MONTREAL -- Candu Energy, a division of SNC-Lavalin, has signed a framework joint venture agreement in China that could lead to construction of nuclear power plants using recycled uranium, a move one executive called a potential "game-changer" for the business.

The framework deal with China National Nuclear Corp. was signed in Beijing over the weekend during Prime Minister Stephen Harper's state visit to China and the company expects to finalize it within six months.

The joint venture follows a supportive recommendation last week from a Chinese Expert Panel Review on AFCR technology and a memorandum of understanding signed Saturday between Natural Resources Canada and the China National Energy Administration to collaborate on civilian nuclear energy. It includes the development and export of advanced fuel reactors.

Each advanced fuel Candu reactor (AFCR) can use the spent fuel from four light water reactors, creating a large potential market, Candu said Monday.

China operates 22 nuclear power reactors, including two Candu 6 reactors at Qinshan that have been in commercial operation for more than a decade. The country has 26 reactors under construction and others have been proposed.

The world's second-largest economy expects to have a network of some 300 nuclear plants in service by about 2040.

"The ability to complement roughly four light water reactors with one Candu reactor assures really strong nuclear engineering, highly skilled jobs back here in Canada, but also some key manufacturing opportunities in Canada as well," Candu CEO Preston Swafford said in an interview.

At a potential cost of $5.5 billion to $7 billion each, the Chinese reactors would generate substantial revenues for Candu. The first reactor wouldn't likely be in service for eight to 10 years, but would require years of initial design and development.

Testing in China and Canada has confirmed the Candu reactors will burn both spent uranium and thorium, a more widely abundant radioactive chemical element.

Establishing Candu as an alternative fuel burner would be a "game-changer" for the company, added Ala Alizadeh, senior vice-president, marketing and business development.

It opens the doors to opportunities in markets like Britain, France, Japan and Russia where thousands of tonnes of recovered uranium are in storage.

The ability to burn thorium is also attractive to countries like Malaysia. However, the plentiful supply of natural uranium in Canada, whose price has been falling since the Japanese nuclear meltdown, limits the potential construction of an AFCR plant in Canada, said Swafford.

The federal government also stands to earn millions of dollars in royalties as part of its deal to sell Atomic Energy of Canada to SNC-Lavalin in 2011 for $15 million.

Maxim Sytchev of Dundee Capital Markets said the construction of new nuclear plants is promising for SNC-Lavalin but difficult to forecast because of the long lead times and uncertainty in signing contracts.

However, he said the work is all "upside" since nobody assumed when SNC-Lavalin acquired AECL a few years ago that Candu would do much more than refurbish existing nuclear power plants.

"It's going to take years before anything realistically is going to come from that," he said Monday. "I think people should be tempering their expectations."

Meanwhile, SNC-Lavalin (TSX:SNC) said it was disappointed to have lost a long-term contract it has had for a decade to manage 3,800 federal government buildings, facilities and properties across Canada.

Ottawa says it has awarded contracts worth up to $9.6 billion to Brookfield Johnson Controls Canada, a joint venture between Johnson Controls and Brookfield Property Partners. The contract, which starts when SNC's contract expires in March, is for up to eight years but can be extended for up to six more years and could include the addition of other assets for a total potential price of $22.8 billion.

SNC-Lavalin described the process as "fair."

Spokeswoman Lilly Nguyen said the contract announcement is unrelated to its decision to moving quickly to cut its global workforce by 4,000, including about one quarter in Canada, as it adjusts to underperforming business segments.

Analyst Benoit Poirier of Desjardins Capital Markets said the contract loss is just "slightly negative" as it is believed to be one of the less profitable contracts in SNC-Lavalin's operations and maintenance division. He said the loss could reduce SNC-Lavalin's annual earnings by four to seven cents per share or cut the company's share price by up to $1.