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Why the prospects of India’s first Nuclear Energy Stock “Nuclear Power Corporation of India” are dim

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Nuclear Power Corporation of India

India’s cash strapped government has been trying to sell shares of public sector undertakings in 2012 without much success. The general economic downturn, bad investor sentiment, unrealistic valuations have meant that most of the share sales have been not occurred and some that have been completed are mainly due to buys by government controlled big investors like LIC, SBI and others. Now the Government is thinking of offloading a 10% stake in India’s monopoly nuclear energy generator NPCIL. The state owned company which has around 4.8 GW of nuclear power capacity and which intends to double it is planning to get itself listed. The company makes a reasonable 20% net profit margin on around $1.4 billion turnover. However it remains to be seen what kind of reception that the company gets given that some of the recent power IPOs and FPOs by the government have given hugely negative returns. India’s state owned hydro power companies SJVN and NHPC have not recovered their IPO price levels till now. Global Nuclear Energy companies and stocks have also been facing tough times in the aftermath of the Fukushima accident. Some of the top nuclear equipment suppliers like GE and Toshiba have announced that they will reduce their investment in nuclear energy as many of the top nuclear power countries like Japan, Germany, Belgium, Switzerland have announced plans to completely phase out nuclear electricity generation.

NPCIL IPO Plans

India’s Finance Ministry has proposed to list Nuclear Power Corporation of India Ltd on the stock exchanges by selling 10 per cent stake. NPCIL currently has 19 nuclear power reactors at six sites with a capacity of 4,680 MW. It is constructing six nuclear power reactors with a  capacity of 4,800 MW. The company plans to reorganize its Board structure to meet the requirements of a public owned company.

State of Nuclear Power Energy in India

India currently has 4560 MW of Nuclear Plant Capacity distributed across 6 places located mostly in southern and western parts of the country. Tarapur is India’s oldest facility and has 1200 MW capacity. Kota in Rajastan has India’s second largest nuclear power capacity at 1080 MW.

India has Lofty Nuclear Power Plans But…..

India has lofty plans to increase nuclear energy’s share in the overall energy basket from the current 4 per cent of total domestic energy production to 9 per cent within the next 25 years. India envisages a capacity of 60,000 mega watt (Mw) by 2032 against current capacity of 4.7 GW. NPCIL will procure nuclear power equipment from nuclear energy providers like Areva, Rosatom, Toshiba and GE who will also be responsible for supplying the uranium fuel for the lifetime of the nuclear reactors. 4-5 sites are being developed simultaneously in the next few years where 8-10 reactors will be deployed.

a) India’s Electricity Companies face massive problems

India’s electricity companies have been making massive losses due to the regulatory mess and a sharp rise in fuel costs. Though NPCIL does not face the same issues, massive nuclear protests have made new nuclear reactors a very risky proposition. The nuclear power plant at Kudankulam has seen huge protests which has prevented the starting of the plant despite completion. The nuclear power plant at Jaitapur planned with Areva collaboration has also seen a person killed in police firing. Given the current siege being faced by nuclear energy around the world, one would not like to bet on NPCIL.

b) Nuclear Power in India facing cost escalation and NIMBY protest

The cost of nuclear power has grown at a distressing pace with massive time and cost overruns. The Areva Nulcear Plant is going to cost Rs 20 crore a MW which is much more than a Thermal Power plant and even costlier than Solar Power which has the highest capital requirement amongst major energy sources. Besides disposal of nuclear energy waste is a huge problem even for countries like USA and Japan which have huge nuclear power industries. For a country like India with poor safety record, nuclear waste disposal would be a nightmare. India should learn from the example of Germany and Italy and stop going down the nuclear path and look for other green energy sources. Note different forms of Renewable Energy have their own pros and cons but Nuclear Energy Risks are too great to be ignored.

i) NIMBY Protests Growing

Rawatbhata Nuclear Power Plant in Rajasthan is situated near a major dam which makes it susceptible to major flooding. Besides the villages near the plant have reported higher incidences of abortion and cancer which is typical of radiation effect of human health. A new plant being proposed in Bhavnagar, Gujarat too is seeing protests being organized by villages near the plant.

ii) Nuclear Plants face massive cost overruns

New Nuclear Power Plants face massive delays leading to much higher costs as rules and regulations become tougher. The Nuclear Power, already the nuclear renaissance which was supposed to be boosted by India and China is coming under attack. India’s nuclear power plant to be built at Jaitapur by Areva is seeing massive protests by local villagers as well as intellectuals alike. India has around 4.5 GW of Nuclear Power Plant Capacity which it proposes to increase by around 1-2 GW every year. This will hardly make a huge difference to India’s massive power needs which requires 10 GW of power every year. Nuclear Energy Disadvantages with the Tail Risk of a Meltdown are too huge to be ignored. China is the other country with massive nuclear power plans, however the government too has decided to be careful. China has more than doubled its solar power target to 50 GW by 2020 from 20 GW.

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PG

Sneha Shah

I am Sneha, the Editor-in-chief for the Blog. We would be glad to receive suggestions, inputs & comments on GWI from you guys to keep it going! You can contact me for consultancy/trade inquires by writing an email to greensneha@yahoo.in or call me on +913340606492.

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