India open for $80 billion in nuclear business - BusinessWeek
India open for $80 billion in nuclear business
By ERIKA KINETZ
MUMBAI, INDIA
Indian officials tend to go a little wiggly at the phrase "U.S.-India civilian nuclear cooperation agreement."
It sounds so . . . foreboding. Why not, they reason, call it India's clean energy deal with the rest of the world? Or a great trade deal?
"Why do you give it this ballistic name?" said Commerce Minister Kamal Nath. "It's an energy agreement."
Even as the U.S. Congress considers overturning three decades of policy by allowing the transfer of atomic fuel and technology to India in return for international inspections of its civilian--but not military-- nuclear reactors, officials here point out that the global gates of nuclear trade with India are now open.
Whether or not the U.S. decides to allow its companies to bid for business, they say, India will get its uranium.
"If a deal with Congress doesn't happen, we will have business with other countries. So simple," said SK Malhotra, a spokesman for India's Department of Atomic Energy.
India finalized bilateral nuclear trade agreements with Russia and France in January, but the government has held out on implementing them until a U.S. deal goes forward, said Shreyans Kumar Jain, chairman of India's state-run Nuclear Power Corp. Ltd., which runs all 17 of the nation's nuclear reactors.
After his U.S. trip, Prime Minister Manmohan Singh heads to France, where he has been widely expected to ink the deal with France.
On Sept. 6, the 45-member Nuclear Suppliers Group made a historic exception for India, overturning a 34-year-old nuclear trade ban despite the fact that India has refused to sign nonproliferation agreements.
Opponents fear India will use its new access to build nuclear weapons. Proponents point to the nation's enormous energy needs and say the NSG waiver has saved the world from a 1.6 billion ton cloud of coal fire which would otherwise have roared up from India in 2050.
Today, India gets just 3 percent of its energy--about 4100 megawatts-- from nuclear power. By 2032 the government plans to quadruple total generating capacity, to 700 gigawatts, with nuclear accounting for 63,000 megawatts.
That adds up to about 40 new nuclear reactors, worth some US$80 billion, according to Jain.
The limiting factor on India's nuclear expansion has been access to uranium. Despite an aggressive hunt in basins, thrusts, and folds across the country, known domestic deposits will support only 10,000 megawatts of nuclear capacity.
"All reactors are going to be sourced from foreign vendors and tied to fuel supply agreements," Jain said.
Jain says Nuclear Power Corp. hopes to finalize contracts with General Electric Co., Westinghouse Electric Co., France's Areva group, and Russia's Rosatom State Nuclear Energy Corp. to build a first round of eight reactors starting in 2009.
The government, he added, plans to take a 30 percent equity stake in the new reactors, and raise the rest in debt. He said he's not worried about the global credit freeze, as large domestic players, like the Life Insurance Corporation of India, Power Finance Corp. Ltd., and domestic banks can fund the initial build-out. "Beyond that, we have to go for external commercial borrowing," he said.
Rosatom is already helping India build two nuclear reactors, under an agreement that predates Russia's NSG membership.
Areva has also been pro-active in pursuing business, with CEO Anne Lauvergeon joining French President Nicolas Sarkozy on his January state visit, according to three government officials.
Ron Somers, president of U.S.-India Business Council, has been leading lobbying efforts for a coalition that includes companies from Wal-mart Stores Inc, FedEx Express, AT&T, General Electric Co. and New York Life Insurance Company to Westinghouse Electric Co., Dow Chemical Co., Lockheed Martin Corp., and Chevron.
Efforts, he said, have kicked into high gear since the Sept. 6 NSG waiver.
If the deal doesn't go through Congress, he said, "we'll be the only one shut out."
"It's like sitting on our hands watching a football game, not being able to play," he added.
GE helped build India's first nuclear reactor in the 1960s, and today GE would love to rekindle that relationship.
"It's a US$30 billion-plus market in India. There's a huge opportunity for a company like GE," said Kishore Jayaraman, regional head of GE operations in India, Sri Lanka, and Bangladesh. "We have been pushing for it."
But he added that a deal is still far off.
"We have not had any detailed discussions," he said, adding that while GE has been in close talks with the Indian government, the company cannot, by law, enter into advanced discussions absent a green light from Congress.
Moreover, India must change its domestic laws to set liability limits for private companies operating in the nuclear sector before private players like GE can build any reactors.
"We are hopeful we'll get something," Jayaraman said. "But it's just a hope at this stage."
A lot of Indian companies are also hopeful.
Currently, private companies cannot operate nuclear reactors, but the separation of India's civilian and military nuclear programs could pave the way for deeper private sector involvement on the civilian side, Montek Singh Ahluwalia, a top official in India's Planning Commission, said in a recent interview.
Jain, of the Nuclear Power Corp., said a raft of companies, including the Tata Group, Reliance Power Ltd., GMR Infrastructure Ltd., GVK Industries Ltd., the Essar Group, and the state-run National Thermal Power Corp. have expressed interest in running nuclear power plants in the future.
Parts suppliers and builders, like Hindustan Construction Co., Bharat Heavy Electricals Ltd., Larsen &Toubro Ltd., Gammon India Ltd. and Godrej & Boyce Mfg. Co. Ltd. could also benefit from India's nuclear build-out.
Deepak Morada, a spokesman for Larsen & Toubro, India's largest builder, said he thinks the capital and manufacturing requirements needed to help 400 million Indians who now live by candlelight switch on the lights, are simply too massive for the government to handle alone.
"We are ready to participate," he said.
