Atomic Energy of Canada Ltd. and partner SNC-Lavalin Group Inc. are asking the government for billions in financing for their bid to build two nuclear reactors in Ontario, and the government has sent initial signals that some backing will be available.

The companies, who say government support is the only way their bid can compete with global players, are also asking Ottawa to help cover any potential cost overruns, which critics say could mount to further billions of dollars.

In a letter to Natural Resources Minister Gary Lunn, SNC-Lavalin Nuclear president Patrick Lamarre said the Canadian consortium is at a major disadvantage to French and US companies, which he said had access to government-backed financing. He said federal support is critical to maintaining an industry that has enormous export potential as the world turns to nuclear power to meet its growing electricity needs.

Ontario is seeking to buy two new reactors at a cost of at least C$6 billion ($5.7 billion). The Canadians are competing against France's Areva and US-based Westinghouse, which is owned by Japan's Toshiba Corp. They are expected to be operational by 1 July 2018.

The financing request illustrates the expensive and politically fraught decisions now confronting the current government on the future of the Crown corporation. Ottawa, which is considering selling AECL, must not only decide whether it will continue to own a nuclear reactor manufacturer, but also how much support it will provide to the nuclear industry.

In an interview yesterday, the minister indicated broad support for the domestic entity in its effort to win the Ontario bid. However, he would not comment on the specific financing request.

"I absolutely believe that AECL will put forward a commercial proposal and we're there to support that proposal," Lunn said. "We believe AECL can be competitive on a commercial basis."

In his letter to the minister, dated 4 July, and obtained by local newspapers The Globe and Mail, Lamarre asked that the government ensure that "the Canadian nuclear industry is not disadvantaged on its home ground" in a competitive bid that is critical to AECL's future prospects.

Typically, international nuclear vendors enhance the attractiveness of their bids by providing financing backed by government-owned export banks; AECL has relied on Canada's Export Development Corp. in past sales to China and Romania.

The government-backed loans - which are regulated by international agreement to avoid subsidy wars - reduce the overall cost of the projects, which would be virtually impossible to finance from private sector sources due to risks of delays and cost overruns.

In his letter to Lunn, Lamarre noted that Areva and Westinghouse will have access to financial support from export credit agencies but EDC backing will not be available to AECL because it is a domestic deal.

"Thus, we are potentially faced with a predatory financing situation," he wrote.

"In order to ensure that AECL and Team Candu are competing on a level playing field with our competitors, you will understand that it is imperative that equivalent financing support for the Canadian bid be confirmed," he added.

Sources say the government has indicated a willingness to provide financial support for the bid, but - with the original 1 October deadline pushed back to December by new Energy Minister George Smitherman - detailed discussions have not yet commenced.

In response, Areva said it did not receive subsidies from Paris for foreign sales. A spokesman said if the firm did receive backing from a French export credit agency, "this support would cover financing for about 8 per cent of the value of a reactor".