Nordion adds up potential arbitration liabilities

OBJ Staff
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Nordion Inc. (NYSE:NDZ; TSX:NDN) might be on the hook for part of the $46 million in arbitration fees claimed by Atomic Energy of Canada Ltd.

(Stock image)

The Ottawa-based company sought damages from AECL over a cancelled reactor project, but an arbitrator ruled against Nordion in September.

A decision as to how much Nordion could owe AECL will likely be made in the second quarter of fiscal 2013, according to Tamra Benjamin, Nordion’s vice-president of public and government relations. The decision will be made after both parties present their argument to a tribunal.

Nordion is currently assessing the legal merits and financial implications of AECL’s cost submissions, and will file a response in early 2013.

Currently, Nordion obtains most of its medical isotopes through AECL, which owns and manages the National Research Universal reactor that has been in service since 1957. The NRU, located in Chalk River, has seen multiple scheduled shutdowns for maintenance as it ages.

To address long-term supply security, Nordion and AECL entered a contractual agreement in 1996 that committed AECL to construct and deliver two new nuclear reactors and a processing facility known as the Maple project, to replace the aging NRU reactor.

The project was cancelled in 2008, however, and Nordion began a three-year battle with AECL and the federal government, arguing that a flaw in the design was “manageable.”

After an arbitrator ruled against Nordion on Sept. 10, the company announced it would suspend its quarterly dividend payments to shareholders and halt a share buy-back program. That resulted in a 36 per cent plunge in Nordion stocks.

The arbitration decision also led to a shakeup in the company’s makeup. On Sept. 13, the company announced it would switch to two instead of three business units: targeted therapies and specialty isotopes. The latter business will be segmented into sterilization technologies and medical isotopes. Three vice-presidents will change roles, and two vice-presidents will step down after the changes are implemented.

The value of the company’s stocks has decreased by 2.9 per cent since its announcement of the arbitration costs at market close on Tuesday.

Nordion is the country's largest producer and seller of medical isotopes, used for the treatment, diagnosis and prevention of disease. Founded in 1946, the company is headquartered in Kanata.

Organizations: AECL

Geographic location: Ottawa, Chalk River, Kanata

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