A breach in security could result in unauthorized
transfer of technology, disclosure of sensitive business information or harm to personnel. Such an event could result in safety implications
at nuclear facilities that could impact AECL’s nuclear-related licences and ability to competitively operate its business.
AECL reduces this risk through the implementation of rigorous security measures and maintains strict controls and operating procedures.
Impact of Risks
These risks could affect AECL with varying degrees of severity. They could also increase AECL’s financial costs and impact the
Corporation’s ability to operate facilities and perform on contracts as a result of issues-related safety factors or quality of work performed.
All have the potential to diminish AECL’s reputation in the industry.
Accounting Changes
Adoption of International Financial Reporting Standards in Canada
As a result of amendments to the scope of public sector accounting standards approved by the Public Sector Accounting Board
(PSAB) in October 2009, AECL is permitted to self-select between International Financial Reporting Standards (IFRSs) or Public
Sector Accounting as its basis of accounting. Due to the commercial nature of some of its business, AECL has determined that
IFRS is the more appropriate basis and will continue its conversion efforts with an implementation date of April 1, 2011.
AECL has an internal team dedicated to IFRS conversion. The team has begun the implementation phase.
2 010 A NNUA L FI NA NCI A L RE PO RT
33
Critical Accounting Estimates and Policies
AECL’s accounting policies are developed in accordance with Canadian Generally Accepted Accounting Principles. Critical accounting
policies are considered to be the most important in determining AECL’s financial condition and results. They also require professional
judgment by management. A summary of the Corporation’s significant accounting policies, including the critical policies discussed below,
is set out in the Notes to the Consolidated Financial Statements.
MANAGEMENT’S DISCUSSION AND A NA LYS I S
Revenue Recognition
AECL generates a significant portion of its revenue from long-term contracts. This revenue is recognized using the percentage of
completion method, whereby revenue is recorded as related costs are incurred, relative to estimated total contract costs. The nature of
this accounting method is such that refinements of the estimating process for changing conditions and new developments are continuous.
Accordingly, revisions in cost and earnings estimates throughout the duration of a contract term are reflected in the period in which the
need for revision becomes known. Additionally, losses on long-term contracts are recognized in the period in which they are identified, and
are based upon the anticipated excess of contract costs over the related contract revenues. Any such losses are recorded as a
component of cost of sales. Revenue from Services sales is recorded when services are rendered and goods are shipped. Revenue from
heavy water shipments is recognized when the shipment is delivered in accordance with the requirements of the contract.
Asset Impairment
AECL reviews its long-lived assets for impairment whenever circumstances indicate that the carrying amount of the asset may not be
recoverable. Determination of recoverability is based on an estimate of undiscounted future cash flows, and measurement of an
impairment loss is based on the fair value of the assets. Estimated undiscounted future cash flows reflect management’s best estimates
and changes in those estimates could materially affect the carrying amount of the long-lived assets. As a result of the asset impairment
review, no major assets required an impairment write-off during the year.
Heavy Water Inventory
Heavy water inventory is recorded as a long-term asset as the lead-time required in relation to future reactor sales exceeds one year.
A provision has been made for detritiation and upgrading of the inventory.
Parliamentary Appropriations
Parliamentary appropriations that are not in the nature of contributed capital are recorded as funding in the year for which they are
appropriated, except as follows:
• Appropriations restricted by legislation and related to expenses of future periods are deferred and recognized as funding in the period in
which the related expenses are incurred.
• Appropriations used for operating activities are recognized as funding in the Consolidated Statement of Operations to offset costs
incurred.
• Appropriations used for the purchase of property, plant and equipment are deferred and amortized on the same basis as the related
asset. The balance of deferred capital funding, as at March 2010, amounted to $147 million compared to $105 million in the previous year.
Commencing in 1996–1997, and pursuant to a 10-year arrangement with the Treasury Board for funding decommissioning activities, AECL
retains the net proceeds from the sale or lease of Government-funded heavy water inventory. This funding arrangement, however, expired
on April 1, 2006, and an amount equivalent to the proceeds has been recorded as a provision on AECL’s Consolidated Balance Sheet.
Decommissioning and Waste Management
Decommissioning and waste management costs are recorded as a long-term liability. The liability is recorded based on the discounted
value of the estimated future decommissioning and waste management expenditures to the extent that they can be reasonably estimated.
The provision is reviewed annually to reflect actual expenditures incurred and changes in management’s estimate of the future costs and
timing thereof. The liability disclosed includes waste generated after March 31, 2006, for which AECL is financially responsible.
34
ATO MI C ENERGY OF CANADA LIMITED
Management’s Responsibility
These systems and practices are also designed to provide
reasonable assurance that transactions are in accordance with
Part X of the Financial Administration Act (FAA) and its regulations,
as well as the Canada Business Corporations Act, the articles, and
the by-laws and policies of the Corporation and its subsidiaries.
The Corporation has met all reporting requirements established by
the FAA, including submission of a Corporate Plan, an operating
budget, a capital budget and this Annual Report. The Corporation’s
internal auditor has the responsibility of assessing the management
systems and practices of the Corporation and its subsidiaries.
AECL’s independent auditors conduct an audit of the consolidated
financial statements of the Corporation and report on their audit to
the Minister of Natural Resources.
The Board of Directors is responsible for ensuring that management
fulfills its responsibility. To accomplish this, the Board has five
standing committees: Audit; Human Resources & Governance;
Project Risk Review; Science, Technology & Nuclear Oversight; and
Special Advisory Committee. The Audit Committee, composed of
independent directors, has a mandate for overseeing the
independent auditors, directing the internal audit function and
assessing the adequacy of AECL’s business systems, practices
and financial reporting. The Audit Committee meets with
management, the internal auditor and independent auditors on a
regular basis to discuss significant issues and findings, in
accordance with their mandate.
The independent auditors and internal auditor have unrestricted
access to the Audit Committee, with or without management’s
presence. The Audit Committee reviews the Consolidated Financial
Statements and the Management’s Discussion and Analysis report
with both management and the independent auditors before they
are approved by the Board of Directors and submitted to the
Minister of Natural Resources. The Chair of the Audit Committee
signs the audited financial statements.
MANAGEMENT’S RESPONSIBILIT Y
The consolidated financial statements, all other information
presented in this Annual Report and the financial reporting
process are the responsibility of management. These statements
have been prepared in accordance with Canadian generally
accepted accounting principles and include estimates based on
the experience and judgment of management. Where alternate
accounting methods exist, management has chosen those it
deems most appropriate in the circumstances. The Corporation
and its subsidiaries maintain books of account, financial and
management control, and information systems, together with
management practices designed to provide reasonable assurance
that reliable and accurate financial information is available on a
timely basis, that assets are safeguarded and controlled, that
resources are managed economically and efficiently in the
attainment of corporate objectives, and that operations are
carried out effectively.
Hugh MacDiarmid
President and Chief Executive Officer
June 18, 2010
Kent Harris
Chief Financial Officer
June 18, 2010
2 010 A NNUA L FI NA NCI A L RE PO RT
35
Auditors’ Report
To the Minister of Natural Resources
AUDITORS’ REPORT
We have audited the consolidated balance sheet of Atomic Energy
of Canada Limited (the “Corporation”) as at March 31, 2010 and the
consolidated statements of operations, changes in shareholder’s
deficit, comprehensive income (loss) and cash flow for the year
then ended. These financial statements are the responsibility of the
Corporation’s management. Our responsibility is to express an
opinion on these financial statements based on our audit.
We conducted our audit in accordance with Canadian generally
accepted auditing standards. Those standards require that we plan
and perform an audit to obtain reasonable assurance whether the
financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the
amounts and disclosures in the financial statements. An audit also
includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall
financial statement presentation.
In our opinion, these consolidated financial statements present
fairly, in all material respects, the financial position of the
Corporation as at March 31, 2010 and the results of its operations
and its cash flows for the year then ended in accordance with
Canadian generally accepted accounting principles. As required by
the Financial Administration Act, we report that, in our opinion,
these principles have been applied on a basis consistent with that
of the preceding year.
Further, in our opinion, the transactions of the Corporation and of
its wholly-owned subsidiaries that have come to our notice during
our audit of the consolidated financial statements have, in all
36
ATO MI C ENERGY OF CANADA LIMITED
significant respects, been in accordance with Part X of the Financial
Administration Act and regulations, the Canada Business
Corporations Act, and the articles and by-laws of the Corporation
and its wholly-owned subsidiaries.
Pursuant to paragraph 132(2)(b) of the Financial Administration
Act, we wish to bring an other matter to Parliament’s attention.
Subsequent to year-end, on May 13, 2010, the Governor in
Council approved only the 2009–2010 portion of the Corporation’s
2009–2014 Corporate Plan. The Corporate Plan sets out the
strategic direction and revised operating and capital budgets for
the Corporation without making assumption as to the outcome of
any possible restructuring as described in Note 2 to the
Consolidated Financial Statements. This Plan is of particular
importance to the Corporation given the significance of
Government funding to major ongoing initiatives.
Sheila Fraser, FCA
Auditor General of Canada
Ottawa, Canada
June 18, 2010
Chartered Accountants, Licensed Public Accountants
Toronto, Canada
June 18, 2010
Consolidated Balance Sheet
As at March 31
2010
Assets
Current
Cash and cash equivalents (Note 4)
Accounts receivable and unbilled revenue
Current portion of long-term receivables (Note 6)
Inventory (Note 5)
$
47,833
121,774
19,028
30,365
2009
$
219,000
170,224
29,671
291,701
231,360
180,040
Long-term receivables (Note 6)
Trust fund (Note 7)
Heavy water inventory (Note 5)
Property, plant and equipment (Note 8)
Intangible assets (Note 9)
Liabilities
Current
Accounts payable and accrued liabilities
Customer advances and obligations
Current portion of provisions (Note 15)
Current portion of decommissioning and waste management provision (Note 12)
Current portion of long-term payables (Note 11)
Decommissioning and waste management provision (Note 12)
Provisions (Note 15)
Deferred capital funding (Note 10)
Deferred development funding (Note 10)
Deferred decommissioning and waste management funding (Note 16)
Employee future benefits (Note 14)
Long-term payables (Note 11)
33,196
116,717
17,977
25,325
193,215
189,364
26,729
294,004
190,594
96,255
$ 1,121,996
$
990,161
$
$
165,857
433,688
79,175
118,400
13,319
206,019
440,872
232,732
131,200
13,319
1,024,142
2,953,699
—
147,002
175,348
100,644
61,501
18,289
810,439
2,981,345
81,593
104,615
96,255
76,143
60,631
30,054
4,480,625
4,241,075
15,000
350,872
(3,724,501)
—
15,000
378,629
(3,644,642)
99
CONSOLIDATED FINANCIAL STATEMENTS
(thousands of dollars)
Commitments and contingencies (Notes 12 and 18)
Shareholder’s deficit
Capital stock
Authorized – 75,000 common shares
Issued
– 54,000 common shares
Contributed capital (Note 16)
Deficit
Accumulated other comprehensive income
(3,358,629)
$ 1,121,996
(3,250,914)
$
990,161
The accompanying notes are an integral part of these consolidated financial statements
Approved on behalf of the Board:
Peter Currie
Director
Hugh MacDiarmid
Director
2 010 A NNUA L FI NA NCI A L RE PO RT
37
Consolidated Statement of Operations
For the year ended March 31
(thousands of dollars)
CANDU Reactor Division
Revenue
Nuclear products and services
Interest on long-term receivables (Note 6)
Interest on investments and other (Note 4)
2010
$
321,639
12,363
1,907
335,909
346,000
100,000
346,000
100,000
889,922
766,020
889,922
766,020
(104,364)
(330,111)
28,994
28,994
23,745
24,494
CANDU Reactor Division net loss
(104,364)
(330,860)
Research and Technology Division
Revenue
Services
32,861
65,377
32,861
65,377
299,566
7,372
4,679
189,154
5,910
2,510
311,617
197,574
359,297
1,551
275,072
1,942
360,848
277,014
Expenses
Cost of sales and operating expenses
CANDU Reactor Division net (loss) before investment in ACR-1000
CONSOLIDATED FINANCIAL STATEMENTS
$
439,558
Funding
Parliamentary appropriations (Note 13)
Investment in ACR-1000 development
Parliamentary appropriations (Note 13)
Development costs (Note 9)
Funding
Parliamentary appropriations (Note 13)
Cost recovery from third parties and other
Amortization of deferred capital funding (Note 10)
Expenses
Cost of sales and operating expenses
Interest on long-term payables (Note 11)
Research and Technology Division net (loss) before Dedicated Isotope Facilities
(16,370)
(14,063)
Dedicated Isotope Facilities
Parliamentary appropriations (Note 13)
Expenses
21,198
9,430
66,646
57,957
Research and Technology Division net loss
(4,602)
Liability Management Unit
Funding (Note 13)
Decommissioning funding
Expenses (Note 12)
Revision in estimate and timing of expenditures
Accretion and other expenses
Liability Management Unit net income (loss)
Net loss
Amortization disclosure (Note 8)
The accompanying notes are an integral part of these consolidated financial statements
38
428,074
11,360
124
2009
ATO MI C ENERGY OF CANADA LIMITED
$
(5,374)
114,656
105,080
114,656
105,080
(72,485)
158,034
27,533
154,691
85,549
182,224
29,107
(77,144)
(79,859)
$
(413,378)
Consolidated Statement of Changes
in Shareholder’s Deficit
For the year ended March 31
CONTRIBUTED CAPITAL
(thousands of dollars)
2010
2009
Balance at beginning of the year
Transfer to deferred decommissioning funding (Note 16)
Transfer to repayable contributions (Note 16)
$
378,629
(24,501)
(3,256)
$
404,234
(24,501)
(1,104)
Balance at end of the year
$
350,872
$
378,629
DEFICIT
2010
2009
Balance at beginning of the year
Net (loss)
$ (3,644,642)
(79,859)
$ (3,231,264)
(413,378)
Balance at end of the year
$ (3,724,501)
$ (3,644,642)
ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)
(thousands of dollars)
2010
2009
Balance at beginning of the year
Other comprehensive (loss) income for the year
$
99
(99)
$
(219)
318
Balance at end of the year (Note 19)
$
—
$
99
Capital stock
$
15,000
$
15,000
Total Shareholder’s Deficit
$ (3,358,629)
$ (3,250,914)
CONSOLIDATED FINANCIAL STATEMENTS
(thousands of dollars)
The accompanying notes are an integral part of these consolidated financial statements
Consolidated Statement of
Comprehensive Income (Loss)
For the year ended March 31
(thousands of dollars)
Net loss
Other comprehensive income (loss)
Net (loss) gain on derivatives designated as cash flow hedges (Note 19)
Reclassification to income of gains on derivatives designated as cash flow hedges
2010
$
$
(198)
99
Other comprehensive (loss) income
Comprehensive loss
(79,859)
2009
103
215
(99)
$
(79,958)
(413,378)
318
$
(413,060)
The accompanying notes are an integral part of these consolidated financial statements
2 010 A NNUA L FI NA NCI A L RE PO RT
39
Consolidated Cash Flow Statement
For the year ended March 31
(thousands of dollars)
Operating activities
Cash receipts from customers
Cash receipts from Parliamentary appropriations
Cash receipts for decommissioning and waste management activities
Cash paid to suppliers and employees
Funds used for decommissioning activities
Interest received on investments (net)
2010
$
CONSOLIDATED FINANCIAL STATEMENTS
Cash from (used in) operating activities
$
660
Investing activities
Purchase of short-term investments
Sales and maturities of short-term investments
Investment in ACR-1000
Acquisition of property, plant and equipment and software
Cash used in investing activities
Financing activities
Proceeds from Government for capital funding
Proceeds from Government for development funding
Repayment of long-term payable
Cash from financing activities
Cash and cash equivalents:
Increase (decrease)
Balance at beginning of the year
564,713
398,218
102,466
(1,001,209)
(104,987)
1,905
(38,894)
—
—
(79,100)
(49,908)
(3,968)
14,027
(97,478)
(51,075)
(129,008)
(138,494)
53,979
89,006
—
59,700
96,255
(500)
142,985
155,455
14,637
33,196
(21,933)
55,129
Balance at end of the year
$
47,833
$
33,196
Supplemental disclosure of cash flow information
Interest and bank charges paid during the year
$
57
$
70
The accompanying notes are an integral part of these consolidated financial statements
40
501,431
658,879
113,324
(1,158,373)
(114,725)
124
2009
ATO MI C ENERGY OF CANADA LIMITED
Notes to the Consolidated Financial Statements
For the year ended March 31, 2010
1. The Corporation
Atomic Energy of Canada Limited (collectively AECL or the Corporation) was incorporated in 1952 under the provisions of the Canada
Corporations Act (and continued in 1977 under the provisions of the Canada Business Corporations Act), pursuant to the authority and
powers of the Minister of Natural Resources under the Nuclear Energy Act.
AECL conducts its business through two divisions: CANDU Reactor Division and the Research and Technology Division. These divisions
represent strategic business units established by senior management to facilitate the achievement of the Corporation’s long-term
objectives, to aid in resource allocation decisions and to assess operational and financial performance. The Research and Technology
Division includes the Liability Management Unit, which has the responsibility to manage the decommissioning and waste management
liability on behalf of the Government of Canada.
2. Restructuring
In November 2007, the Corporation’s Shareholder announced that it would initiate a review of AECL to determine whether AECL’s
structure as a Crown corporation best equips it, its employees and ultimately the Canadian nuclear industry, to participate fully in the
expanding global nuclear market. The review was conducted by the AECL Review Team at Natural Resources Canada, in consultation
with the Department of Finance and the Department of Justice, and with the collaboration of AECL and external financial advisors.
In May 2009, the Shareholder announced its decision to move forward with a restructuring of AECL, noting the distinct mandates,
resource and management needs of the two divisions of AECL: CANDU Reactor Division and the Research and Technology Division.
Financial advisors were engaged to develop a restructuring plan and to provide external financial advice.
In December 2009, the Shareholder invited investors to submit proposals for AECL’s commercial CANDU Reactor Division, in order to
restructure the Corporation. Proposals will be assessed based on how well they meet set objectives, including: ensuring that Canadians
have nuclear as a safe, reliable and economic clean energy option; controlling costs to the Government while maximizing the return on the
taxpayers’ investment; and positioning the nuclear industry in Canada to seize domestic and global opportunities. AECL management is
supporting the process. Ultimate sale of all or a portion of the CANDU Reactor Division is at the discretion of the Shareholder.
NOTES TO THE CONSOLIDATED FINANCIAL STATEM E NTS
The Corporation is a Schedule III Part I Crown corporation under the Financial Administration Act and an agent of Her Majesty the Queen
in Right of Canada. As a result, AECL’s liabilities are ultimately liabilities of Her Majesty in Right of Canada. The Corporation receives
funding from the Government of Canada and is exempt from income taxes in Canada.
Prior to the close of the fiscal year, the Corporation submitted its 2009–2010 to 2013–2014 Corporate Plan. Subsequent to year-end, on
May 13, 2010, Governor in Council approval was obtained for the 2009–2010 planning period. The Corporate Plan and these financial
statements have been prepared without making any assumptions as to the outcomes of the restructuring. As such, they do not
contemplate any changes to AECL’s existing activities. Should Government decisions with respect to AECL’s restructuring affect the
Corporation’s structure, mandate or future financial situation, there may be a need to revisit the strategies outlined in that Plan and the
related financial statement presentation (Note 3).
AECL’s Research and Technology Division, which includes the Chalk River Laboratories, is not included in the sale process. The
Shareholder has indicated it will make a decision at a later date on the best management structure for that Division.
3. Significant Accounting Policies
The Corporation’s financial statements are prepared in accordance with Canadian generally accepted accounting principles (GAAP). The
significant accounting policies are:
a) Basis of Presentation
These consolidated financial statements include the accounts of the Corporation’s wholly-owned subsidiaries, AECL Technologies Inc.,
incorporated in the state of Delaware, U.S.A. in 1988, AECL Technologies B.V., incorporated in the Netherlands in 1995, and its interest in a
Trust Fund for which the Corporation is the primary beneficiary. All inter-company transactions have been eliminated.
In addition, the Corporation’s financial statements do not include any adjustments that would be required to the carrying values of the
assets and liabilities, the reported net income/loss for the year, and the balance sheet classification if it was determined at a future date
2 010 A NNUA L FI NA NCI A L RE PO RT
41
that any of the existing activities of the Corporation would meet the criteria to be classified as held for sale. The application of such criteria
would require that the assets and liabilities be written down to the lower of carrying value and fair value less costs to sell and such a writedown may be material and would depend on market conditions on the date such criteria are met.
b) Use of Estimates
The Corporation’s financial statements include estimates and assumptions made by management that affect the amounts reported in the
financial statements and accompanying notes. Estimates are based on a number of factors, including historical experience, current events
and actions that the Corporation may undertake in the future, and other assumptions that management believes are reasonable under the
circumstances.
NOTES TO THE CONSOLIDATED FINANCIAL STATEM E NTS
Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period
in which the estimate is revised if the revision affects only that period or in the period of the revision and future periods if the revision
affects both current and future periods.
Some estimates require a high level of judgment. Significant areas of judgment and estimates are: valuation of heavy water inventory, costs of
future decommissioning and waste management, future contract costs, revenue, fair value of derivatives, provisions, employee future benefits
provision, research and development costs and amortization of property, plant and equipment and intangible assets. Actual results may
materially differ from these estimates.
Management bases its estimate of contract revenues and costs on the latest available information, which includes detailed contract
valuations. In many cases the results reflect the expected outcome of long-term contractual obligations which span more than one
reporting period. Contract revenues and costs are affected by a variety of uncertainties that depend on the outcome of future events and
often need to be revised as events unfold and uncertainties are resolved. The impact of the changes in accounting estimates is then
reflected in the ongoing results.
The most significant judgments and estimates impacting revenue recognition are required for the four fixed price contracts in which the
Corporation is completing the life extension of existing CANDU reactors. The accuracy of the Corporation’s revenue and Consolidated
Statement of Operations in a given period is largely dependent on the accuracy of its estimates of the cost to complete each of these
projects. There are a number of factors that can contribute to changes in estimates of contract cost and profitability. The most significant
of these include the completeness and accuracy of the original bid, costs associated with added scope changes, complex technical
issues arising from the nature of these first-of-a-kind projects, subcontractor performance issues, changes in productivity expectations,
site conditions that differ from those assumed in the original bid (to the extent contract remedies are unavailable) and the availability and
skill level of workers in the geographic location of the project. Incorporated in the Corporation’s forecasts are the best estimates of the
financial impact of these project uncertainties prior to their resolution which may vary materially from the actual amounts realized.
Substantial changes in cost estimates, particularly in these larger, more complex projects have had, and can in future periods have, a
material effect on the Corporation’s Consolidated Statement of Operations.
When accounting for provisions for litigation and other items, the Corporation has taken internal and external advice in considering known
legal claims made by or against the Corporation. It carefully assesses the likelihood of success of a claim or action. Appropriate provisions
are made for legal claims or actions against the Corporation on the basis of likely outcome, but no provisions are made for those which in
the view of management are unlikely to succeed or cannot be reliably determined.
c) Cash, Cash Equivalents and Short-Term Investments
Investments with maturities of 90 days or less from the date of purchase are presented as cash equivalents. Short-term investments have
original maturities greater than 90 days but less than one year. Cash equivalents and short-term investments are recorded at fair value on
the date of trade.
d) Trust Fund
Long-term investments in the Trust Fund established pursuant to the Nuclear Fuel Waste Act are measured at fair value on the date of
trade. Interest earned is netted against Accretion and Other expenses on the Consolidated Statement of Operations since the
Decommissioning and Waste Management provision includes the obligations under the Act.
e) Foreign Currency Translation
Transactions denominated in a foreign currency are translated into Canadian dollars at the exchange rate in effect at the date of the
transaction. Monetary assets and liabilities outstanding at the Balance Sheet date are adjusted to reflect the exchange rate in effect at that
date. Exchange gains and losses arising from the translation of foreign currencies are included in income.
42
ATO MI C ENERGY OF CANADA LIMITED
f) Financial Instruments
Derivative Financial Instruments
The Corporation enters into foreign exchange forward contracts with major financial institutions to manage its exposure to changes in
exchange rates arising from contractual terms and ongoing business operations. The Corporation’s policy precludes it from using
derivative financial instruments for trading or speculative purposes. All derivative instruments are recorded on the Consolidated Balance
Sheet at fair value. Derivatives with a positive fair value are included in accounts receivable and derivatives with a negative fair value are
included in accounts payable and accrued liabilities.
Comprehensive Income
Comprehensive income consists of net income and other comprehensive income (OCI). This category includes changes in the fair value of
the effective portion of cash flow hedging instruments. Amounts are recorded in OCI until the criteria for recognition in the Consolidated
Statement of Operations are met.
Recognition and Measurement
Category
Financial assets and liabilities held for trading
Financial assets held to maturity
Available for sale financial assets
Loans and receivables
Other financial liabilities
•
•
•
•
•
•
•
•
•
•
Financial Instruments
Cash and cash equivalents
Trust fund
None
None
Accounts receivable
Long-term receivables
Accounts payable and accrued liabilities
Customer advances and obligations
Provisions
Long-term payables
Loans and receivables and other financial liabilities are recorded at fair value upon initial recognition and are subsequently carried at
amortized cost using the effective interest method. Accounts receivable are reviewed on an invoice by invoice basis to establish the
provision for bad debts.
Financial assets and liabilities held for trading are recorded at fair value at the Balance Sheet date based on instruments with quoted
market prices. Gains and losses arising from changes in fair value are recognized in revenue and/or cost of sales and operating expenses
for the period in which they occur, except in the case of derivative instruments designated as hedges in a cash flow hedging relationship
(as discussed below). Transaction costs are expensed as incurred for financial instruments classified or designated as held for trading.
NOTES TO THE CONSOLIDATED FINANCIAL STATEM E NTS
The following table presents the classification of AECL’s financial instruments into various categories:
AECL classifies the investment in the Nuclear Fuel Waste Act Trust Fund as held for trading (measured at fair value) as the Fund Manager
is permitted to trade within the approved investment guidelines to generate adequate returns.
The Corporation formally documents all relationships between hedging instruments and hedged items, as well as its risk management
objective and strategy for undertaking various hedge transactions. This process includes linking all derivatives to specific assets and
liabilities on the Consolidated Balance Sheet or to specific firm commitments or forecasted transactions. The Corporation also formally
assesses, both at the hedge’s inception and on an ongoing basis, whether the derivatives that are used in hedging transactions are
effective in offsetting changes in fair values or cash flows of hedged items.
Hedge accounting is applied when a derivative instrument is designated as a hedge and is expected to be effective throughout the life of
the hedged item. The effective portion of the change in fair value of such a derivative instrument is recorded in OCI while the ineffective
portion is recognized immediately in net income. Any unrealized gain or loss on effective foreign exchange hedges is recognized in OCI.
Any ineffective portion of the unrealized gain or loss on hedging is recognized immediately in net income. When a derivative hedging
relationship expires, the designation of a hedging relationship is terminated, or a portion of the hedging instrument is no longer effective,
any associated gains or losses included in accumulated other comprehensive income (AOCI) are recognized in the current period’s
Consolidated Statement of Operations under Cost of sales and operating expenses. AECL only undertakes cash flow hedges.
g) Inventory
Heavy water, supplies and reactor fuel are valued at the lower of average cost and net realizable value.
2 010 A NNUA L FI NA NCI A L RE PO RT
43
h) Property, Plant and Equipment
Property, plant and equipment are recorded at cost less amortization. Construction in progress is not amortized until ready for use. When
complete, the constructed asset is transferred to the appropriate category and amortized at the rate applicable to that category. Asset
retirement costs are included as part of the related asset costs. Amortization is provided on a straight-line basis over the estimated useful
life of the asset, and on a usage basis for certain machinery and equipment used in commercial projects, as follows:
Land improvements
Buildings and reactors
Machinery and equipment
10 to 20 years
20 to 40 years
3 to 20 years
i) Impairment of Long-Lived Assets
NOTES TO THE CONSOLIDATED FINANCIAL STATEM E NTS
AECL reviews long-lived assets whenever events or changes in circumstances indicate that the carrying amount of such assets may not
be fully recoverable. An impairment loss, if any, is recognized when the carrying amount of a long-lived asset is not recoverable and
exceeds its fair value. Determination of recoverability is based on an estimate of undiscounted future cash flows. Fair value is calculated
using an expected present value technique.
j) Customer Advances and Obligations and Unbilled Revenues
Certain contracts may have revenue recognized in excess of billings (unbilled revenues), and other contracts may have billings in excess
of revenue recognized (customer advance payments). Unbilled revenues are recorded as an asset and included in accounts receivable.
Billings collected in excess of revenue recognized on contracts are recorded as a liability and recognized in accordance with the
Corporation’s revenue recognition policy.
k) Decommissioning and Waste Management Provision
AECL provides for its legal obligation to decommission nuclear facilities and to manage nuclear waste in order to satisfy regulatory
requirements. The obligation is recognized at fair value in the period when a reasonable estimate can be determined. As the provision is
recorded based on a discounted value of the projected future cash flows, it is increased annually to reflect the passage of time by
removing one year’s discount. The accretion is charged to expense in the Consolidated Statement of Operations.
The provision is reduced by actual expenditures incurred. The cost estimate is subject to periodic review and any material changes in the
estimated amount or timing of the underlying future cash flows are recorded as an adjustment to the provision. Upon settlement of the
liability, a gain or loss will be recorded. The provision includes future construction costs associated with certain enabling facilities, such as
disposal facilities for nuclear waste.
Decommissioning costs of new assets are added to the carrying amount and amortized over the related assets’ useful life.
l) Revenue Recognition
Long-Term Contracts and Service Contracts
Revenue is derived from sales of the Corporation’s services and products to clients. Revenue under certain long-term contracts, many of
which provide for periodic payments, is recognized under the percentage-of-completion method using the ratio of costs incurred to total
estimated costs as the measure of performance. When adjustments in contract value or estimated costs are determined, any changes
from the prior estimates are generally reflected in earnings in the current period. Anticipated losses on contracts are charged to earnings
when identified and determined to be likely. Penalties, including penalties for late delivery, are recorded as a reduction of total contract
revenue in the period in which the determination is made. Amounts for claims against customers are recognized when determinable and
realization is likely. Revenue under cost-reimbursement contracts is recorded as costs are incurred and include an estimate of fees earned.
Revenue under all other contracts is recognized when services are performed.
Supply of Product
Revenue is recognized when the product is shipped to the customer.
Interest Revenue
Interest entitlement under a long-term receivable is recognized as revenue over the term of the related agreement.
m) Research and Development
Research and development costs include direct and indirect costs associated with research and development activities, including:
salaries, wages and other personnel-related costs; the cost of materials and services consumed; amortization of equipment and facilities;
overhead support costs; and other costs such as amortization of patents and licences.
44
ATO MI C ENERGY OF CANADA LIMITED
Research expenses are expensed as incurred. Development charges are expensed unless they meet the following criteria for
capitalization: the product or process is clearly defined and the attributable costs are reliably identifiable and measurable; technical
feasibility of the product or process has been established; management intends to produce and either market or use the product or
process; a market for the product or process is clearly defined or its usefulness to the enterprise has been established; and adequate
resources exist, or are expected to be available, to complete the project.
Management monitors the progress of internal research and development projects. However, distinguishing between research and
development phases and costs requires a detailed analysis. Management also monitors whether the recognition requirements for
development costs continue to be met.
Amortization is provided on a straight-line basis over the estimated useful life of the development costs.
Research and development costs incurred to discharge long-term waste management and decommissioning obligations for which specific
provisions have already been made are charged against the related liability.
Parliamentary appropriations that are not in the nature of contributed capital are recorded as funding in the year for which they are
appropriated, except as follows: appropriations restricted by legislation and related to expenses of future periods are deferred and
recognized as funding in the period in which the related expenses are incurred; and appropriations used for the purchase of property,
plant and equipment or development costs are recorded as deferred capital funding or deferred development funding and amortized on
the same basis as the related asset. From 1997 to 2006, and pursuant to the 10-year arrangement for funding decommissioning activities,
the Corporation retained cash proceeds from the sale or lease of the portion of heavy water inventory that was funded by the Government
of Canada. The cash proceeds were transferred from contributed capital to deferred decommissioning funding and were then recorded as
funding in the Consolidated Statement of Operations as related expenditures were incurred. Proceeds from sales made during the 10-year
arrangement that are received after April 1, 2006 are transferred from contributed capital to deferred decommissioning funding.
o) Cost Recovery from Third Parties
AECL operates the Low-Level Radioactive Waste Management Office and the Port Hope Area Initiative Management Office through the
Research and Technology Division on a cost-recovery arrangement with Natural Resources Canada. Costs recovered under these
arrangements are recorded as cost recovery from third parties and are recognized as the related expenses are incurred.
p) Pension Plan
Employees of the Corporation participate in the Public Service Pension Plan (PSPP) administered by the Government of Canada. Although
the PSPP is a defined benefit plan, the Corporation is not required under present legislation to make contributions with respect to actuarial
deficiencies of the Plan. Therefore, contributions to the Plan are limited to those made by the employees and the Corporation on account
of current service. These contributions represent the total pension obligations of the Corporation and are expensed in the Consolidated
Statement of Operations on a current basis.
NOTES TO THE CONSOLIDATED FINANCIAL STATEM E NTS
n) Parliamentary Appropriations
q) Other Employee Future Benefits
The Corporation provides certain termination benefits for current employees pursuant to collective agreements and conditions of
employment. Other benefits include workers’ compensation claims for which the Corporation reimburses Human Resources and Social
Development Canada in accordance with the Government Employees Compensation Act for current payments billed by the provincial
compensation boards.
The Corporation accrues the cost of these employee future benefits over the periods in which the employees earn the benefits. The cost
of employee future benefits earned by employees is determined using the Unit Credit Actuarial cost method prorated on length of service
and management’s best estimate of salary escalation, retirement ages of employees and expected employee turnover.
r) Variable Interest Entities
A variable interest entity (VIE) is an entity in which the equity invested is not sufficient to permit that entity to finance its activities without
external support, or, in which the equity investors lack voting control, an obligation to absorb future losses, or the right to receive future
returns. The primary beneficiary of a VIE is the enterprise that will absorb a majority of the VIE’s expected losses, receive a majority of its
expected returns, or both. The Corporation has examined its business arrangements and has concluded that there is no significant interest
in VIEs with the exception of the Trust Fund, which has been consolidated.
2 010 A NNUA L FI NA NCI A L RE PO RT
45
s) Adoption of Accounting Standards
Goodwill and intangible assets
On April 1, 2009, AECL adopted Section 3064 of the CICA Handbook, “Goodwill and Intangible Assets” which superseded Section 3062,
“Goodwill and Other Intangible Assets” and Section 3450, “Research and Development Costs”.
The standard defines the recognition and measurement criteria for intangible assets and, in particular, for intangible assets that are
internally generated. Prior to the adoption of Section 3064, AECL recorded software costs as Property, Plant and Equipment. Except for
the reclassification of computer software to Intangible Assets, the implementation of this new section did not have a significant impact on
AECL’s financial statements. Amortization is provided on a straight-line basis over the estimated useful life of the asset, as follows:
Development costs
Software costs
Useful life
3 years
NOTES TO THE CONSOLIDATED FINANCIAL STATEM E NTS
Financial instruments
In June 2009, the Canadian Accounting Standards Board issued an amendment to CICA Handbook Section 3862, “Financial Instruments –
Disclosures” to align Section 3862 with International Financial Reporting Standard (IFRS) 7, Financial Instruments: Disclosures. The purpose
was to establish a framework for measuring fair value in GAAP and to expand disclosures. An entity is required to classify fair value measurements using a fair value hierarchy that reflects the significance of the inputs used in making the measurements. The fair value hierarchy
includes the following levels: (a) quoted prices (unadjusted) in active markets for identical assets or liabilities (Level 1); (b) inputs other than
quoted prices included in Level 1 that are observable for the asset or liability, either directly (i.e., as prices) or indirectly (i.e., derived from
prices) (Level 2); and (c) inputs for the asset or liability that are not based on observable market data (unobservable inputs) (Level 3). The
amendment enhanced liquidity risk disclosure with a requirement to include a maturity analysis for derivative and non-derivative financial
liabilities. These standards apply to annual consolidated financial statements relating to fiscal years ending after September 30, 2009. The
adoption of the new standard resulted in additional disclosures in the Notes to the Consolidated Financial Statements.
t) Future Changes in Accounting Policies
Adoption of International Financial Reporting Standards in Canada
As a result of amendments to the scope of public sector accounting standards approved by the Public Sector Accounting Board (PSAB) in
October 2009, AECL is permitted to self-select between IFRS or Public Sector Accounting Standards as its basis of accounting. AECL’s
assessment is that IFRS is the more appropriate basis due to its commercial nature and will continue its conversion efforts with an
implementation date of April 1, 2011.
AECL has an internal team dedicated to the conversion to IFRS and it has begun the implementation phase.
4. Cash and Cash Equivalents
Bank deposits are maintained at levels required to meet daily operating needs. Any surplus deposits are invested in the short-term money
market. The investing strategy is based on a conservative risk assessment. All instruments mature within a year and are rated as R1 Low
or higher by the Dominion Bond Rating Service and as A1 or higher by Standard and Poor’s. Investments are comprised of the following:
(thousands of dollars)
Cash and cash equivalents*
$
2010
Yield
2009
Yield
47,833
0.2%
$ 33,196
0.4%
2010
2009
17,171
13,194
$ 30,365
291,701
$ 322,066
$ 14,598
10,727
$ 25,325
294,004
$ 319,329
*Cash and cash equivalents include cash and short-term money market instruments
5. Inventory
(thousands of dollars)
Reactor fuel
Spare parts and store supplies
Heavy water inventory
$
Reactor Fuel inventory costs include an allocation of overhead.
The cost of inventory for reactor fuel, spare parts and store supplies recognized as expense and included in Cost of sales and operating
expenses, amounts to $5.8 million (2009 – $7.8 million). There were no material write-downs of inventory in 2010.
46
ATO MI C ENERGY OF CANADA LIMITED
In addition to internal consumption of heavy water at the Chalk River Laboratories, the cost of inventory for heavy water recognized as
expense and included in Cost of sales and operating expenses was $0.7 million (2009 – $0.5 million). There were no material write-downs
of heavy water in 2010.
AECL had no reversals of write-downs and no inventory pledged as security for liabilities.
6. Long-Term Receivables
(thousands of dollars)
2010
Contract receivables from customers in respect of the financing of products and services,
maturing through 2019 at fixed repayment amounts
Current portion
$ 189,252
(19,028)
$ 170,224
2009
$ 207,341
(17,977)
$ 189,364
(thousands of dollars)
2011
2012
2013
2014
2015
Subsequent to 2015
$ 19,028
20,141
21,319
22,566
23,886
82,312
$ 189,252
7. Trust Fund
The Nuclear Fuel Waste Act requires Canadian nuclear utilities to form a waste management organization, the Nuclear Waste Management
Organization, to provide recommendations to the Government of Canada on the long-term management of nuclear fuel waste and to
implement the approach selected. The legislation also requires that each nuclear fuel waste owner establish a trust fund to finance
implementation of the approach. Each individual trust fund is held in order to meet the requirements of the Act and only the Nuclear Waste
Management Organization may withdraw monies from it in accordance with the provisions of the Act. As required by the Act, AECL’s initial
deposit to its Trust Fund was $10 million on November 25, 2002. Subsequent annual deposits of approximately $2 million have been made
as required, and will continue until the obligation ceases or the amount is modified by the Government of Canada once certain
requirements stipulated in the Act are met by the Nuclear Waste Management Organization.
NOTES TO THE CONSOLIDATED FINANCIAL STATEM E NTS
The long-term receivable is primarily related to heavy water sales in previous years. Required repayment amounts are recorded as
operating activities on the cash flow statement and are due as follows:
The Trust Fund, managed by CIBC on behalf of AECL, invests in fixed income instruments, with various maturities. The fund has been
recorded as a long-term asset and measured at fair value. Interest earned from the fund offsets accretion expense related to the
decommissioning and waste management provision. Quoted market values of the instruments are estimated at $29.7 million as at
March 31, 2010 (2009 – $26.7 million). Interest earned on trust assets accrues to the Trust Fund. Interest earned on these instruments is
fixed whereas the fair values of the instruments vary according to the prevailing market rate of interest. Therefore, yield on the instruments
is variable. These investments are comprised of the following:
(thousands of dollars)
Maturities
Short-term
Cash and cash equivalents*
Corporate bonds
Not applicable
June 2010 – February 2011
2010
Yield
6
1,780
1,786
0.0%
3.0%
$ 22,610
5,275
$ 27,885
$ 29,671
4.2%
3.8%
$
$
Long-term
Canadian Government bonds**
Corporate bonds
April 2012 – December 2025
May 2011 – January 2017
2009
Yield
87
—
87
0.4%
$ 23,421
3,221
$ 26,642
$ 26,729
4.2%
3.8%
$
$
*Cash and cash equivalents include cash and short-term money market instruments
**Canadian Government bonds include federal, provincial and municipal bonds
2 010 A NNUA L FI NA NCI A L RE PO RT
47
8. Property, Plant and Equipment
(thousands of dollars)
2010
Cost
CANDU Reactor Division
Construction in progress
Land and land improvements
Buildings
Machinery and equipment
NOTES TO THE CONSOLIDATED FINANCIAL STATEM E NTS
Research and Technology Division
Construction in progress
Land and land improvements
Buildings
Reactors, machinery and equipment
Total
$
4,198
1,174
19,888
36,526
61,786
53,847
47,019
236,451
317,202
654,519
$ 716,305
2009
Accumulated
Amortization
$
—
273
14,402
24,771
39,446
—
28,279
163,018
254,202
445,499
$ 484,945
Net Book
Value
$
4,198
901
5,486
11,755
22,340
53,847
18,740
73,433
63,000
209,020
$ 231,360
Cost
$
2,025
1,035
19,888
32,450
55,398
74,950
44,381
206,921
281,470
607,722
$ 663,120
Accumulated
Amortization
$
—
261
13,887
22,492
36,640
—
26,914
160,362
248,610
435,886
$ 472,526
Net Book
Value
$
2,025
774
6,001
9,958
18,758
74,950
17,467
46,559
32,860
171,836
$ 190,594
Amortization of property, plant and equipment for the year ended March 31, 2010 was $14.9 million (2009 – $11.7 million).
The Corporation reviews the net recoverable amount of its long-lived assets. As a result of the review, no impairment charges were
recorded in 2010 and 2009.
9. Intangible Assets
(thousands of dollars)
2010
Cost
ACR-1000 development
Software
$ 175,349
10,101
$ 185,450
Accumulated
Amortization
$
$
—
5,410
5,410
2009
Net Book
Value
Cost
$ 175,349
4,691
$ 180,040
$ 96,255
3,845
$ 100,100
Accumulated
Amortization
$
$
—
3,845
3,845
Net Book
Value
$ 96,255
—
$ 96,255
AECL’s research and development activities are undertaken to maintain and enhance Canada’s scientific and technological expertise in
support of the production of environmentally friendly and cost effective CANDU nuclear generated electricity, as well as other important
peaceful nuclear technologies such as nuclear medicine. In particular, they involve the maintenance of intellectual property developed over
the years. This includes basic knowledge of materials, reactor physics, chemistry, critical components, radiation and the environment,
which could have an impact on the safety, licensing and design basis of CANDU technology. Additionally, it includes advancement of the
economics, safety and operating performance of the existing product line and applying advancements to future technologies.
Development costs that meet the criteria for capitalization are capitalized, and the remaining development costs, along with all research
activities, are expensed in the Consolidated Statement of Operations.
In 2010, $79.1 million (2009 – $96.3 million) of the $108.1 million (2009 – $120.7 million) of ACR-1000 development costs met the criteria for
capitalization. There were no other development costs that met the criteria for capitalization (2009 – $nil). The determination of qualifying
development costs is subject to ongoing review.
Other commercial research and development costs under the CANDU Reactor Division were $8.0 million (2009 – $2.1 million). Under the
Research and Technology Division, CANDU technology research and development costs were $58.8 million (2009 – $57.9 million) and
Facilities, nuclear operations and support costs were $301.5 million (2009 – $212.3 million).
Amortization of software for the year ended March 31, 2010 was $1.6 million (2009 – $0.8 million).
10. Deferred Funding
The Corporation recognized funding of $47.1 million (2009 – $52.4 million) from the Government of Canada in 2010 for capital infrastructure
refurbishment projects at the Chalk River facilities, and $79.1 million (2009 – $96.3 million) in ACR-1000 development funding. Deferred
capital funding and deferred development funding are provided to the Corporation through appropriations from its shareholder.
48
ATO MI C ENERGY OF CANADA LIMITED
Deferred capital funding
(thousands of dollars)
Deferred capital funding, opening balance
Capital funding recognized during the year (Note 13)
Amortization of deferred capital funding
Deferred capital funding, closing balance
2010
$ 104,615
47,066
(4,679)
$ 147,002
2009
$ 54,731
52,394
(2,510)
$ 104,615
Deferred development funding
(thousands of dollars)
Deferred development funding, opening balance
Development funding recognized during the year (Note 13)
Deferred development funding, closing balance
2010
$ 96,255
79,093
$ 175,348
2009
$
—
96,255
$ 96,255
(thousands of dollars)
Long-term payable
Unsecured, non interest bearing, maturing September 2012
Amount is recorded net of discount of $1.7 million at 4.08%
Less current portion
2010
2009
$ 31,608
$ 43,373
31,608
(13,319)
$ 18,289
43,373
(13,319)
$ 30,054
Required payments over subsequent years are as follows:
(thousands of dollars)
2011
2012
2013
$ 13,319
13,319
6,660
$ 33,298
Long-term payables relate to inventory purchased from MDS (Canada) Inc. in February 2006. AECL entered into an agreement with
MDS (Canada) Inc. whereby AECL acquired beneficial ownership of the Dedicated Isotope Facilities, comprised of two medical isotopeproducing reactors (MAPLE 1 and 2) and their related processing facility. Additionally, AECL acquired $53 million of isotopes production
related inventory with a deferred payment obligation of 48 monthly installments of $1.1 million, commencing in October 2008. The value of
the inventory and the related deferred obligation were recorded at $41.7 million (Fuel and Targets), and $2.5 million (Spare parts), the
present value of these future payments.
NOTES TO THE CONSOLIDATED FINANCIAL STATEM E NTS
11. Long-term Payables
Imputed interest expense of $1.6 million (2009 – $1.9 million) related to the discount on the long-term payable was expensed in the
Consolidated Statement of Operations. Required payments are disclosed at the undiscounted amount.
12. Decommissioning and Waste Management Provision
AECL has an obligation to decommission its nuclear facilities and other assets in order to satisfy CNSC and other applicable regulations.
These facilities include prototype reactors, heavy water plants, nuclear research and development, waste management and other facilities.
Due to the variety of facilities, the decommissioning process may differ in each case. In some situations, decommissioning activities are
carried out in stages with intervals of several decades between them to allow radioactivity to decay before moving on to the next stage.
These activities include surveillance and monitoring, decontamination, demolition and the management of the associated waste.
A significant portion of the obligation relates to liabilities that were incurred prior to the creation of AECL in 1952.
The estimated future decommissioning and waste management costs require that judgments be made about the regulatory environment,
health and safety considerations, the desired end state, technology to be employed and, in some cases, research and development activities
that extend well into the future. Significant assumptions determine the valuation, such as timing of major decommissioning and remediation
project expenditures, regulation requirements, volumes of waste, market based premium, interest rate estimates, inflation factors, and the
impact of technological advances. Another important assumption is that the liability reflects the funding level necessary to achieve health,
safety and environmental protection objectives that are in accordance with CNSC regulations. Changes to these assumptions, as well as
changes to the timing of the programs or the technology employed, or changes in the standards and regulations governing the
decommissioning of nuclear facilities, could result in material changes to the decommissioning and waste management provision.
2 010 A NNUA L FI NA NCI A L RE PO RT
49
The decommissioning plan follows a hierarchy of activities to achieve:
• A controlled and controllable state for all redundant nuclear facilities that removes short-term risks.
• A sustainable, stable and safe state of the facilities under surveillance.
• Cost-optimized completion of actions to achieve a final end state that is an accepted completion of the decommissioning process as
required by the regulator.
The decommissioning plan projects undiscounted expenditures of $6,873.6 million (in current dollars) until 2085. The discount and inflation
rates used to calculate the present value of the provision, at the time the plan was implemented, were 5.25% and 1.7% respectively. In
accordance with the requirements of CICA Handbook Section 3110, “Asset Retirement Obligations”, increased estimates resulting from new
liabilities or increases in the spending profile are discounted using the current rate of 3.92% while decreases use a blended rate of 5.08%.
The decommissioning and waste management provision is as follows:
NOTES TO THE CONSOLIDATED FINANCIAL STATEM E NTS
(thousands of dollars)
Opening balance
Liabilities settled
Accretion expense
Revision in estimate and timing of expenditures
Revision in estimate and timing of expenditures affecting Property, plant and equipment
Waste, decommissioning and site restoration costs from ongoing operations
Less current portion
2010
$ 3,099,745
(111,129)
158,206
(72,485)
2,272
8,290
3,084,899
(131,200)
$ 2,953,699
$ 3,008,236
(103,114)
155,124
27,533
601
11,365
3,099,745
(118,400)
$ 2,981,345
In June 2006, the Government of Canada announced it would provide funding of $513 million over five years to fund the Nuclear Legacy
Liabilities Program. Previous to this, AECL retained proceeds from heavy water sales to fund the decommissioning program (Note 16).
The Government of Canada requires AECL to account for waste, decommissioning or site restoration liabilities resulting from AECL’s
ongoing operations after April 1, 2006. $38.1 million is included in the closing decommissioning and waste management provision.
13. Funding
a) Parliamentary Appropriations
AECL segregates its Parliamentary appropriations to ensure funds are spent in a manner consistent with the basis for which they were
approved. Although $802 million was received in the current year (2009 – $554 million), $822 million has been recognized (2009 –
$528 million), with the difference recorded as an adjustment to the amount repayable to the Government of Canada included in provisions.
(thousands of dollars)
Operating funding
Research and Technology Division
Research and related infrastructure
Dedicated Isotope Facilities
Chalk River Laboratories regulatory, health, safety, security and environment initiatives
NRU return to service
CANDU Reactor Division
Life extension projects
ACR-1000 development
Total operating funding
Capital funding
ACR-1000 development
Capital infrastructure refurbishment project funding
Total capital funding
2010
$
$
132,536
66,646
56,618
—
255,800
$ 346,000
28,994
374,994
$ 695,758
$
100,000
23,745
123,745
379,545
$
$
$
Research and related infrastructure funding is the base operating funding for AECL’s Chalk River Laboratories.
ATO MI C ENERGY OF CANADA LIMITED
2009
154,885
21,198
72,681
72,000
320,764
The Government of Canada has committed funding for 2011 totaling $535 million.
50
2009
79,093
47,066
126,159
$
$
96,255
52,394
148,649
During the year, AECL received $25 million (2009 – $80 million) from the Government of Canada to support placing the Dedicated Isotope
Facilities into an extended shutdown state.
Chalk River Laboratories regulatory, health, safety, security and environment initiatives funding includes the revitalization of AECL’s Chalk
River Laboratories and the maintenance of isotope production at the NRU reactor.
NRU return to service funding includes the cost of repairing the NRU reactor, returning it to service, and replacing lost margins from
forgone isotope sales during its outage.
Life Extension Projects funding is used to bridge the shortfall in the various projects due to re-estimates in project completion costs.
ACR-1000 development funding is used for research and development activities relating to the Generation III+ reactor.
b) Other Funding
Amounts received from other government entities for execution of work performed on service contract agreements and invoiced in a
manner similar to other commercial customers are classified as Other Funding. In addition, amortization of Deferred Capital Funding is
recorded simultaneously with the amortization of the related asset in AECL’s Consolidated Statement of Operations.
Operating funding
Cost recoveries from third parties and other
Amortization of Deferred Capital Funding
Decommissioning and waste management
2010
$
7,372
4,679
114,656
$ 126,707
2009
$
5,910
2,510
105,080
$ 113,500
14. Employee Future Benefits
a) Pension Plan
The Corporation’s employee pension benefits are covered through the Public Service Pension Plan. Payments are made to three
accounts: Public Service Superannuation Account, Public Service Pension Fund account, and the Retirement Compensation Arrangement
account. Total contributions made on account of current service are as follows:
(thousands of dollars)
Payments by employees
Payments by employer
2010
2009
$ 25,971
$ 51,252
$ 24,605
$ 51,328
NOTES TO THE CONSOLIDATED FINANCIAL STATEM E NTS
(thousands of dollars)
The Corporation’s rate of contribution to the Public Service Superannuation Account equals the employee contributions and the Public
Service Pension Fund account is a 1.94 multiple of the employee contributions (2009 – 1.91). The contribution to the Retirement
Compensation Arrangement account for calendar year 2010 is a multiple of 8.9 of the employee contributions (calendar year 2009 – 7.5).
The multiple is subject to change based on revaluation by the Public Service Pension Plan administration.
2 010 A NNUA L FI NA NCI A L RE PO RT
51
b) Other Employee Future Benefits
The Corporation provides certain termination and other benefits as described in Note 3 (q). The accrued benefit obligation is not funded
as funding is provided when benefits are paid. Accordingly, there are no plan assets and the plan deficit is equal to the accrued benefit
obligation.
NOTES TO THE CONSOLIDATED FINANCIAL STATEM E NTS
(thousands of dollars)
Accrued benefit obligation, beginning of year
Current service cost
Interest on accrued benefit obligation
Benefits paid
Actuarial (losses) gains
Accrued benefit obligation, end of year
Unamortized net actuarial losses
Accrued benefit liability
Current portion, accrued benefit liability
Net accrued benefit liability
Net benefit plan cost
Current service cost
Interest cost
Amortization of actuarial losses
Annual benefit plan expense
2010
2009
$ 72,490
4,143
5,442
(8,954)
1,953
75,074
(4,022)
71,052
(9,551)
$ 61,501
$ 79,077
2,832
4,504
(6,379)
(7,544)
72,490
(2,847)
69,643
(9,012)
$ 60,631
$
$
$
4,143
5,442
—
9,585
$
2,832
4,504
258
7,594
Cumulative actuarial gains or losses in excess of 10% of the obligation are amortized over the remaining average service period of active
employees. The average remaining service period of the active employees covered by the other employee future benefits plan is 11 years
(2009 – 11 years). The measurement date of the accrued benefit obligation is March 31, 2010, and the latest actuarial valuation of these
benefits was performed in March 2010. The next valuation will be performed in March 2011.
The significant actuarial assumptions adopted in measuring the Corporation’s accrued benefit obligation are:
• A discount rate of 5.15% (2009 – 7.5%).
• A rate of compensation increase of 2.5% (2009 – 5%).
15. Provisions
(thousands of dollars)
Contract loss provision
Due to Shareholder (Note 13)
Other
Total provisions
Less current provision
2010
$ 212,037
7,023
13,672
$ 232,732
(232,732)
$
—
2009
$ 127,606
27,079
6,083
$ 160,768
(79,175)
$ 81,593
The Corporation encountered delays in its active life extension projects and estimated costs to complete these projects have increased
substantially. As a consequence, expected losses of $212 million (2009 – $128 million) have been recognized as a liability and recorded as
Provisions on the Consolidated Balance Sheet.
The balance of amounts due to Shareholder represents appropriated funding received that is in excess of amounts spent on funded
programs.
16. Contributed Capital and Deferred Decommissioning Funding
Included in contributed capital is approximately $161 million (2009 – $189 million) related to Parliamentary appropriations received for the
production of heavy water inventory. Up to and including 1995–1996, the Corporation was required to repay the Government of Canada,
by way of a dividend, the cash proceeds from the sale of Government-funded heavy water. From 1997 to 2006, a Decision by the Treasury
Board directed the Corporation to hold the proceeds from the sale or lease of Government-funded heavy water in a segregated fund for
use in decommissioning activities for the 10-year period following the Decision. As Government-funded heavy water was sold or leased,
the cash proceeds were transferred from contributed capital to deferred decommissioning funding, which was used to fund ongoing
decommissioning activities.
52
ATO MI C ENERGY OF CANADA LIMITED
An amount equivalent to the proceeds from sales made during the 10-year arrangement received after April 1, 2006 (Note 6) is transferred
from contributed capital to deferred decommissioning funding. However, the funds are not required to be segregated for use in
decommissioning activities. Other cash proceeds from heavy water sales are recorded as repayable contributions to the Government of
Canada and are presented in Provisions (Note 15) on the Corporation’s Consolidated Balance Sheet.
17. Related Party Transactions
In addition to the transactions disclosed in Notes 8, 9, 10, 11, 12, 13, 14, 15 and 16, the Corporation had the following transactions with the
Government of Canada:
Repayment of loans
Principal
Interest
2010
$
$
—
—
—
2009
$
$
500
11
511
Cost recovery from third parties includes billings to Natural Resources Canada for historic low-level radioactive waste management activities.
In the normal course of business, the Corporation also enters into various transactions with the Government of Canada, its agencies and
other Crown corporations. These transactions are recorded at the exchange amount.
18. Commitments, Contingencies and Obligations
a) Commitments
The Corporation has entered into non-cancellable operating leases expiring on various dates for the rental of office space. The leases
contain an escalation clause providing for additional rent. The Corporation also enters into other non-cancellable agreements facilitating
operations and project requirements. Minimum future payments under these obligations are as follows:
(thousands of dollars)
2011
2012
2013
2014
2015
Subsequent to 2015
$ 60,613
13,737
11,049
8,675
6,857
21,443
$ 122,374
NOTES TO THE CONSOLIDATED FINANCIAL STATEM E NTS
(thousands of dollars)
b) Regulatory Obligations
To ensure compliance with CNSC site licence conditions and other regulatory requirements, the Corporation has undertaken major
investment in new and existing building infrastructure at the Chalk River facility. The Corporation’s planned expenditure on these initiatives
for 2011 is $30 million. These obligations are funded through Parliamentary appropriations.
c) Performance Guarantees and Liquidated Damages
It is industry practice to use letters of credit, surety bonds and other performance guarantees on major contracts. Such guarantees may
include guarantees that a project will be completed or that a project or particular equipment will achieve defined performance criteria.
Liquidated damages are those damages whose amount the parties designate during the formation of a contract for the injured party to
collect as compensation upon a specific breach (e.g. late performance).
In the normal course of business, AECL guarantees that certain projects will be completed within a specified time and may bear
responsibility for liquidated damages should obligations not be met.
The aggregate amount of the Corporation’s potential exposure under the performance guarantees is estimated to be approximately
$500 million. Exposure to liquidated damages penalties is estimated at $99 million at March 31, 2010. Management has assessed the
impact of liquidated damages penalties on the active life extension projects and incorporated it in the calculation of the contract loss
provision (Note 15).
2 010 A NNUA L FI NA NCI A L RE PO RT
53
d) Other
On July 8, 2008, MDS (Canada) Inc. commenced legal proceedings against AECL and the Government of Canada in connection with
AECL’s isotope business. The amount claimed against AECL and the Government of Canada is $1,600 million, and is currently under
review. No provision has been made in these financial statements as the liabilities, if any, are not determinable at this time.
In the normal course of operations, AECL has become involved in various other claims and legal proceedings. AECL has taken internal and
external advice in considering known legal claims and proceedings made by or against the Corporation. Consequently, it carefully
assesses the likelihood of the success of a claim or proceeding. While the final outcome with respect to claims and legal proceedings that
are pending at March 31, 2010 cannot be predicted with certainty, it is the opinion of management that their resolution will not have a
material adverse effect on AECL’s financial position or results of operations.
19. Financial Instruments and Financial Risk Management
NOTES TO THE CONSOLIDATED FINANCIAL STATEM E NTS
As part of its operations, AECL carries out transactions that expose it to financial risks, such as credit, liquidity and market risks. The
Corporation’s overall risk management program focuses on the unpredictability of the financial markets and seeks to minimize potential
adverse effects on the Corporation’s performance.
Risk management is the responsibility of the Corporation’s management. They identify, evaluate and where appropriate, control the
negative impact of any such risk. Material risks are monitored and discussed with the Audit Committee of the Board of Directors.
Fair value measurements
Section 3862 of the CICA Handbook establishes a framework for measuring fair value in GAAP and for expanding disclosures about fair
value measurements. An entity is required to classify fair value measurement using a fair value hierarchy that reflects the significance of
the inputs used in making the measurements. The fair value hierarchy includes the following levels: (a) quoted prices (unadjusted) in active
markets for identical assets or liabilities (Level 1); (b) inputs other than quoted prices included in Level 1 that are observable for the asset
or liability, either directly (i.e., as prices) or indirectly (i.e., derived from prices) (Level 2); and (c) inputs for the asset or liability that are not
based on observable market data (unobservable inputs) (Level 3).
The fair value under the amendment to Section 3862 is principally applied to financial assets and liabilities consisting of investments and
foreign exchange forward contracts. The following table provides a summary of financial assets and liabilities that are measured at fair
value as of March 31, 2010 and 2009:
2010
(thousands of dollars)
Level 1
Assets measured at fair value
T-bills
Term deposits
Bankers acceptance
Bonds
Derivatives designated as
hedging instruments:
Foreign exchange forward
contracts
Total assets
Level 2
2009
Level 3
Total
Level 1
Level 2
Level 3
Total
$ 13,998
15,000
10,000
29,665
$ 13,998
15,000
10,000
29,665
$ 18,585
5,000
4,999
26,642
$ 18,585
5,000
4,999
26,642
—
$ 68,663
—
$ 68,663
99
$ 55,325
99
$ 55,325
There are no liabilities measured at fair value.
Level 1 – Based on quoted market prices in active markets.
Level 2 – Inputs, other than quoted prices in active markets, that are observable, either directly or indirectly.
Level 3 – Unobservable inputs that are not corroborated by market data.
Fair value represents management’s estimates of the market value at a given point in time. The carrying value of all financial assets and
liabilities approximates fair value as at March 31, 2010 and 2009, with the exception of long-term receivables and payables. The fair value
of long-term receivables is $185.7 million (2009 – $207.5 million). Loans from the Government of Canada included in the long-term payable
were fully repaid in 2009.
54
ATO MI C ENERGY OF CANADA LIMITED
(thousands of dollars)
Fair value of financial assets
Within Cash and cash equivalents
T-bills
Term deposit
Bankers acceptance
Trust fund
T-bills
Bonds
Derivatives designated as hedging instruments:
Within Accounts receivable
Foreign exchange forward contracts
Total
2010
2009
$ 13,998
15,000
10,000
$ 38,998
$ 18,498
5,000
4,999
$ 28,497
—
29,665
$ 29,665
87
26,642
$ 26,729
—
$
—
$ 68,663
99
$
99
$ 55,325
There are no liability derivatives at fair value
a) Foreign Currency Risk
Foreign Currency risk is the risk of transacting in a currency other than the operational currency of the organization. This can lead to
variations in cash management of the operations. The objective of the Corporation’s foreign exchange risk management activities is to
minimize transaction exposures and the resulting volatility of the Corporation’s earnings and commitments. The Corporation currently
transacts in many currencies, but the exposure to foreign currency transactions primarily relates to the U.S. dollar.
Hedges
AECL enters into hedging contracts with major financial institutions to manage the Corporation’s exposure to foreign currency risks.
Realized foreign exchange translation gains and losses on these foreign currency denominated derivative contracts are recognized as an
adjustment to the purchase price of the commodity or goods received. The Corporation enters into foreign exchange forward contracts to
reduce the risk associated with the purchase and sale of goods in foreign currencies, primarily with respect to the U.S. dollar.
At the inception of a hedging relationship, AECL documents the relationship between the hedging instrument and the hedged item, its risk
management objective and its strategy for undertaking the hedge. The Corporation documents, both at hedge inception and on an
ongoing basis, whether or not the derivatives that are used in hedging transactions are effective in offsetting the changes attributable to
the hedged risks. A hedge is effective when the amount and the timing of payment of the transactions are matched by the hedge or is
within the ratio of 80 to 125% when comparing the fair value of the hedge against the change in fair value of the cash flow of the
underlying transactions. Currently, all of AECL’s forward contracts are designated as effective hedging relationships. The Corporation’s
policy precludes it from using derivative financial instruments for trading or speculative purposes. AECL has reviewed relevant contracts
for embedded derivatives and elected April 1, 2003 as the transition date. It was determined there were no material embedded derivatives
in contracts that should be accounted for separately.
NOTES TO THE CONSOLIDATED FINANCIAL STATEM E NTS
The following table represents the fair value of the Corporation’s financial instruments as well as their classification on the Consolidated
Balance Sheets as of March 31, 2010 and 2009:
As of March 31, 2010, there are no forward contracts (2009 – 15 forward contracts, notional value $6 million).
As of March 31, 2010, had the exchange rate (CAN$/US$) been 5% higher or lower, and had hedge accounting not been applied, the net
loss for the year would have remained unchanged. The following table shows the fair value of the hedges used to manage risk associated
with foreign exchange, expressed in Canadian dollars. The impact of foreign exchange hedging transactions on operations is recorded in
the line item corresponding to the hedged item within OCI:
(thousands of dollars)
Instruments designated as cash flow hedges
2010
$
—
2009
$
99
In 2010, AECL’s foreign currency risk management objectives were unchanged from those in 2009.
2 010 A NNUA L FI NA NCI A L RE PO RT
55
b) Credit Risk
Credit risk is the risk that one party to the financial instrument might not meet its obligations under the terms of the financial instrument. In
2010, AECL’s credit risk management objectives were unchanged from those in 2009.
Cash equivalents and short-term investments
The objective of managing counterparty credit risk is to prevent losses in financial assets. AECL’s exposure is reduced by:
• Monitoring at the appropriate levels of management.
• Applying a conservative investing strategy.
• All instruments mature within a year.
As of March 31, 2010, all instruments are rated as R1 Low or higher by the Dominion Bond Rating Service and as A1 or higher by
Standard and Poor’s.
NOTES TO THE CONSOLIDATED FINANCIAL STATEM E NTS
Accounts receivable (trade)
Exposure to credit risk from accounts receivable is low due to AECL’s specific customer base within a government-regulated industry. The
carrying amount of accounts receivable is reduced by tracking invoices on an individual basis and any bad debt provision is kept strictly
on an invoice-by-invoice basis with a stringent review and approval process.
Eight customers (2009 – three), each representing greater than 4% (2009 – 10%) of the total accounts receivable, comprise an aggregate
87% (2009 – 53%) of total accounts receivable. No significant amounts are due in foreign currency.
Presented below is the value of trade receivables, by age, and the related bad debt provision:
(thousands of dollars)
Current
1 to 30 days
31 to 60 days
61 to 90 days
Over 90 days
Provision for bad debts
Total trade accounts receivable
2010
$ 34,310
7,306
2,533
1,866
4,786
50,801
(898)
$ 49,903
During the year, the bad debt provision decreased by $0.3 million to $0.9 million.
c) Interest Rate Risk
Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market
interest rates.
The objective of the Corporation’s interest rate management activities is to minimize the volatility of the Corporation’s earnings and
expenses. The Corporation’s exposure to interest risk is limited to changes in discount rates associated with asset retirement obligations
and long-term payables. Changes in the discount rate are based on a credit adjusted risk-free rate that is sensitive to interest rate
fluctuations. A one per cent increase in the rate yields a $475 million decrease in the decommissioning and waste management provision
and a one per cent decrease in the rate results in a $650 million increase in the liability.
AECL’s exposure is reduced by:
• Limited transactions dealing with interest payments.
• Financial instruments invested in relatively conservative instruments.
• Investing in reputable institutions.
In 2010, AECL’s interest rate management objectives were unchanged from those in 2009.
d) Regulatory Risk
The Corporation operates in a highly regulated business environment. Changes in government policy may have an adverse impact on the
Corporation’s financial position. The Corporation’s objective in managing regulatory risk is to actively monitor and implement changes on a
timely basis to enable operations. In 2010, AECL’s regulatory risk management objectives were unchanged from those in 2009.
56
ATO MI C ENERGY OF CANADA LIMITED
e) Liquidity Risk
This represents the risk that the Corporation will not have sufficient funds to meet its commitments and obligations. The Corporation’s
objective in managing liquidity risk is to maintain sufficient readily available reserves in order to meet its liquidity requirements at any point
in time. As a Schedule III Part I Crown corporation, AECL is restricted from borrowing funds to meet its obligations. The Corporation is
dependent on funding from its shareholder to meet its obligations.
AECL manages liquidity risk by:
• Cross-functional participation in project and business reviews.
• Frequent communication with its shareholder to manage ongoing cash requirements and secure appropriate funding.
• Maintaining a portfolio of highly liquid investments or instruments readily convertible into liquidity with high-quality counterparties.
The Corporation’s funding plan is part of the Corporate Plan, and is reviewed and approved annually by the Board of Directors and the
Government of Canada. AECL relies on funding from the Government of Canada to continue operations and meet future obligations.
20. Capital Management
As a Schedule III Part I Crown corporation under the Financial Administration Act, Her Majesty the Queen in Right of Canada owns the
shares of the Corporation. Any procurement or disposition of shares can only be undertaken after Parliamentary authorization. Further,
AECL’s liabilities are ultimately liabilities of Her Majesty in Right of Canada.
AECL’s ability to obtain additional capital, either through equity or debt, is pursuant to the provisions of the Financial Administration Act.
Historically, no long-term debt was put in place. Additional capital arose in the form of Government contributions. At year-end, the
Corporation had no plans to seek additional capital in the next 12 months; however, the eventual capital structure after restructuring was
not known.
AECL safeguards the entity’s ability to continue as a going concern by managing its capital in order to achieve the Corporation’s long-term
objectives. The Corporation’s objective in managing capital is to provide sufficient liquidity to support its financial obligations and its
operating and strategic plans, while generating a reasonable return to the Government of Canada from its various commercial operations.
This is managed through periodic funding received from the Government, the volume of cash received from operations and the portfolio of
highly liquid investments or instruments readily convertible into cash with high-quality counterparties. In 2010, AECL’s capital management
objectives were unchanged from those in 2009.
NOTES TO THE CONSOLIDATED FINANCIAL STATEM E NTS
In 2010, AECL’s liquidity risk management objectives were unchanged from those in 2009. However, additional funding was required from
the Government of Canada to meet obligations. As of March 31, 2010, the Corporation was holding cash and cash equivalents of
$47.8 million. Accounts payable and accrued liabilities of $206 million are due within the year. Long-term payables (Note 11) of
$31.6 million are due within three years, of which $13.3 million is due within one year.
The Corporation has a capital structure comprised of Shareholders’ deficit, long-term payables, deferred capital funding, deferred
development funding, deferred decommissioning and waste management funding and decommissioning and waste management
provision. Given the limited amount of capital available from these sources, the Corporation relies principally on operating and capital
funding provided by the Shareholder, which is requested in the Corporation’s Corporate Plan.
21. Comparative Figures
Certain 2009 comparative amounts have been reclassified from financial statements previously presented to conform to the 2010 financial
statement presentation.
2 010 A NNUA L FI NA NCI A L RE PO RT
57
Board of Directors
Glenna Carr
Appointed January 2008, Chair of the
Board, AECL, Mississauga, Ontario
Formerly Chair of the Board of Directors of
Independent Electricity System Operator;
Chair of the Board of Technical Standards
and Safety Authority; President of the
Canadian Council for Public-Private Partnerships; Board Director, Ault Foods Ltd.; Chief
Executive Officer, Carr-Gordon Limited;
Vice-President, Laidlaw Inc.; Deputy Minister
of the Ontario Management Board of
Cabinet, Ministry of Consumer and
Commercial Relations, and Ministry of Skills
Development. Awarded National Champion
for Excellence and Innovation in PublicPrivate Partnerships 2001; ICD.D Certified
Director, Institute of Corporate Directors
2005.
Committees: Chair, Special Advisory.
Ex-Officio on Audit; Science, Technology &
Nuclear Oversight; Human Resources &
Governance; Project Risk Review.
Gloire de L’Escolle. Appointed January 2001,
reappointed in 2005 and 2008.
Committees: Member, Human Resources &
Governance.
Richard Boudreault
Network, Chair of the Schmeelk Foundation
and Board member of the Canada–Israel
Committee. Appointed March 2005.
Committees: Chair, Science, Technology &
Nuclear Oversight; Member, Project Risk
Review and Special Advisory.
President and Chief Executive Officer,
Exploration Orbite Inc.
Dr. John Luxat
Former Chief Executive Officer of
PyroGenesis Inc., Chief Technology Officer
and Vice-President of Corporate Strategy at
Advanced Research and Technology Inc.
Venture Advisor for Caisse de dépôt et
placement du Québec and Professor of
Mechanical Engineering, Université de
Sherbrooke. Director of Mechtronix,
ITSMax and GeoMax and ex-Director of
25 firms and organizations. Holds a physics
degree from the University of Montreal, a
Master of Engineering from Cornell
University and an MBA from the Université
de Sherbrooke. Appointed December 2007.
Committees: Member, Audit, Science,
Technology & Nuclear Oversight, and Special
Advisory.
Hugh MacDiarmid
BOARD OF DIRECTORS
President and Chief Executive Officer,
AECL, Mississauga, Ontario
Director of ALH Holding Inc.
Former Managing Director, Holden America
LLC; President and Chief Executive Officer,
Laidlaw Educational Services; Executive
Vice-President, Commercial, Canadian
Pacific Railway; President and Chief
Executive Officer, Lumonics Inc.; and
principal with McKinsey & Company.
Previous appointee of both the Government
of Canada, as Chair of the External Advisory
Committee on Smart Regulation, and the
Government of Ontario, as Governor of
Ortech International. Appointed
January 2008.
Committees: Ex-Officio on Science,
Technology & Nuclear Oversight; Human
Resources & Governance; Project Risk
Review. By invitation: Audit and Special
Advisory.
Q.C., Ad. E.
Former Executive Vice-President and
Chief Financial Officer of Nortel Networks
Corporation; Vice-Chairman and Chief
Financial Officer for the Royal Bank of
Canada; and Executive Vice-President and
Chief Financial Officer at North American
Life Assurance Company. Former member
of the Board of Governors and Executive
Committee of York University, former
member of the Board of York University
Development Corp. Former Director of
Toronto East General Hospital, C.D. Howe
Institute and former Board Chairman of
Symcor Inc. Named Canada’s CFO of the
Year in 2003 by PricewaterhouseCoopers,
Financial Executives International Canada
and The Caldwell Partners International.
Appointed July 2008.
Committees: Chair, Audit; Member,
Special Advisory.
Lawyer, Managing Partner, Heenan Blaikie,
Montreal, Quebec
Cassie J. Doyle
Marcel Aubut, O.C., O.Q.,
Former President-CEO of the Quebec
Nordiques and Governor of the NHL;
Founder of law firm Aubut Chabot, which
merged with Heenan Blaikie; Founder and
President of the Quebec Metro High Tech
Park; President and CEO of Trans-America
Productions Ltd. Directorships include
Hydro-Quebec; Purolator; Whole Foods
Market Canada, Olymel, VANOC, Canada’s
Sports Hall of Fame, Boralex, Intra
Continental Insurers Ltd., General Insurance
Company Inc., Laurentian Life Insurance
Company of Canada; Investors Group;
Æterna Zentaris Inc.; NHL Pension Society;
Toronto 2015 Pan Am Bid; Fondation
Nordiques. Officer of the Ordre national du
Quebec (2006), Member (1986) and Officer
(1993) of the Order of Canada, Official Medal
of the Quebec National Assembly (1981),
Queen’s Counsel (1986). Recipient of the
Quebec Bar’s honorary advocaters Emeritas
(2009). In 2010, elected President of the
Canadian Olympic Committee, received the
title of Grands Québécois by the Chambre de
commerce de Québec and the Medal of
58
ATO MI C ENERGY OF CANADA LIMITED
Barbara Trenholm
Professor and NSERC/UNENE Industrial
Research Chair in Nuclear Safety Analysis,
McMaster University
Deputy Minister, Natural Resources Canada
Former Associate Deputy Minister of
Environment Canada; President and Chief
Executive Officer, British Columbia Assets
and Land Corporation; Deputy Minister of
Environment, Lands and Parks, Small
Business, Tourism and Culture and Housing
and Consumer Services; and Assistant
Deputy Minister of Municipal Affairs,
Government of British Columbia. Holds a
Master of Social Work in Public Policy and
Administration. Appointed December 2007.
Committees: Member, Human Resources &
Governance, to September 2009.
Dr. Claude Lajeunesse
President and CEO, Aerospace Industries
Association of Canada
Former President of Concordia University in
Montreal and Ryerson University in Toronto,
and President and CEO of the Association
of Universities and Colleges of Canada.
Member of the Board and Chair of the
Green Aviation Research Development
Professor Emerita, Faculty of Business
Administration, University of New
Brunswick, Fredericton, N.B.
Carol Perry
A Fellow Chartered Accountant, directorships include Plazacorp Retail Properties
Ltd. Member of the Institute of Corporate
Directors. Awards include the National Post/
PricewaterhouseCoopers Leaders in
Management Education Award, the Global
Teaching Excellence Award, and University
of New Brunswick Merit Award and Dr. Allan
P. Stuart Award for Excellence in Teaching.
Former member of the Canadian Institute of
Chartered Accountant’s Board of Directors,
Past-President of the New Brunswick
Institute of Chartered Accountants, and
former Acting Dean of the University of
New Brunswick’s Faculty of Business
Administration. Appointed June 2002.
Committees: Member, Audit and Project Risk
Review.
Commissioner, Ontario Securities
Commission and Chair of its Governance
and Nominating Committee
NON-VOTING ADVISORS
Former Vice-President and Board Director
of Nuclear Safety Solutions Limited with
32 years of experience in the Canadian
nuclear industry. Member of the Province of
Alberta’s Nuclear Power Expert Panel. PastPresident and Treasurer of the Canadian
Nuclear Society. Member of the Canadian
and American Nuclear Societies and of the
Advisory Board of the International
Association for Structural Mechanics in
Reactor Technology. Holds a PhD in
electrical engineering from the University of
Windsor. Appointed October 2008.
Committees: Member, Science, Technology &
Nuclear Oversight.
Peter Currie
Director, Canadian Tire Corporation
Limited, Affinion Group Inc., Intelius Inc.,
Arise Technologies
Powerful Women. Former Vice-President at
Petro-Canada. Appointed September 2002.
Committees: Chair, Human Resources &
Governance; Member, Audit and Project
Risk Review.
Former Director of DALSA Corporation and
Independent Electricity Market Operator.
Served as Chair of the Board of Directors
of St. Joseph’s Health Centre in Toronto,
and as a Director of the Bloorview
MacMillan Children’s Foundation. A former
investment banker, held senior positions
with RBC Dominion Securities, Richardson
Greenshields and CIBC World Markets.
Professional Engineer and ICD.D Certified
Director, Institute of Corporate Directors.
Appointed July 2008.
Committees: Chair, Project Risk Review;
Member, Human Resources & Governance
and Special Advisory.
Gordon H. Shaw
Director, Corporate Secretary, and Advisory
Board Chair, Aeolis Wind Power
Corporation
Former Senior Executive with Imperial Oil
Limited, Vice-Chair and Executive Director,
Reform Party of Canada, Chair of Board
and Director, Terra Mines Ltd., President
and Director, SPL Wastewater Recovery
Centre. Advisory Board, Strategic Power
Solutions. Appointed December 2007.
Committees: Member, Science, Technology &
Nuclear Oversight and Human Resources &
Governance.
Stella Thompson
Corporate Director, Calgary, Alberta
Current directorships include: Alberta’s
Electricity Balancing Pool, the Alberta
Provincial Audit Committee, Alberta
WaterSmart (Chair), Calgary Airport
Authority, Resverlogix Corp., Genome
Alberta (Vice-Chair) and Talisman Energy Inc.
Recipient of the ICD.D certification granted
by the Institute of Corporate Directors and, in
2005, was recognized by the Women’s
Executive Network and the University of
Western Ontario’s Richard Ivey School of
Business as one of Canada’s Top 100 Most
Graham Brown
President and CEO of Carillion Canada Inc.
Former Chief Operating Officer of Ontario
Power Generation and National Power PLC
and former Senior Vice-President of British
Petroleum PLC. Current Director of the
Canadian Council for Public-Private
Partnerships. Former Board Director of
Ontario Power Generation, National Power,
Seafield Resources, and New Brunswick
Power Corp. Holds an Honours Degree in
Mathematics from Durham University,
Durham, England. Appointed February 2010.
Committees: Member, Project Risk Review.
Elizabeth Dowdeswell
President and CEO, Council of Canadian
Academies, Management Consultant.
Adjunct Professor, McLaughlin-Rotman
Centre for Global Health, University of
Toronto, Toronto, Ontario
Former Founding President & CEO of
Canada’s Nuclear Waste Management
Organization; Executive Director of the
United Nations Environment Program;
Under-Secretary-General of the United
Nations; Assistant Deputy Minister,
Environment Canada; Executive Director,
Royal Commission on Unemployment
Insurance; Deputy Minister, Saskatchewan
Culture and Youth. Current directorships
include Technical Standards & Safety
Authority; Ashco Shareholders Inc.,
Associated Engineering; Ontario Genomics
Institute and Grand Challenges Canada.
Chair of the Scientific Advisory Committee,
Council of Canadian Academies and
member of the Standing Advisory Group on
Technical Assistance and Cooperation,
IAEA. Holds a Master of Science degree
from Utah State University. Appointed
February 2010.
Committees: Member, Science, Technology &
Nuclear Oversight.
Officers
Glenna Carr
Chair of the Board
Anthony DeVuono
Jerry Hopwood
Beth Medhurst
Senior Vice-President and
Chief Technology Officer
Vice-President,
Product Development
Senior Vice-President,
Human Resources
Earnest (Hank) Drumhiller
Georgina Kossivas
Joan Miller
Vice-President and
General Manager, Operations
(Research and Technology
Operations)
Vice-President, Finance
Vice-President and General
Manager, Waste Management
and Decommissioning
Hugh MacDiarmid
Ala Alizadeh
Vice-President, Marketing and
Business Development
Ramzi Fawaz
Bruce Ambeault
Vice-President, Contracts
George Bothwell
Senior Vice-President,
External and Communications
Senior Vice-President,
Operations
Tracy Greig
Vice-President,
Isotopes Business
Vice-President and
General Manager,
Research and Development
William Pilkington
Senior Vice-President and
Chief Nuclear Officer
Joseph Lau
Vice-President, Engineering
and Technical Delivery
Vice-President, Supply Chain
Michael Robins
Senior Vice-President,
Restructuring
Jonathan Lundy
Kent Harris
Richard Coté
William Kupferschmidt
Senior Vice-President and
Chief Financial Officer
Senior Vice-President,
General Counsel and
Corporate Secretary
Ian Trotman
Vice-President,
Life Extension Projects and
Project Management
Allan Hawryluk
OFFICERS
President and
Chief Executive Officer
Senior Vice-President,
Strategic Contracting
2 010 A NNUA L FI NA NCI A L RE PO RT
59
Corporate Governance
The corporate governance structure of AECL is similar to publicly
traded companies with the Board of Directors appointed by AECL’s
shareholder, the Government of Canada. The Board Chair, and the
President and Chief Executive Officer are also appointed by the
Shareholder by Order-in-Council.
In 2009–2010, the Board provided direction, input and evaluation of
AECL’s strategic plans and approved major contracts and initiatives.
A major focus for the Board during the year was the provision of
effective governance oversight over the development and submission
of AECL’s bid proposal for the Ontario government’s Nuclear
Procurement Project Request for Proposals.
CORPORATE GOVERNANCE
AECL’s corporate governance framework reflects best practice as
outlined in the Treasury Board of Canada Secretariat’s Corporate
Governance Guidelines for Crown Corporations. The Board of
Directors recognizes that effective governance requires continuous
improvement of corporate processes and practices necessary to
ensure a high level of accountability to its stakeholders.
60
In 2009–2010, AECL continued to implement and strengthen its
governance activities to enhance stronger accountability, transparency
and confidence throughout the organization. In particular, the Board
undertook the following initiatives during the year:
• Continued the Director succession and search process for the
purpose of ensuring continuity and effective leadership by the
Board aligned with strategic priorities.
• Completed an annual review of its Board Committee structure for
the purpose of ensuring the appropriate level of Board oversight
over business risk and other related risks.
• Provided significant oversight and monitoring of AECL’s major
commercial projects and capital projects by enhancing the
respective role and mandates of the Project Risk Review Committee
and the Science, Technology & Nuclear Oversight Committee.
• As a result of the Committee review, created the Special Advisory
Committee to provide oversight to, and perspective on, the
Government of Canada’s restructuring initiative.
• Continued to provide regular reporting to the Minister of Natural
Resources in regard to the Board’s fulfillment of its governance role
and accountabilities.
ATO MI C ENERGY OF CANADA LIMITED
• The Board Chair also gave several keynote addresses on the
subject of Crown corporation governance to audiences of Directors
and prospective Directors during the year.
The Board
Last year, the Board had 12 appointed members, 10 of whom were
independent in the sense that they were not management, nor did
they have any interest, business or other relationship with the
company.
AECL’s business affairs are governed by the Board of Directors, which
provides key stewardship responsibilities as set out in the Board
Charter. These responsibilities include oversight for financial
management, the identification of principal risks, approval of the
strategic direction of the organization, examination of the corporation’s
public policy objectives, as well as meeting its overall legal
requirements.
The following table sets forth the record of attendance for Board and
committee meetings for each of the Directors over the past fiscal year.
The compensation of the Board complies with the Remuneration
Guidelines for part-time Governor in Council Appointees. Ms Doyle,
Deputy Minister of Natural Resources Canada, and Mr. MacDiarmid,
President and CEO of AECL, are considered non-independent
Directors, and as such do not receive compensation as Directors.
The Board regularly assesses its effectiveness and functioning through
an assessment process using external expertise. The Board has also
created Director standards that set out the skills and criteria required
to be an effective member of the Board of Directors. These criteria are
aligned with the Corporate Governance Guidelines for Crown
Corporations issued by the Privy Council Office, and an orientation
process is in place to familiarize new Directors with the standards. The
Board has approved a number of governance policies and procedures
to assist it in fulfilling its role and responsibilities.
Directors’ Attendance at Board Meetings and Committee Meetings, 2009–2010
Director
G. Carr1
H. MacDiarmid
1
Audit
(9 meetings +
1 joint meeting
with Project
Risk Review)
Science,
Technology &
Nuclear Oversight
(17 meetings)
10/10
16/17
10/10
16/17
M. Aubut
R. Boudreault
P. Currie
Human Resources
& Governance
(9 meetings)
Project
Risk Review
(12 meetings +
1 joint meeting
with Audit
Special
Advisory*
(11 meetings)
Board of
Directors
(11 meetings)
9/9
12/13
11/11
11/11
8/9
12/13
10/11
11/11
5/9
9/10
8/11
15/17
10/10
10/11
10/11
11/11
10/11
C. Doyle
6/11
E. Dowdeswell2
4/4
C. Lajeunesse
17/17
J. Luxat
15/17
C. Perry
1/1
13/13
17/17
S. Thompson
10/10
B. Trenholm
10/10
11/11
11/11
8/9
G. Shaw
11/11
13/13
8/9
9/9
11/11
11/11
11/11
13/13
10/11
12/13
11/11
1 Ex-Officio Members of all Committees, with the exception that Mr. MacDiarmid is not a member of the Audit or Special Advisory Committees.
2 E. Dowdeswell joined the Board in February 2010 as a non-voting Advisor and Member of the Science, Technology & Nuclear Oversight Committee.
First meeting held July 13, 2009
CORPORATE GOVERNANCE
*
2 010 A NNUA L FI NA NCI A L RE PO RT
61
Five-Year Consolidated Financial Summary
(Unaudited)
(millions of dollars)
CANDU Reactor Division
Revenue
Interest revenue
Net (loss) income before investment in
Advanced CANDU reactor development
ACR funding
ACR development costs
Net (loss) income
FIVE-YEAR CONSOLIDATED FINANCIAL SUMMARY
Research & Technology Division
Revenue
Funding
Gains
Net (loss) income before Dedicated Isotope Facilities
Funding
Impairment charge
Expenses
Net (loss) income
Liability Management Unit
Funding
Net income (loss)
Financial position
Cash, cash equivalents and short-term investments
Heavy water inventory
Capital expenditures
Property, plant and equipment
Decommissioning and waste management provision
Long-term payables (excludes current portion)
Other
Export revenues
Number of full-time employees
* Certain amounts have been reclassified to conform to the 2010 Financial Statement presentation
62
ATO MI C ENERGY OF CANADA LIMITED
2010
$
428
11
2009*
$ 322
14
2008*
$
541
17
(104)
29
29
$ (104)
(330)
24
25
$ (331)
$
$
$
65
198
—
(14)
67
—
58
$
(5)
$
$
33
312
—
(16)
21
—
9
(5)
58
150
—
(41)
—
247
9
$ (297)
$
$
115
29
$ 105
$ (77)
$
$
$
48
292
50
231
$
$
$
$
33
294
51
191
3,085
18
$
3,100
30
163
4,957
$ 105
4,891
$
$
50
38
87
1
2007*
$
$
80
—
69
11
$
$
48
60
61
47
$
$
105
109
61
33
—
—
—
33
96
(68)
$
$
63
(84)
$
$
49
(75)
65
295
111
142
$
141
299
84
246
$
111
299
56
188
136
4,728
$
$
2,928
47
124
4,135
$
303
17
56
113
—
(70)
—
—
—
(70)
3,008
41
$
514
19
2006*
$
$
2,847
46
183
3,604
AECL Offices
Canada
Argentina
Sheridan Park
2251 Speakman Drive
Mississauga, Ontario
Canada L5K 1B2
I. Nuñez 1567, 6th floor
(C1429BVA) Cuidad Autonoma
de Buenos Aires
Argentina
Chalk River Laboratories
Chalk River, Ontario
Canada K0J 1J0
Whiteshell Laboratories
Pinawa, Manitoba
Canada R0E 1L0
Place de Ville, Tower B
112 Kent Street, Suite 501
Ottawa, Ontario
Canada K1A 0S4
2000, McGill College Avenue
Suite 1400
Montreal, Quebec
Canada H3A 3H3
Point Lepreau
Refurbishment Project
430 Bayside Drive
Saint John, New Brunswick
Canada E2J 1A8
177 Tie Road, Concession 4
Douglas Point – B01
Tiverton, Ontario
Canada N0G 2T0
Low Level Radioactive
Waste Management
1900 City Park Drive
Suite 200
Ottawa, Ontario
Canada K1J 1A3
Inquiries
Public requests for
information/media inquiries
Toll free: 1-866-886-2325
Marketing Services
Email: [email protected]
Visit Our Website
www.aecl.ca
China
AVIC Plaza 1104B
Dongsanhuan Zhonglu Yi No. 10
Beijing 100022
People’s Republic of China
Version française
La version française du rapport
annuel sera fournie sur demande.
Sun Tong Infoport Plaza 21A
Huai Hai Xi Lu No. 55
Shanghai 20003
People’s Republic of China
Romania
95–99 Polona Street,
2nd Floor, Sector 1
010496 Bucharest
Romania
Branch Office:
Str. Medgidiei Nr. 6, Pavilion 5 (U2)
Camerele 108 – 109, Etaj P
905200, Cernavoda,
Constanta – Romania
South Korea
4th Floor, IL Won Building
1000–1 Daechi-dong, Kangnam-Ku
Seoul 135–280
South Korea
USA
5235 Westview Drive
Suite 100
Frederick, Maryland 21703
PRINTED IN CANADA • IMPRIMÉ AU CANADA
CC1-3/2010E-PDF • ISBN: 978-1-100-15026-0
CATALOGUE #: CW-502400-REPT-003 Rev. 0
Atomic Energy of
Canada Limited
2251 Speakman Drive
Mississauga, Ontario
Canada L5K1B2
Tel: 905.823.9060
Fax: 905.823.7565
www.aecl.ca
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