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Nuclear power - A dream still quite far. Big contribution from nuclear (20 GW by 2020)
remains difficult on back of (1) high capital cost (>Rs100 mn/MW) and time (>70 months) with
upside risks to both, (2) technology (stage-III of India’s nuclear programme is long way off while
pending international regulatory issues still limit access) and (3) negative public perception. Fresh
projects start-ups (Jaitapur-Areva, incremental units in Kudankulam and other indigenous plants)
may provide EPC opportunity, but may be some time away. Kudankulam (2 GW, Russian) is
complete and Rajasthan and Gujarat (1.4 GW each indigenous) have been ordered out already
(L&T, HCC, BHEL, Punj etc.). Globally capacity addition is marginal (post Chernobyl; receding in
Germany/Japan) apart from China (27 GW under construction).
Big contribution still remains distant; highlight downside risks to 2020 target of 20 GW
Improved uranium availability after the civil nuclear deal has helped to increase PLFs but a target of
20 GW of by 2020 (4.8 GW complete, 5.3 GW under construction) is tough due to various issues.
` Operational. Key issues include substantial capital cost (Rs100 mn/MW) and long construction
time span (70 months). We also note upside risks to these estimates based on overruns in
Kudankulam and fast-breeder reactor projects (cost revision of 20-60%, time delay of five years).
Progress based on 700 MW indigenous technology is limited by Uranium scarcity. Thoriumbased stage-III closed fuel cycle remains a long way off. Stage-II fast breeder reactor is delayed
(expected in2015 versus 2011 earlier) with work on stage-III expected to start in 2HCY13.
` Policy. The policy issues include (1) suppliers’ concerns about liability (still not fully assuaged by
Civil Liabilities Damage Act, 2011) and (2) roadblocks in technology transfer agreements
(disagreement with Tokyo delaying progress as both GE and Westinghouse have Japanese lead
partners, Hitachi and Toshiba); a recent Korean offer may help partially, but issues remain.
` Negative public perception. Public protests over safety concerns (foreign technology with
capped liability, Fukushima) may also impact activity (as in Kudankulam and Jaitapur projects).
Incremental EPC opportunity on fresh project start ups may be some time away; Jaitapur next
We note that Kundakulam projects (2 GW) is close to completion and substantial parts of
Rajasthan and Gujarat projects (1.4 GW each) having been ordered out already (L&T, HCC, BHEL,
Punj Lloyd). Jaitapur (site allocated to Areva) may be the earliest project to start (environmental
clearance achieved, land acquisition in progress) though domestic share of awards is yet to be seen.
Recent Rajasthan and Gujarat ordering suggests that following companies participate: L&T (civil,
fabrication, forgings and steam generators), BHEL (turbines and associated BoP), HCC (civil),
Walchandnagar (fabrication). Assuming 5 GW of ordering in next three years and 10%
opportunity share (though addressable share based on past ordering trends is close to 20-25%)
we believe L&T may have an annual inflow opportunity of about Rs15 bn.
Only China is adding meaningful capacity; project cost/time and negative perception still intractable
Global capacity addition slowed after the Chernobyl incident and almost stalled after the
Fukushima incident. Germany (3% of total nuclear power) plans top shut down its nuclear reactors
by 2022 and almost all Japanese nuclear reactors (12% share) are offline. About 60 GW of nuclear
projects are under construction led by (1) China (26 GW), (2) Russia (8 GW) and India (5 GW). The
nuclear industry has lacked standardization and scale and thus improvement in capital cost and
construction time span have been slow.
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