Thursday, July 10, 2008

MDS sues AECL and government for 1.6 billion over Maple reactors

I just wonder if the reactor start up issue was not related to threats by MDS Nordion to sue! If the reactor had not been restarted MDS Nordion could have sued or threatened to sue for damages.
That the AECL should cancel the two Maple reactors without proper consideration of the consequences for its contract with Nordion is mind-boggling. Of course the incompetence of AECL in the whole Maple project is mind-boggling as well. That both Liberal and Conservative governments have let this process drag on shows something of the competence of the two main parties when in government as well. Vote Libertarian, Communist, Christian Heritage, BQ, or even Green or NDP but not for the two major dunces!
Maybe the government will try to settle out of court by giving MDS Nordion all of AECL's assets. However, Nordion would no doubt prefer cash! A U.S. hedge fund a part owner of MDS , is suggesting that Nordion's parent MDS Inc should sell off MDS Nordion.
This is from 660news.

MDS sues AECL and government for $1.6B over quashed MAPLE reactors
July 9, 2008 - 2:45 pm By: Eric Shackleton, THE CANADIAN PRESS
TORONTO - MDS Inc. (TSX:MDS) has launched a $1.6-billion lawsuit against Atomic Energy of Canada Ltd. and the federal government to make a point that they should get on with the job of ensuring a long-term supply of medical isotopes, says CEO Stephen DeFalco.
The Toronto-based life sciences company filed its suit after work on two next-generation MAPLE reactors was stopped in April by the government-owned AECL, despite years of work on developing to produce rare radioactive materials used in healthcare.
A division of MDS has long worked with AECL and currently buys materials from its existing reactor in Chalk River, Ont., for processing and resale around the world.
"What we're seeking most importantly is for them to get back on the job, complete these reactors and bring online this 40-year supply" of isotopes, DeFalco said Wednesday in an interview.
"That's the goal of the lawsuit is to get the reactors done and get the supply for (heart and cancer) patients around the world."
These products, said DeFalco, "are used in about 60,000 patient procedures per day everywhere around the world."
The Toronto-based company, a major supplier of nuclear medicine isotopes through MDS Nordion, served AECL with notice that it is seeking arbitration, and at the same time has filed suit alleging negligence and breach of contract.
The company's parallel litigation against the government alleges inducement to break a contract and interference with economic relations.
AECL responded with a brief statement asserting that it believes it has met its obligations and will "vigorously defend" itself.
In Ottawa, Gary Lunn, the federal minister of natural resources, said the government also does not accept the allegations: "We will be taking steps to defend AECL and the Crown."
Maher Yaghi, an analyst with Desjardins Securities, said many people had expected this action to take place.
"The fact that they (MDS and AECL) were not able to reach an agreement probably left no choice for MDS but to start this process," Yaghi said.
MDS is seeking an order compelling AECL to complete a 40-year supply contract signed with MDS Nordion in 2006, and failing that, to pay "significant monetary damages."
The company said its main objective in the legal proceedings is to have AECL replace the National Research Universal reactor with the new MAPLE reactors, whose development the federal Crown corporation abruptly cancelled in May after years of delay and cost escalation.
The two MAPLE medical-isotope reactors, into which AECL and MDS had invested hundreds of millions of dollars, were intended to be capable of meeting the entire global demand for molybdenum-99, iodine-131, iodine-125 and xenon-133.
This project, said DeFalco, began in 1996 when MDS concerned about the life of the NRU reactor contracted with AECL to design and build the MAPLE reactors. "It was our concern in 1996 and we've never wavered from that."
While it does take a good amount of time to design and build one of these MAPLE type reactors, "this is one that has been built and was (in the process of) being completed," said DeFalco.
MDS had AECL provide the company with regular updates, he said. "All their updates were 'we're resolving all our technical issues and we're going to bring these reactors into service,' " he said.
In cancelling the project, AECL said it would instead continue producing isotopes at the aging NRU in Chalk River, Ont., whose current operating licence expires in October 2011.
"We have had to resort to taking these steps to protect the interests of patients, the nuclear medicine community, our shareholders and our customers," said DeFalco.
"We are disappointed that AECL and the government decided to abandon the MAPLE project without establishing a clear plan for the long-term supply of critical medical isotopes."
MDS shares declined 23 cents or 1.5 per cent to $15.60 at Wednesday's close on the TSX, down from $20 just before AECL killed the MAPLE project on May 16.

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