NuClear Outlook for India

Note on Nuclear Outlook 2017

We have done a brief review of Nuclear Sector internally and listed down the key risks and concerns which can be deliberated upon with you.

International Nuclear Markets:

• Most of the plants being constructed in Europe, US, China are facing delays and cost overruns.
• Renewable energy is posing a serious threat to Nuclear business as tariffs have been falling.
• Major players (Areva/EDF, Toshiba-Westinghouse) are in financial distress. The losses may have come from new technologies being introduced (AP1000/EPR) as compared to GE/Hitachi – which is still relying on older technology. Westinghouse acquiring CB&I (which was involved in EPC of nuclear plants) led to further problems as there were huge time and cost overruns.
• Quality concerns – High Carbon concentration in Forgings supplied by Areva have led to shutdown of plants. Discrepancy in records and alleged forging of reports have led to investigations by the Regulators.

Indian Nuclear Market:

• As per news reports published on 9th March, Westinghouse (WEC) is likely to go ahead with India plans. However, as per the latest press release by Toshiba, it plans to either sell off their WEC stake or WEC may file for bankruptcy (Chapter 11).
• Even though EDF is in the process of taking over Areva, the technology/capability issues still persist.
• Our business outlook had been dependent on the two projects, Jaitapur (Areva/ EDF) & Kovvada (Westinghouse – Toshiba), taking off. However, we feel these projects taking off in the next two years is highly unlikely. Moreover, the initial cost estimates and the resulting tariff from these nuclear plants may be way higher than by other sources like Renewables/Coal etc. It is likely that Govt. may change the target of Nuclear in the total energy mix.  
• Even though Indian Govt. supports Nuclear energy, there is a lot of resistance from public at large on account of safety concerns, which may lead to further delays.
• NPCIL is also facing issues in land acquisition in most of its proposed plants.
• Jaitapur(EDF/Areva) and Kovvada(Toshiba/Westinghouse) plants were to be built on EPR & AP1000 technologies respectively. However, both the technologies AP1000/EPR have not been commissioned yet anywhere in the world.  With delays and cost overruns expected, contractors need to be suitably protected in contracts.