The Conservative government is considering selling a stake in Canada's federally owned nuclear vendor, industry sources say.

Industry executives involved in talks with Natural Resources Minister Gary Lunn say Ottawa is mulling a public-private partnership for Atomic Energy of Canada Ltd.

Such an arrangement could bring capital -- and stability -- to the heavily subsidized Crown corporation, which has laboratories in the Ottawa Valley community of Chalk River.

AECL's future has been uncertain since the federal government hired National Bank Financial earlier this year to review the ownership of the company.

The official line out of Ottawa is that the Harper government will consider the bank's findings before making a decision on AECL.

But a nuclear industry executive says Lunn narrowed it down to two options months ago.

"His view at the beginning of the year was . . . really, status quo is not viable. It can't work. AECL is just too small," the executive said.

"He tended to say, in private, that the first alternative -- maintaining the status quo -- was really ruled out and it would either be an outright sale or trying to look for private partners to work with AECL."

According to another industry executive, Lunn said earlier this year that the government wasn't at the point of an outright sale, but was considering a greater degree of public-private participation.

Lunn insists all options for AECL are still on the table.

"Obviously we're looking at how do we strengthen it so we can take advantage of the opportunities in the years ahead," he said in an interview.

"The simple fact that we're doing that review suggests we're looking at all the options.

"But, you know, status quo is always an option. I'm not trying to suggest that any model or option has got any preference over another. I'm just not going to speculate on that until cabinet has made a decision."

Lunn said he has received National Bank's report, but he wouldn't discuss its findings. A bank spokesman directed calls to Natural Resources Canada.

The department wouldn't say if the bank's review will be made public.

"The AECL review is still ongoing and progressing well. National Bank Financial is still looking at potential options for the future of AECL and providing external financial advice and the review will continue for some months," spokeswoman Heloise Perron said in an email.

Several companies, including Montreal's SNC-Lavalin Group and U.S.-based Westinghouse Electric Co., have shown interest in partnering with AECL.

"The commercial arm of AECL has a lot of strong expertise in the nuclear market in Canada -- in particular with respect to things like . . . regulations, licensing with the Canadian regulatory agency and so forth," said Bob Pearce, Westinghouse's director of global development.

"We would look to work with AECL in those areas, and perhaps some other areas, if we're successful in winning work in Canada."

While potential suitors have their eyes on AECL's reactor business, it's less certain what would become of the company's medical isotope producing arm.

There are also question marks surrounding AECL's liabilities, which include decommissioning and managing waste at its facilities, if some of the company is sold.

AECL's future will likely remain in limbo until March 2009, when the Ontario government awards a contract to build two reactors in the province.

AECL partnered with four private-sector companies, collectively known as Team Candu, to bid on the reactor contract. The consortium is up against Westinghouse and France's Areva.

A sale to the province would increase AECL's prospects of selling its Advanced Candu Reactor technology abroad -- and would likely raise AECL's market value if the federal government decides to sell all or part of it.

However, if AECL loses the bid it would still have a steady revenue stream from servicing existing Candu reactors.

The federal government is probably monitoring the Team Candu consortium's Ontario bid as it decides whether to spin off AECL, said Steve Aplin, an Ottawa-based energy policy consultant.

"Any kind of involvement in Ontario is going to set a precedent."