Obama, Modi Kick Start the Westinghouse Nuclear Deal

But it won’t go very far unless some major challenges are overcome.

During a state visit to the US the week of June 7, Indian Prime Minister Narendra Modi and President Barack Obama agreed to take the next steps on the long path to enabling Westinghouse to build six of its 1150 MW AP1000 nuclear reactors near Chennai in Andhra Pradesh on India’s southeast coastline. Up until the last minute there were a lot of caution notes that the deal might not go through.


If it comes to fruition it will be the first solid evidence of a deal struck by the Bush Administration. President Obama and PM Modi agreed that all contracts should be in place by June 2017. In the meantime, site engineering work will get underway in order to provide visibility for the project.

The US-India Civil Nuclear Cooperation, also known as the 123 Agreement, was signed by then Prime Minister Manmohan Singh and then US President George W. Bush on July 18, 2005 and ratified by Congress in 2008. It has taken more nearly a decade for progress to show up.

President Obama said he is directing the US Export Import bank to develop a financing package and support the final contract negotiations. The financing will be a tough job unless a new Congress lifts the limits on the size of the deals the bank can work on now set at $10 million.

Also, NPCIL, the Indian nuclear state owned organization which will buy and operate the reactors, must come up with 15% of the purchase price in cash before work can begin on each reactor. At roughly $4-5 billion each, over a 10-20 year period that comes to about $4 billion. Funding at this level will require major legislative action by India’s parliament. Obviously, work isn’t going to start on all six reactors at the same time. The most likely plan is to build two at a time.

While Westinghouse is based in the US, its majority stockholder is Japan’s Toshiba.  India and Japan have signed a civil nuclear cooperation agreement in principle. Japan’s parliament, theDiet, went home for the summer on June 1 without ratifying it.

Concerns about India’s refusal to sign the Nuclear Nonproliferation Treaty run deep in Japan which has been a long running source of tension between the two countries. The sweet smell of export deals has moderated it to some degree. The Diet’s inaction was not  helpful.

Meanwhile, India has signed on to the International Convention on Supplementary Compensation which set standards for assigning damages in the event of a nuclear accident. However, India’s domestic political / economic interests are disconnected from these types of global developments.

The nuclear supplier liability law has been the central bone of contention. Regardless of what agreement PM Modi made with President Obama about putting it on a short leash, a future PM may have other ideas if it is still on the books.

Westinghouse may be able to address some of the opposition from Indian business interests by executing a “localization” strategy of buying major reactor components, like turbines, from Indian heavy industry firms. Most of the construction labor will be Indian workers. While it hasn’t come up so far, India may yet take a page from China’s playbook and ask for technology transfer rights to some of the AP1000 technologies.

At its Jaitapur project on India’s west coast, Areva has already signed technology transfer agreements with NPCIL and its India industrial partners. A localization strategy to buy components for the first two of a planned six EPRs for the power station is also in place.

The net of all this is that PM Modi has stopped playing the non-aligned card when it comes to nuclear technology deals. President Obama has finally got some face saving progress he can point to for all the effort he’s put into working the relationship with Modi. Westinghouse gets $10 million to move dirt around at their new site in Andhra Pradesh.

Separately, the US is also providing $60 million to India for solar and wind energy projects. Given the size and scope of India’s energy needs, and its stated commitment to the Paris Climate agreement, the money looks like diplomatic window dressing even if it will go far, compared to US projects, with Indian energy developers.

Meanwhile, EDF has taken over Areva’s planned project to build six 1650 MW EPR reactors at Jaitapur south of Mumbai on India’s west coast. The French government says a deal will be signed by December 2016. Like the Westinghouse deal, the project was announced years ago, but has not yet completed all of its financial arrangements.

In Kudankulam, in Tamil Nadu, which is south of Andhra Pradesh, Russia’s Roastom is starting work on two more 1000 MW VVER reactors having commissioned the first two at the same site last year.

Getting uranium to make nuclear fuel for all these civilian reactors is India’s next challenge. It has a deal from Australia, but it needs access to world markets. For political reasons, China has aligned with Pakistan to block India’s request for membership in the Nuclear Suppliers Group which manages trade in uranium. President Obama has pledged to lobby on India’s behalf. It ain’t over until the fat lady sings.

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