Thursday, 22 August 2013

Financial post: Nordion Reaches Settlement with AECL to Resolve MAPLE Lawsuits and Arbitration Costs

Financial post: Nordion Reaches Settlement with AECL to Resolve MAPLE Lawsuits and Arbitration Costs:

" Nordion Inc. (TSX:NDN) (NYSE:NDZ) announced today that Nordion and Atomic Energy of Canada Limited (“AECL”) have entered into a comprehensive settlement agreement to resolve the outstanding claims between both parties related to the MAPLE facilities. Nordion has also announced that, effective immediately,the parties have entered into an amended and restated isotope supply agreement and a waste management services agreement.

“This resolution provides greater clarity for Nordion and removes the uncertainty and liability around these matters,” said Steve West, Chief Executive Officer, Nordion Inc. “Nordion is now better positioned to focus on the needs and priorities of our business, including our important relationship with AECL, with a continued view to enhancing shareholder value and creating new opportunities for the company and our customers.”

Under the terms of the settlement agreement, Nordion will receive CAD$15 million in cash from AECL, and AECL has released its claim against Nordion of approximately CAD$47 million for arbitration costs. Nordion has correspondingly withdrawn its MAPLE-related lawsuit against AECL in relation to the Isotope Production Facilities Agreement (“IPFA”) and the parties have released each other from claims relating to the IPFA and related litigation. The release of claims includes Nordion’s claim for damages against AECL under the IPFA of approximately CAD$244 million and AECL’s IPFA counterclaim for damages against Nordion of CAD$80 million.

The amended and restated isotope supply agreement is a non-exclusive agreement for medical isotope supply by AECL to Nordion, which has a term ending October 31, 2016. The supply agreement may also be terminated upon, among other things, Nordion establishing a satisfactory alternative supply of isotopes, the permanent shutdown of AECL's isotope production facilities, Nordion's failure to meet a minimum purchase quantity and any force majeure that continues for a period of more than two years. The primary cost of supply of medical isotopes will continue to be determined based on a revenue share methodology. Starting in 2014, the percentage of revenue share that AECL receives each year will increase throughout the term of the supply agreement contributing to a mid single-digit decrease in Nordion’s Medical Isotopes gross margin percentage over the course of the contract. In addition, Nordion has entered into an agreement to continue waste disposal services from AECL until October 31, 2026."

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