>India Nuclear Power (HSBC)

■ India’s return to the global nuclear fold is generating a lot of headlines

■ But what does it really mean for the country’s big private sector players?

■ Our industry primer is essential reading for long-term investors

India has rejoined the international nuclear community after more than three decades in the wilderness, opening up huge long-term opportunities for domestic utilities and equipment
manufacturers. Recent newsflow, marked by the announcement of a number of potential billion-dollar deals, suggests that events are moving rapidly. We beg to differ. Our message is that this will be a lengthy process and that the impact on earnings over the next 2-3 years is minimal.

Having said that, we feel it is important for investors to understand this new landscape, look at the big picture, and be aware of the limitations and timing of opportunities arising from the significant expansion in India’s nuclear power sector. This report explores the questions of who is likely to benefit, why and when.

There is no doubt that companies we cover want to be part of India’s nuclear renaissance, but this is an industry with its own set of challenges – energy security, national security, public safety, regulatory risk, massive capex, legal liability, lengthy project timelines and government subsidies, to name a few. And then there’s the politics, which are never far away when nuclear power is being discussed.

It is also important to remember that India is no nuclear novice; the country already has 17 nuclear power stations – all run by the government-owned NPCIL – with six more under construction.

Now that India has access to fuel and technology from overseas, NPCIL will want to expand rapidly to help meet the country’s rising demand for power. This is good news for domestic manufacturers of nuclear equipment like BHEL and Larsen & Toubro. What remains to be seen is how private sector utility giants like NTPC, Reliance Power and Tata Power fit into the long-term picture.

To see full report: NUCLEAR POWER