The Ontario Municipal Employees Retirement System had been negotiating with engineering firm SNC-Lavalin Group to jointly buy AECL from the Canadian government.

But the pension fund has scrapped its plans for a stake in AECL, the daily Globe and Mail said citing sources close to the deal, over concerns that SNC-Lavalin did not have a long-term vision of the nuclear business, and that the disaster in Japan would further hinder the market.

The international market for nuclear plants will not be as robust as had been expected, the report said.

The pension fund would have brought financial heft to the partnership, offering buyers loan guarantees for reactor purchases and assuming cost overruns.

But the pension fund also expected the government to provide support for research and development, and financial backstops, which Ottawa has refused to put on the table.

Industry observers cited by the Globe and Mail said SNC-Lavalin is expected to focus on servicing and refurbishing AECL's existing Candu reactors and not introduce new product lines.

SNC-Lavalin chief executive Pierre Duhaine said AECL can capture 20 percent of the nuclear energy market with sales of its smaller reactors, as governments worldwide look for less costly proven technologies that can be more easily integrated into their energy networks.

Competitors are developing next-generation nuclear reactors.

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