India Needs to Tap Atomic Opportunity as Crisis May Slow Orders

India needs to tap opportunities to get nuclear reactors and secure uranium supplies as a global financial crisis may slow orders from other countries.

``The current global financial crisis may very well be a blessing in disguise,'' Shyam Saran, special envoy to the prime minister on the nuclear deal, said at a conference in New Delhi today. ``We should soon see something of a buyer's market in nuclear power plants and uranium as a consequence of the slowdown of major economies.''

The worst financial crisis since the Great Depression is pushing the world economy toward recession and has prompted governments worldwide to shore up bank balance sheets. This coincided with India signing a nuclear energy agreement with the U.S., ending a three-decade ban.

JPMorgan Chase & Co. this month cut its uranium price forecast through to 2010, citing the potential for the freeze to slow nuclear power project development. High up-front capital costs for nuclear power projects may slow the so-called nuclear renaissance, the securities firm said.

``This creates a favorable condition for India to embark on a truly ambitious nuclear energy program, getting the best terms and conditions,'' Saran said. ``This opportunity should not be frittered away, because this window will probably close once this crisis is over.''

Last month, India secured the right to buy equipment from the 45-member Nuclear Suppliers Group as it seeks to bridge the shortfall in electricity.

Seeking Orders

Asia's third-biggest economy has said it plans to add 40,000 megawatts of nuclear capacity by 2020. The agreement with the U.S. paves the way for General Electric Co. and other U.S. companies to export nuclear equipment to India and the waiver from the Nuclear Suppliers Group allows France's Areva SA, Russia's Rosatom Corp. and Japan's Toshiba Corp. to seek orders.

Nuclear Power Corp. of India Ltd., the monopoly atomic energy generator, said this month it plans to place orders for as much as 2,000 metric tons of uranium, equal to almost a fifth of Japan's annual demand, before the end of this year to ensure supplies.

The state-owned company is in talks for long-term contracts and is also willing to invest as much as to $1 billion to buy stakes in as many as four uranium mines overseas, Chairman Shreyans Kumar Jain had said.

India expects to agree on long-term uranium supply contracts with Kazakhstan, Uzbekistan and Niger, Saran said. It is also exploring a joint mining initiative with Mongolia, he said.

Uranium dropped to the lowest level since January 2006 as utilities held off purchases, expecting the metal used to fuel nuclear reactors to continue declining, Denver-based pricing service TradeTech LLC said on Oct. 13.

Uranium Prices

Uranium has fallen 37 percent from this year's high of $75 a pound as funds pulled back from commodities, concerned that a U.S. economic decline may slow new construction and business expansion.

Spot prices may average $65.98 a pound this year, down from an earlier forecast of $69.62, JPMorgan said in its report. It cut its 2009 forecast by 14 percent to $64.75 and the 2010 estimate by 4.7 percent to $71.50. JPMorgan left its long-term uranium price forecast unchanged at $65 a pound.

India plans to spend as much as $14 billion to buy nuclear reactors from suppliers such as Areva, General Electric and Westinghouse Electric Co., Jain said in an earlier interview on Sept. 8.

The government may consider allowing private companies in the nuclear energy industry, Saran said.

Regulation, Licensing

``The entry of Indian private industry into the nuclear power sector will certainly enable a more rapid expansion,'' Saran said. ``However, this would require an amendment in the Atomic Energy Act and the establishment of a much more elaborate regulatory and licensing system. The government may at an appropriate time move in that direction.''

The country needs to make changes in the law as soon as possible, said Abhishek M. Singhvi, a spokesman of the Congress Party, which leads the ruling coalition government.

As much as 2 trillion rupees ($41 billion) is required to set up 20,000 megawatts of nuclear power plants in the next two decades, Singhvi said at the conference in New Delhi today.

``For all this, where do you get the money unless you get the private players?'' said Singhvi. ``Such a large volume of construction, reactors, investment, principally by foreign direct investment and other sources, should lead to some boost in these tough times and these times of distress.''

India needs to consider issuing a global ``nuclear'' bond to partly pay for building the power generation plants, Singhvi said.

Nuclear reactors may produce more than a fifth of the world's electricity by 2050 from the current 16 percent, according to the Organization for Economic Cooperation and Development. To reach this level, 54 reactors would need to be built each year between 2030 and 2050, the agency said on Oct. 16.

In June, 41 reactors were being built around the world, with an average construction time of 62 months, the OECD said.

More than 90 new plants have been approved and are in the planning stage, while at least double that are proposed, according to the World Nuclear Association.

(Source: Bloomberg)