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Tuesday, September 9, 2008

Beneficiary stocks/companies of NSG Waiver

Indian nuclear industry—current scenario
In India, Nuclear Power Corporation of India Ltd (NPCIL) is the only agency that generates nuclear power on a commercial basis. NPCIL, incorporated in 1987, is fully owned by the Government of India and operates under the administrative control of the Department of Atomic Energy.

Currently, the company has a capacity of 4,120MWe from 17 nuclear power plants. India is implementing its nuclear power programme in three stages. In the first stage, natural uranium is used as fuel in pressurised heavy water reactors (PHWR) for generating energy and forming plutonium. In the second stage, plutonium is used as fuel along with thorium to produce uranium-233 in Fast Breeder reactors. Uranium-233 is used as fuel to generate power in the last stage.

Since India has abundant thorium reserves but limited uranium reserves, most of its nuclear plants operate at significantly low utilisation levels. The NSG waiver would ensure India an uninterrupted supply of uranium and hence would aid in increasing the utilisation levels at the existing nuclear facilities. This, in turn, will enable India to make good use of its ample thorium reserves as well.

NPCIL has already drawn up plans to expand its nuclear capacity by 2,660MW and the project is under various stages of implementation. India plans to expand its nuclear capacity exponentially in the years to come. It is looking at taking its nuclear capacity to 20GW by 2020 and further to 68GW by 2030. Going by the capital expenditure pattern of NPCIL in the past, an investment of ~Rs6.5 crore is required to set up 1MW of nuclear capacity. By that token, the opportunity size of India's capacity expansion plan could be about Rs103,000 crore by 2020 and about Rs415,000 crore by 2030.

Economics of nuclear technology
Nuclear fuel based power plants are much more capital intensive compared with the gas and coal fired plants. Typically, the capital outlay for a nuclear fuel based power plant is $1,000-2,000/KWh or Rs6-7 crore per MW, which is much higher than the Rs4-5 crore required to generate per MW of energy on the coal fired sets.

NPCIL is currently setting up a (2x1,000MWe) plant in Kundankulam in Tamil Nadu at a total cost of Rs13,171 crore. The cost of per MW of power thus works out to Rs6.6 crore in NPCIL's case. While the cost of setting up a nuclear fuel based power plant is higher compared with the plants running on practically all other kinds of fuels, the cost of power generation works out to be much lesser in nuclear plants. As enumerated in the table below, the cost of manufacturing 1MW of nuclear power ranges from $21 to $31 as compared with $25-50 per MW (considering a discount rate of 5%) of energy generated from coal.

Possible beneficiaries of the NSG waiver
Apart from NPCIL, a host of other companies involved in the manufacture of nuclear reactor components are likely to benefit from the NSG waiver. Currently, very few Indian players possess the necessary technology in the nuclear field, but the private sector is expected to gain access to the requisite technology through tie-ups with the foreign players over a period. Accordingly, initial beneficiaries of the end of India's nuclear isolation are likely to be some of the foreign behemoths like Areva of France, GE of the USA, Westinghouse of the USA and Atomstroyexport of Russia.

Among the Indian players, Larsen & Toubro (L&T) and Bharat Heavy Electricals Ltd (BHEL) already have some experience in nuclear power generation and are likely to gain from the NSG approval.

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