The ink was barely dry on the approval of an exception for India by the international Nuclear Suppliers Group, when the race to be part of the game was on. India declared the goal to contribute over 40,000 megawatts of nuclear power by 2020. Estimates of the size of the opportunity vary, from some US$40 billion to more than US$100 billion, and no one wants to be left out.
After pushing hard to have the deal approved internationally, the US government had to return to the US Congress for approval. The US House of Representatives moved quickly to approve the deal voting 298 for, and 117 against.
Within three weeks of approval (although negotiated prior), even before the US Senate could take action, the government of France signed a nuclear cooperation agreement to supply reactors and fuel. Areva, EdF and Alstom all rushed into the queue. Areva announced plans to ship two European pressurized reactors, with the hope of sending more.
Russia, already working with India on nuclear energy, anticipates a broader agreement soon. Rosatom State Nuclear Energy Corporation plans to build eight reactors starting in 2009.
The US Senate on 6 October approved the deal by a vote of 86 to 13. It was quickly signed into law by President George Bush. GE, which had participated in building India’s first nuclear plant in the 1960s, and Westinghouse moved quickly to ensure they were not to be left out. The strong push by the US had turned around the last few hold-outs in the Nuclear Suppliers Group. US firms did not want to be left on the sidelines.
In India, Power Minister Jairam Ramesh stated that he was in “no hurry” for private participation in nuclear power. Clearly the split of Indian civilian and military nuclear activities pursuant to the deal leaves the door open for the private sector. A large number of local companies looking to take part in the construction of nuclear facilities moved to bolster expertise. At the same time, many of the power majors like Reliance, NTPC, GVK and GMR, announced plans to take on international partners for nuclear development opportunities. More than 40 companies joined to form a lobbying group.
The deal will inevitably bring nuclear power to the forefront. Indian reactors currently operate at less than full capacity due to the shortage of uranium. India lacks sufficient deposits of uranium to fuel even 25% of its plants, so fuel agreements, mining deals and international acquisitions will clearly be on the table.
US-India relations will undoubtedly take a major step forward. The global partnership between the US and India has been significantly strengthened as a result of the agreement and closer ties are expected as trade dramatically increases, and newer areas, including military commerce, are expanded.
India will also become a long-term player in the nuclear field. While much of the deal’s focus centres on benefits for foreign firms, the long-term benefit will rest with India.
Not considering the energy benefit, the long-term market may move towards India. With the US possessing approximately six times the nuclear reactors, with one-third the population, India will move quickly to close the gap. In the longer term Indian engineering, manufacturing and technology will be greatly demanded in the global nuclear field.
Advancements in emission-free energy promise to be another result of the agreement. The nuclear deal will go a long way to addressing the huge growth in Indian energy demands, while holding the line on emissions.
Furthermore, joint ventures are expected to abound as companies in all aspects of the nuclear field come together. Engineering, construction, fuel, mining, exploration, equipment – collaboration in all of these areas will be essential.
The need for greater legal expertise to handle such a wide range of issues in the sector will certainly be significant. In India, the lack of expertise in the area will be matched by the lack of local knowledge on the legal side of many firms experienced in the nuclear sector. New areas of the Indian law practice will thus be developed.
Nuclear power in the US has had a mixed record. Excluding the accident at Three Mile Island (or the disaster at Chernobyl in Russia), the economic risk in nuclear power constructions and operations is significant. US utilities were bankrupted with cost overruns resulting in nuclear systems becoming a dead energy option in the US for over 25 years. Even now, the construction of US nuclear plants is not likely to proceed without significant government guarantees of financing, cost overruns and risks of political delay.
Indian and international euphoria may just be that, as the reality of the difficulty of managing a robust nuclear construction programme sets in, and projections are significantly revised.
Wayne Rogers is a senior adviser in the international law firm of Sonnenschein Nath & Rosenthal, where he specializes in international trade and cross-border transactions. He may be reached at +1-202-408-6478 or [email protected]
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