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China suspends approvals for new nuclear plants; pace of nuclear orders in India to also be impacted
● India is expected to increase capacity of nuclear plants from ~4.7
GW to 20 GW by CY20 and to ~60 GW by CY32. We were
anticipating orders to commence from FY13 with cumulative award
ranging Rs500-600 bn pa for foreign vendors (~50% outsourcing).
● Post the earthquake in Japan and the subsequent issues at its
nuclear facilities, India’s intent to continue its nuclear programme
has been questioned. Until now, there is no change to government
plans and only a review on existing plants is being conducted.
China, however, today decided to suspend approvals for all new
nuclear plants and intends to start a comprehensive review on its
existing facilities, as per the CS China power equipment analyst.
● With thermal ordering expected to slow in India, we were
anticipating nuclear orders to support growth for the sector
Companies catering to the nuclear supply chain in India are L&T,
BHEL (only two with ASME stamps for nuclear) and Bharat Forge.
We expect delay in ordering, as the debates on nuclear safety and
intensity of protests from local population increases. Even before
this event, protests at Jaitapur (nuclear site) have been intense.
● We do not expect alternatives such as wind/solar to be relevant
substitutes in India from a cost point of view, and hence, do not
expect any material increase in the pace of orders for the sector.
Figure 1: JVs in nuclear engineering/others
Indian firm Partner Agreements
L&T Separate agreements with –
Westinghouse,
Atomstroyexport, GE Hitachi
and Rolls Royce
Involve developing technology and
producing reactor components
L&T NPCIL Nuclear Forgings JV in Hazira
BHEL Sheffield Forgemasters
International, UK
Manufacture of large size forgings for
turbines and generators up to
1,000MW rating
BHEL Alstom/NPCIL Turbines. Not received approvals as
yet
Bharat Forge Areva Casting and forging nuclear
components for exports and domestic
market
HCC (Supplies
containment
structures/Civil)
AMEC Plc Consultancy and engineering services
for nuclear power plants in India
Source: Company data, Credit Suisse estimates
Nuclear supply chain
After the signing of the Indo-US Nuclear Bill and lifting of sanctions by
the Nuclear Suppliers Group, there has been a lot of activity in the
nuclear space in India with foreign players entering into collaborations
with Indian engineering companies. L&T and BHEL are the key
players who can capture a large portion of the nuclear value chain,
followed by Bharat Forge (components), HCC (civil) and Simplex
(civil).
India’s nuclear plans
India currently has 20 operational nuclear power units with a capacity
of 4.7 GW. Nuclear power capacity in India is planned to rise up to 20
GW by 2020 and ~60 GW by 2032. Currently, NPCIL has four projects
under construction. In our power demand model, we were assuming
5-6 GW pa of orders (worth Rs500-600 bn) to be awarded by NPCIL
to foreign vendors who were in turn expected to outsource some
production to Indian vendors (in order to reduce their overall costs).
Past trends suggest that the pace of nuclear orders slows post such a
crisis. The impact has already started shaping up globally with China
deciding to suspend approvals for new nuclear plants.
While the debate on such a suspension continues in India, the
possibility of substantial delays in such orders remains. The protests
in Jaitapur (site for Areva) had already delayed the setting up of the
plant and, post this incident, we expect such protests to intensify.
If we were to assume that these orders are not awarded and expect
~70% outsourcing by the foreign vendors, at the base case, the
impact will be to the extent of ~Rs350-400 bn pa of lost orders for
Indian vendors. An inability to substitute it with thermal orders (coal
constraints in the medium term) could increase pricing pressure on
thermal orders up for bid. Alternatives (like wind/solar) cannot be a
relevant and implementable substitute given the cost of such power
and the magnitude of assets that need to be funded for generating the
same amount of power (given lower PLFs of alternatives).
Figure 2: Projects under construction
Project Capacity (Mwe) Expected comm. operation
Kudankulam Unit 1 and 2 2x1000 June CY11 and March CY12
Rajasthan Unit 7 and 8 2x700 June and Dec. CY16
Kakrapar Unit 3 and 4 2x700 June and Dec. CY15
Kalpakkam fast breeder reactor 500 CY14
Source: NPCIL
Figure 3: Nuclear projects planned
Project Capacity
(Mwe)
Comments
Kudankulam Unit 3 and 4,
TN
2x1000 To be executed with Russian collaboration. Work
scheduled to start in CY11
Jaitapur Unit 1 and 2,
Maharashtra
2x1650 Areva will supply the reactors and fuel for the
complex. Moef approval has come but land
acquisition delayed due to public protests
Haripur Unit 1 and 2,
West Bengal
2x1000 To be executed by Rosatom. Preliminary work
expected to start in CY12 and construction will
begin in CY14.
Kovvda Unit 1 and 2,
Andhra Pradesh
2x1600 Land survey over but Moef has refuse clearance.
Talks on with GE-Hitachi for building the reactors.
Mithi Vardi Unit 1 and 2,
Gujarat
2x1000 AP1000 Westinghouse reactors may be set up with
work scheduled to start by CY13. Public protests
may delay the project further
Gorakhpur Unit 1 and 2,
Haryana
2x700 Land acquisition has begun but Moef clearance
waited
Chutka, Unit 1 and 2
Madhya Pradesh
2x700 NPCIL expects work to start in CY12
Source: Credit Suisse estimates
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
India Capital Goods Sector ----------------------------------------------------------------------------------
China suspends approvals for new nuclear plants; pace of nuclear orders in India to also be impacted
● India is expected to increase capacity of nuclear plants from ~4.7
GW to 20 GW by CY20 and to ~60 GW by CY32. We were
anticipating orders to commence from FY13 with cumulative award
ranging Rs500-600 bn pa for foreign vendors (~50% outsourcing).
● Post the earthquake in Japan and the subsequent issues at its
nuclear facilities, India’s intent to continue its nuclear programme
has been questioned. Until now, there is no change to government
plans and only a review on existing plants is being conducted.
China, however, today decided to suspend approvals for all new
nuclear plants and intends to start a comprehensive review on its
existing facilities, as per the CS China power equipment analyst.
● With thermal ordering expected to slow in India, we were
anticipating nuclear orders to support growth for the sector
Companies catering to the nuclear supply chain in India are L&T,
BHEL (only two with ASME stamps for nuclear) and Bharat Forge.
We expect delay in ordering, as the debates on nuclear safety and
intensity of protests from local population increases. Even before
this event, protests at Jaitapur (nuclear site) have been intense.
● We do not expect alternatives such as wind/solar to be relevant
substitutes in India from a cost point of view, and hence, do not
expect any material increase in the pace of orders for the sector.
Figure 1: JVs in nuclear engineering/others
Indian firm Partner Agreements
L&T Separate agreements with –
Westinghouse,
Atomstroyexport, GE Hitachi
and Rolls Royce
Involve developing technology and
producing reactor components
L&T NPCIL Nuclear Forgings JV in Hazira
BHEL Sheffield Forgemasters
International, UK
Manufacture of large size forgings for
turbines and generators up to
1,000MW rating
BHEL Alstom/NPCIL Turbines. Not received approvals as
yet
Bharat Forge Areva Casting and forging nuclear
components for exports and domestic
market
HCC (Supplies
containment
structures/Civil)
AMEC Plc Consultancy and engineering services
for nuclear power plants in India
Source: Company data, Credit Suisse estimates
Nuclear supply chain
After the signing of the Indo-US Nuclear Bill and lifting of sanctions by
the Nuclear Suppliers Group, there has been a lot of activity in the
nuclear space in India with foreign players entering into collaborations
with Indian engineering companies. L&T and BHEL are the key
players who can capture a large portion of the nuclear value chain,
followed by Bharat Forge (components), HCC (civil) and Simplex
(civil).
India’s nuclear plans
India currently has 20 operational nuclear power units with a capacity
of 4.7 GW. Nuclear power capacity in India is planned to rise up to 20
GW by 2020 and ~60 GW by 2032. Currently, NPCIL has four projects
under construction. In our power demand model, we were assuming
5-6 GW pa of orders (worth Rs500-600 bn) to be awarded by NPCIL
to foreign vendors who were in turn expected to outsource some
production to Indian vendors (in order to reduce their overall costs).
Past trends suggest that the pace of nuclear orders slows post such a
crisis. The impact has already started shaping up globally with China
deciding to suspend approvals for new nuclear plants.
While the debate on such a suspension continues in India, the
possibility of substantial delays in such orders remains. The protests
in Jaitapur (site for Areva) had already delayed the setting up of the
plant and, post this incident, we expect such protests to intensify.
If we were to assume that these orders are not awarded and expect
~70% outsourcing by the foreign vendors, at the base case, the
impact will be to the extent of ~Rs350-400 bn pa of lost orders for
Indian vendors. An inability to substitute it with thermal orders (coal
constraints in the medium term) could increase pricing pressure on
thermal orders up for bid. Alternatives (like wind/solar) cannot be a
relevant and implementable substitute given the cost of such power
and the magnitude of assets that need to be funded for generating the
same amount of power (given lower PLFs of alternatives).
Figure 2: Projects under construction
Project Capacity (Mwe) Expected comm. operation
Kudankulam Unit 1 and 2 2x1000 June CY11 and March CY12
Rajasthan Unit 7 and 8 2x700 June and Dec. CY16
Kakrapar Unit 3 and 4 2x700 June and Dec. CY15
Kalpakkam fast breeder reactor 500 CY14
Source: NPCIL
Figure 3: Nuclear projects planned
Project Capacity
(Mwe)
Comments
Kudankulam Unit 3 and 4,
TN
2x1000 To be executed with Russian collaboration. Work
scheduled to start in CY11
Jaitapur Unit 1 and 2,
Maharashtra
2x1650 Areva will supply the reactors and fuel for the
complex. Moef approval has come but land
acquisition delayed due to public protests
Haripur Unit 1 and 2,
West Bengal
2x1000 To be executed by Rosatom. Preliminary work
expected to start in CY12 and construction will
begin in CY14.
Kovvda Unit 1 and 2,
Andhra Pradesh
2x1600 Land survey over but Moef has refuse clearance.
Talks on with GE-Hitachi for building the reactors.
Mithi Vardi Unit 1 and 2,
Gujarat
2x1000 AP1000 Westinghouse reactors may be set up with
work scheduled to start by CY13. Public protests
may delay the project further
Gorakhpur Unit 1 and 2,
Haryana
2x700 Land acquisition has begun but Moef clearance
waited
Chutka, Unit 1 and 2
Madhya Pradesh
2x700 NPCIL expects work to start in CY12
Source: Credit Suisse estimates
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