NEW DELHI (Reuters) - A deal to build six Westinghouse nuclear reactors in India is still alive, but to be viable must be ring-fenced from a financial crisis at the U.S. reactor maker and its Japanese parent Toshiba Corp, people with direct knowledge of the matter told Reuters.
Westinghouse would only provide reactors for the six AP1000 units to be built in the southern state of Andhra Pradesh. It would not carry out civil engineering work to build the entire project - an approach that led to cost overruns at its projects in the United States.
Toshiba last month booked a $6.3 billion charge arising from those overruns, forcing it to put its core flash-memory chip business up for sale and pull out of building nuclear power plants abroad.
Despite the financial crisis, Westinghouse CEO Jose Gutierrez flew in to India last week for talks with state-run National Power Corp of India Ltd (NPCIL) and the Department of Atomic Energy that reports to Prime Minister Narendra Modi, said two people who spoke on condition of anonymity.
“We still have daily meetings and things are going to plan,” said one, echoing comments to Reuters on Feb. 17 by India’s atomic energy secretary Sekhar Basu.
Westinghouse and NPCIL did not respond to calls and emails requesting comment.
U.S.-INDIA NUCLEAR COOPERATION
Modi and former U.S. President Barack Obama made finalizing the multi-billion-dollar reactor deal by mid-2017 the centerpiece of their Washington summit last June.
That deadline will probably slip but, in an industry inured to lengthy talks, some participants now suggest a final agreement would still be possible by the end of this year.
Closing the deal would crown a U.S.-India civil nuclear accord championed by George W. Bush that had been slow to advance because of teething troubles over liability in the event of a nuclear accident.
Now, existential doubts over the viability of nuclear power at a global level threaten Modi’s ambitious goal of tripling India’s nuclear capacity by 2024 to wean Asia’s third-largest economy off polluting fossil fuels like coal.
Toshiba has asked a Japanese law firm to estimate the potential financial impact if Westinghouse files for Chapter 11 bankruptcy to protect itself from creditors and allow it to continue operating.
Indian engineering group Larsen & Toubro, a potential partner that has signed a memorandum of understanding with Westinghouse to supply nuclear plant elements and do civil works, still views the India project as viable.
“As long as the guarantees are in place, I see no reason why this won’t go ahead,” Shailendra Roy, head of L&T’s power business, told Reuters, without elaborating on the nature of any such guarantees.
“I don’t think the financial crisis at Westinghouse will affect the execution of the project,” he added. “The project is on, it is viable and that is what the government has intimated to us.”
Westinghouse advertises its AP1000 pressurized water reactor, with a generation capacity of 1,110 megawatts, as “the safest and most economical nuclear power plant available”.
Yet it was the same reactor that was the source of its financial problems in the United States, and construction of a fleet of AP1000s in China has also faced delays.
Critical to managing costs is ensuring that any overruns on the construction side of the project would be borne by contractors and not Westinghouse, as is the norm in India, one of the sources said.
And, while technical negotiations have reached an advanced stage, more work is needed on the commercial side of the deal that would include financing from the Export-Import Bank of the United States.
U.S. ExIm, though, has lacked a quorum on its board of directors, preventing it from issuing loans over $10 million, and the attitude of new President Donald Trump’s administration to the India reactor deal remains unclear.
Those are grounds enough for scepticism, say some nuclear industry experts and sources in India.
“I doubt that NPCIL will finalize a deal until there is clarity about Toshiba’s exit, and who the new project manager would be,” said Rakesh Sood, a former disarmament negotiator and now a distinguished fellow at the Observer Research Foundation in New Delhi.
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Additional reporting by Tommy Wilkes and Aditya Kalra; Editing by Ian Geoghegan