Sunday, July 22, 2007

India nuclear deal may be near

IAEA supervision of a dedicated fuel facility may be the key

There has been a lot of chatter in the news media in India all weekend that extended negotiations between the U.S. and India over exchange of nuclear technologies are drawing close to a deal. The latest is that the negotiators agreed to a text, but that political reality has to be tested before it is released. Several sources say that U.S. VP Dick Cheney was heavily involved in the discussions.

The Times of India gave this report on Sunday.

Foreign Secretary Shiv Shankar Menon and US Undersecretary of State Nicolas Burns held tough discussions to resolve differences on issues like reprocessing right for India and fate of the deal if New Delhi were to conduct nuclear tests in future.

National Security Advisor M K Narayanan also met Vice President Dick Cheney, Secretary of State Condoleezza Rice, Defense Secretary Robert Gates and US National Security Advisor Stephen P Hadley.

The differences had arisen after India insisted on the right to reprocess the spent fuel which the US was reluctant to agree. India last month offered to set up a dedicated reprocessing facility under IAEA safeguards, which apparently helped break the logjam.

The next step in the U.S. will be to test the waters in Congress. Intense lobbying is expected by Boeing and other firms that see the potential for 'offset' deals for jet aircraft, and other big ticket items, along with nuclear reactors. When India signed a nuclear deal with Brazil earlier this summer, it included the purchase of a fleet of regional jets.

Constellation and EDF in Reactor Joint Venture

AREVA's EPR will be basis for multiple plants in the U.S. market

The New York Times reports that the French nuclear electric utility Electricite de France (EDF), the world's largest nuclear operator, has signed a partnership to build and own nuclear plants in the U.S. and Canada. The partner in this country is Constellation Energy which will lead and manage the joint venture. The deal will absorb the UniStar Nuclear alliance which also includes Areva and Bechtel.

The firm announced it will file a license application by the end of 2008 to build a plant about 60 miles south of Washington, D.C. The plant will be located at Calvert Cliffs, MD, which is adjacent to two operating reactors owned by Constellation Energy.

UniStar plans to build a fleet of identical reactors across the U.S. with standard design and systems. Michael Wallace, the new CEO of the joint venture, told the NYT the plants will be similar "right down to the office furniture." The next-generation U.S. Evolutionary Power Reactor (USEPR), based on AREVA, Inc.'s newest nuclear power plant design, will be the joint venture's reactor technology of choice.

According to the press release from the firms, EDF will initially put $350M in cash into the project. Subsequent EDF investment under the agreement will include $175 million related to the filing of construction and operating license applications at existing Constellation Energy nuclear sites. Also, EDF will buy up to 9.9% of Constellation's stock. EDF is 87% owned by the French government and operates 58 reactors.

Loan guarantees are a success factor

The Baltimore Sun reported that even with this deal federal loan guarantees will still be important if additional investors are to be brought to the table. According to the Sun, nuclear industry officials say they are waiting to see whether the federal Energy Department develops a package of tax breaks and loan guarantees that will help spur development. The Bush administration has yet to offer a program that satisfies the bankers who must finance nuclear projects. Final regulations establishing the loan guarantees are expected later this year. However, the bad news is the House Appropriations bill for the Department of Energy in 2008 provides no support for loan guarantees for nuclear power plants.

On the Senate side, Platts reports the Senate Appropriations Committee on June 28 approved a bill that places no restrictions on the value of loan guarantees DOE can issue next fiscal year. The Senate recommended that the loan guarantee office receive $8.3 million to support its operations. It said the full funding would enable DOE to hire people with experience in project finance or with such government agencies as the Overseas Private Investment Corporation or the Export-Import Bank. Getting people with the right expertise to run the program has been a concern of the nuclear industry. It looks like the Senate heard them.

The financial backing of EDF will give Constellation more credibility with lenders and potential buyers of new plants, but the joint venture will still need a strong package of federal loan guarantees to succeed.

The competition is out there

In terms of the competition, Toshiba owns the controlling interest in Westinghouse and recently won a contract to build four new reactors in China. General Electric, the other U.S. firm that has nuclear plant technologies, signed an alliance with Hitachi in November 2006 to build nuclear plants worldwide.

U.S. technology leadership in advanced nuclear energy technologies has lagged relative to other countries. R&D work on the "Next Generation Nuclear Plant" (NGNP) has only recently received funding commitments, and the money won't be available until next year. Design work on a prototype reactor in Idaho started in 2006. Work on Pebble Bed reactors in South Africa and China is proceeding ahead of U.S. efforts. South Africa plans a massive near-term investment in these plants. Exports won't be far behind.