Monday, December 6, 2010

Areva inks India nuclear deal

It covers the first two of a planned six pack of power stations

Areva logoThe Wall Street Journal reports that Areva, a French state-owned firm, has signed a (euro)7 billion deal with state-owned Nuclear Power Corporation India Ltd (NPCIL) for two 1,600 MW EPR reactors. The deal envisions construction of four additional reactors plus fuel for 25 years.

The reactors will be located at seacoast city of Jaitapur in the western state of Maharashtra, about 550 Km south of Mumbai (map) The first two units are expected to enter revenue service in 2017.

The signing ceremony took place at the highest levels. It included French President Nicolas Sarkozy, Indian Prime Minister Manmohan Singh, Areva CEO Anne Lauvergeon, and the Chairman of NPCIL Dr. S.k. Jain.

Areva said in press statement about the deal the scope of the agreement includes reactors, steam generators, and related components. The agreement lays out contractual terms and conditions.

India’s harsh nuclear liability law has frozen out U.S. firms from India’s $150 billion new build. Areva, which has sovereign immunity, and its Indian counter parts said only that they would establish a “framework” to deal with the law.

The Times of India reported Dec 6 that no reactor will break ground until there is resolution of two issues -- India's nuclear liability law and pricing.

In a joint statement, Indian and French government officials said:

"Following India's enactment of a civil nuclear liability legislation, both countries stand ready to further exchange views on this issue so as to ensure the appropriate framework for the sound development of their cooperation. "

Russia not happy about liability law

russiaEven the Russians are complaining about the Civil Liability for Nuclear Damage law. Section 17 assigns liability to suppliers in the event of a nuclear accident long after the components are installed in an operating reactor.

The Hindu, India’s largest newspaper, reported Dec 5 that Gregory O. Kumani, VP of Atomstroyexport, said the Russian state-owned firm has not agreed to accept the new liability law as a condition to do business with NPCIL.

While the Russian firm has sovereign immunity, it may be worried about the appearance of liability if something were to do wrong, and the impact on its ability to sell Russian built reactors in other global markets.

India’s big stake in Russian reactor technology

The Russian company is building two 1,000 MW reactors at Kudankulam on India’s southern coastal tip. A follow-up deal calls for two more 1,000 MW VVER design reactors and two rated at 1,200 MW.

Construction is done on the first unit which is now in its start-up phase. The second unit will complete construction soon. Both units will likely be in revenue service in 2011.

Impact on Indian supply chain

As a practical matter, as the Russians and the French “localize” production of reactor components, the burden of the liability law will fall more on Indian firms. Former Indian Atomic Energy Chairman Anil Kakodkar said as much in an interview with the Economic Times Dec 5. He complained that Indian firms could face increased liability risks.

Kakodkar has been a staunch advocate of localization of production of components for India’s massive program to build 20 GWe of new reactor power stations.

He called for a cost effective insurance program to handle liability coverage so that investment funds for growth in production capacity are not diverted into financial instruments that don’t contribute to the new build.

NDTV News Coverage from India

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