>Nuclear Power revival in India (MACQUARIE RESEARCH)

■ A new Asian dawn for nuclear power led by China and India
We released a thematic report on Asian nuclear power on 18 February 2010 (Hunting Stocks-A new Asian dawn for nuclear power). Outlook for nuclear power in Asia looks increasingly favourable amidst fast-growing electricity demand in China and India. China and India are poised for a substantial expansion in their nuclear electricity generation capacity. The IAEA projections imply that Asia and the Middle East will account for 52% and 66% of the global nuclear power capacity by 2020 and 2030 respectively versus 29% in 2008. In
this note, we focus on nuclear opportunity in India.

■ Positive but long-drawn benefits
India is in the midst of a nuclear power renaissance. The country has rejoined the international nuclear community after more than three decades in the wilderness. However, we believe it is likely to be a lengthy process, with the opportunities best seen from a long-term perspective for equipment manufacturers and the power generation sector.

■ Nuclear still a very miniscule part of India’s power plans
Power from India‘s nuclear power plants contributed to just 3% of the country‘s installed capacity base at the end of April 2009, and nuclear power still provides just 2% of India‘s total electricity generation. A further 2.8GW in net capacity is being constructed now, which will take India‘s net nuclear power capacity to over 7GW –7.8GW in gross capacity – by the end of the current 11th Five-Year Plan in 2012. Even before the Nuclear Supplier‘s Group waiver, India had aimed to have 20GW of capacity by 2020. However, now that India has joined the international nuclear community, these targets are likely to be scaled upward.

■ NPCIL, the nodal agency, driving growth
Government-owned NPCIL is responsible for constructing and operating India‘s commercial nuclear power plants. It has 17 nuclear power stations in operation, and one entering into operation now. Five more nuclear power plants currently are under construction. NPCIL is preparing to build more power reactors, backed by improving access to nuclear fuel and technology.

■ Foreign investment starting to kick in
Fuel supply agreements have been signed with countries like France, the US and Russia post the 123 agreements and NSG waiver that guarantee uninterrupted uranium fuel supplies for its nuclear power reactors and unrestricted transfer of technology. Also, international players from Russia, France, etc are expected to
put up 6-8GW of nuclear power plants in the near future for which sites are being finalised already. Construction opportunity for players like L&T, BHEL, HCC, etc could be as large as US$4-5bn from this in the next couple of years.

■ Power equipment manufacturers could be key beneficiaries
Indian power equipment manufacturers now have an opportunity to supply spares and components not only to indigenous power plants but also to manufacturers of power plants based on foreign technology. Firms that may benefit in the manufacturing sector include L&T and BHEL, Gammon and HCC. Private utilities would still have to wait until India signs subsequent agreements to make the NSG waiver and 123 agreements operational.

To read the full report: NUCLEAR POWER