Landmark Nuclear Deal between US and India removes India’s pariah status

The landmark Nuclear Energy deal signed between USA and India was supposed to herald the entry of India into a new Nuclear Age and remove the pariah status.India’s Pokhran nuclear tests in 1998 had led to international condemnation and nuclear sanctions as well as tit for tat nuclear tests by arch enemy Pakistan.However India’s growing economic might and huge markets had led the USA move closer to India.Under President Bush,India signed a comprehensive Nuclear Treaty with the US which would allow India to procure nuclear material and equipment from other countries.This long drawn process which would allow India to get a special exemption from the Nuclear Suppliers Group (NSG) was the crowning achievement of India-US close relations in recent times.Note India is not a signatory to Nuclear Non-Proliferation Treaty (NPT) which forbids any nuclear trade with non-members of the group.However in case of India an exception had been made despite some protests by fringe countries like Australia and New Zealand.

The U.S.-India Nuclear Deal – Council of Foreign Relations

The U.S. Congress on October 1, 2008, gave final approval to an agreement facilitating nuclear cooperation between the United States and India. The deal is seen as a watershed in U.S.-India relations and introduces a new aspect to international nonproliferation efforts. First introduced in the joint statement released by President Bush and Indian Prime Minister Manmohan Singh on July 18, 2005, the deal lifts a three-decade U.S. moratorium on nuclear trade with India. It provides U.S. assistance to India’s civilian nuclear energy program, and expands U.S.-India cooperation in energy and satellite technology. But critics in the United States say the deal fundamentally reverses half a century of U.S. nonproliferation efforts, undermines attempts to prevent states like Iran and North Korea from acquiring nuclear weapons, and potentially contributes to a nuclear arms race in Asia. “It’s an unprecedented deal for India,” says Charles D. Ferguson, science and technology fellow at the Council on Foreign Relations. “If you look at the three countries outside the Nuclear Non-Proliferation Treaty (NPT)-Israel, India, and Pakistan-this stands to be a unique deal.”

China trying to block India’s Nuclear Energy growth using Pakistan as a proxy

Pakistan which has fought more than 3 wars with India since both countries independence from British rule in 1947,regards India as an existential threat.Relations between these 2 neighbours continues to be one of the most tense in the globe with both countries armed with nuclear weapons.Unlike India,Pakistan’s Nuclear Technology has mostly been procured from outside through both legal and illegal means.Pakistan has already been convicted of being amongst the biggest proliferators of nuclear weapon technology.However this has not thwarted with Pakistan’s foremost ally and India baiter China to plan on building 2 nuclear energy reactors in Pakistan.China has always tried to checkmate India using Pakistan as a proxy by giving it weapons and technology on extremely generous terms.While Pakistan is on the verge of becoming a failed state due to increasing Talibanisation and a Basket economy,China’s gift of nuclear reactors can only have one meaning.China wants the world to question India’s special nuclear status. It is trying to checkmate the US -India deal using Pakistan as a willing puppet.Note Nuclear Energy Equipment Giants like Areva,GE-Hitachi and Toshiba-Westinghouse have been planning to invest huge amounts into India’s Nuclear sector.However these moves at the very least make them slowdown these Billion Dollar Investments if not bring them to a complete standstill.

India’s nuclear ambition runs up against China’s – Economic Times

China and Pakistan are threatening to disrupt India’s nuclear aspirations by stepping up collaboration of their own, a prospect that has raised international misgivings and revived concern about the wisdom of making a special case for India. China is now proposing to build two reactors at Pakistan’s Chashma complex, a move based on the logic that if the United States can secure a deal for India, then China should be allowed to do the same for Pakistan.

AQ Khan Pakistan’s salesman for Nuclear Weapons Proliferation – Nuclear News

Pakistan has actively, willingly and illegally supplied Nuclear Weapons to every rogue nation on Earth from North Korea in exchange of its missile technology to Libya in an apparent support of the Islamic brotherhood. Every country that has ever tried to acquire Nuclear Weapons technology illegally has found a more than willing supplier in Pakistan.

At the heart of this vast and flourishing Nuclear proliferation racket of Pakistan stands one man Abdul Qadeer Khan [aka Abdul Xerox Khan aka Photochor Khan]. A trained Metallurgist of immense disrepute, he has been the person whom the Pakistan government and Army has entrusted to peddle Pakistan’s nuclear wares anybody and everybody willing to pay for it.

China-Pakistan deal raises fears of nuclear proliferation – CS Monitor

A $2.4 billion nuclear reactor deal between China and Pakistan aimed at reducing Pakistan’s chronic energy shortage has cast light on the decades-old strategic partnership that Chinese President Hu Jintao described as “higher than the mountains, deeper than the oceans.”The agreement, announced last week, would see the construction two 650-Megawatt nuclear reactors, and it reaffirms the longtime alliance between the two nations particularly as their shared rival India and the United States also deepen ties.

Solar Energy in India has the potential to be one of the biggest opportunities in the Energy Sector in the 21st Century.The government’s strong backing through JNNSM and India’s favorable location for Solar Energy is a win-win combination.This coupled with India’s huge energy deficit and scorching growth makes it a no-brainer investment.A number of Indian private companies like Energy  Giant Reliance have already made plans to enter into the Solar Space.India’s large State Run Companies have also started firming up their plan in this Green Energy segment.Oil companies like IOC,ONGC,Power Utilities like NTPC and Capital Goods companies like BHEL have all announced big ticket investments into Solar.

PSU Companies Solar Plans

India has a huge state run Oil and Gas Sector.Most of India’s Oil and Gas sector is in the hands of a few massive government owned companies like ONGC,OIL,IOC,HPCL and BPCL.Like China’s Oil and Gas giants like PetroChina,Sinopec and CNPC India’s Energy companies are constrained by government mandated price controls . However these state run companies are starting to become more independent as the government partially deregulates the Energy Sector despite massive protests.With Indian goverment making a strong commitment towards Solar Energy,these companies have followed suit.

NTPC and BHEL lead the charge

India’s largest utility NTPC is leading the way planning large solar capacities on its own.Note NTPC with around 30 GW of power generation capacity is India’s largest power utility by far and through its trading arm will play a vital role in proving subsidies to solar power generation.BHEL which is India’s largest Capital Good makers is the other company with the big solar ambitions.BHEL has strong capabilities in the field of making electricity generating equipment.Extending these capabilities in the field of solar power generation is a natural extension.It is following the JV route with various other Public Sector Undertakings (PSUs) like HPCL,BEL and IOC to build power plants and solar equipment factories in the country

NTPC to add 301-mw solar power by 2014 – FE

State-run NTPC has decided to add around 301 mw of solar power by March 2014, taking a year more than the national solar mission’s target of achieving 1300 mw of solar generation by 2013.Chandan Roy, director, operations, told FE that although NTPC’s solar capacity addition was not on the account of the projects being allotted by the ministry of new and renewable energy (MNRE) for the first phase of the national solar mission, “the MNRE is likely to take into account.NTPC’s solar power projects in its national solar mission target”.“NTPC, as a Navaratna company, can take its own decision to spin off projects and it is only the NTPC board that needs to approve new ventures,” Roy said.

IndianOil eyes Rs 100 cr solar power plant in green thrust – Hindustan Times

Flagship refiner-marketer IndianOil Corporation is setting up a grid-linked solar power plant worth about Rs 100 crore at Barmer in Rajasthan, even as the state-run firm sharpens focus on non-conventional energy sources in an attempt to supplement fossil fuels earnings with carbon credits and move towards a green future.

Sources said IndianOil will set up the plant as an equal venture with government-run power equipment manufacturer Bhel. The plant will be set up on a parcel of land belonging to the oil company’s marketing division, while Bhel will supply the panels and other paraphernalia. Most of the electricity generated from the plant will be sold to the general grid, while some quantity may be used for captive use.

ONGC to tap solar power sector – Hindu

Not content with being Asia’s biggest oil and gas exploration company, the Oil and Natural Gas Corporation is exploring avenues to wrench a share out of the solar and nuclear power sectors.Announcing this here the ONGC CMD, R.S. Sharma, said the company had a vision to graduate into a real-time energy organisation and not remain merely an oil and gas company as the hydro carbon reserves were limited and bound to dry out in the near future. “We would like to end the dependence of the nation on other countries for our nuclear needs and have already signed an MoU with the Uranium Corporation of India to venture into the nuclear energy sector”, he said.

Emphasising on the vast solar energy potential of India, Mr Sharma said the ONGC was in touch with major foreign solar energy companies to tap the solar power sector in a big way.

BPCL to foray into solar power generation – Free Library

The company has inked a Memorandum of Understanding (MoU) with the state-owned Punjab Energy Development Agency (PEDA) to set up the power plant, involving the cost of  INR 220-225 million) USD 5.2 million to 5.3 million on build operate and own (BOO) basis at Lalru in Mohali, within the next 8-10 months.

BHEL, HPCL plan JV for solar power foray – Hindustan Times

The two PSUs are working out the modalities to form a new joint venture company with equal equity participation for setting up a series of solar photo-voltaic based power plants across the country.Stating that the modalities of the JV arrangement are being worked out, a senior HPCL official said the plan is to begin with the development of a 25 MW capacity solar power project costing Rs 350 crore by 2012.The two companies plan to scale up their solar power capacity plans to 100 MW by 2015 and to 1000 MW by 2020, the official said. “The board of HPCL deliberated this proposal at its last board meeting. Some more details for the company’s foray into non-fossil fuels with BHEL have been sought by the board,” he added.

BEL mulls Rs 1,500-cr JV in solar energy space – Business Standard

To produce 2,500 tonnes of polysilicon used in solar panels.City-based public sector undertaking (PSU), Bharat Electronics (BEL), said it is planning a major investment in the solar energy space in a tie-up with another PSU, Bharat Heavy Electricals (Bhel).BEL is in the process of setting up a greenfield facility to produce 2,500 tonnes of polycrystalline silicon (also known as polysilicon), the main raw material for making solar panels, at an investment of Rs 1,500 crore. This translates into 250 mw of power.This will be the first major facility for manufacturing a raw material for solar panels by BEL, which is a leading manufacturer of solar panels in the country.

Green Investing in India has become a buzzword much as it has become in the rest of the world.However the Green Industry in India is at a nascent stage compared to other parts of the world .India does not figure in the Clean Technology race with Green Leadership being taken over by China with US ,Japan,South Korea and Europe in hot pursuit.It is not that India is totally bereft of Green Investing Opportunities but on a World Class level, India has still got a long way to go.

Wind Energy

Suzlon is/was the first World Class Green Company from India figuring in the top 5 Global Wind Turbine Makers . It made ambitious acquistions in Europe buying up German turbine producer Repower and Hansen Transmission at the Peak 2008 price levels.The Global Financial Crisis coupled with Execution problems has reduced to a bit player in the Wind Energy Market.It is languishing at 10% of its stock price peak with only faint hopes of a turnaround as it is still saddled with high debt .With the advent of Chinese heavyweights  Goldwind,Suzlon has little chances of winning its lost marketshare back.

Solar Energy

Like Suzlon,Moser Baer had ambitious plans in the Solar Energy field making investments left and right in Crystalline Silicon and Thin Film Solar.Also like Suzlon,its execution has fallen  far short of its ambitions.There are other companies like Tata BP Solar,Webel and others but they are not competitive on the world stage.The recent lobbying for protection from solar imports is clear proof of this fact.

Other Green Segments

India is almost non existent in other upcoming Green Industries of  Energy Efficiency,Energy Storage,Biofuels Clean Transportation etc.Most of the Technology and Equipment is imported from outside.There have been some innovative companies like Reva but these are exceptions which can be counted on fingers.Unlike its strengths in knowledge based sectors like Information Technology and Pharma,India still does not figure in Green Technology.

Green Investing Opportunities

The opportunities for Green Investing are  quite few at present with some upcoming Green IPOs and investing in listed companies like Suzlon,Moser Baer,Webel etc.However these investments are hardly lucrative relative to other booming sectors of the Indian Economy.Greater opportunities lie in the investing in Green Infrastructure like Hydro,Solar and Nuclear Power with substantial PE investments being made in this sector.In Summary,an investor would be much better off searching for “Greener Pastures” in countries other than India

The Indian Government failed to pass a law reforming the structure of state subsidies to the Oil sector .The Meeting between a empowered committee of Indian ministers was expected to loosen the control over prices of petrol,diesel and cooking gas.However the Government failed to make any headway citing high inflation as a reason to delay critical reforms in this sector.India’s State Oil Companies face the brunt of these price controls facing huge losses by subsidizing the cost of petroleum products.The Indian government  periodically issues Oil Bonds when the Losses by the Oil PSU’s becomes too great for the companies to bear.Note the subsidies are mostly a complete waste not reaching their target segment as most of these products are consumed by India’s well off classes.The Cooking Gas subsidy is the most obvious example of this waste.No one amongst India’s poor can afford Cooking Gas using mostly Kerosene or Wood .

India which has been mostly ruled by Coalition governments in the last 20 years has never possesed the political will to implement  unpopular reforms in the Energy sector.But the UPA coalition this time which has the Congress Party as a Dominating Member had raised hopes that they could  pass some unpopular reforms.The government has managed to pass some Reforms in the Social Sector like Education and Female Empowerment,however the Government has failed to muster the Political Will in the case of Oil Subsidies.India’s State owned Oil PSU’s whose stocks had risen with the expectations of Oil Reforms have fallen back once again.

India Delays Fuel Price Decision Amid High Inflation – Bloomberg

India delayed a decision to raise prices of fuels including gasoline and diesel on concern higher costs will stoke inflation, already running at the fastest clip among the Group of 20 nations. Shares of state refiners fell.

Ministers led by Finance Minister Pranab Mukherjee met yesterday to discuss a recommendation made by a panel in February that India free gasoline and diesel prices from state control and increase kerosene and cooking gas rates. The group is likely to reconvene in 10 days and a decision may be reached then, Oil Secretary Sthanunathan Sundareshan said in New Delhi.

Raising prices will help the government cut expenditure on fuel subsidies, which were 260 billion rupees ($5.5 billion) last year. India, which more than doubled prices of natural gas sold by state-run Oil & Natural Gas Corp. and Oil India Ltd. last month, is seeking to limit losses of state refiners that help cap inflation by selling fuels below cost.

The detente between the Ambani brothers which lead to the rescinding of the non-compete agreement has resulted in Reliance Industries  Ltd (RIL) being the biggest Winner in the win-win arrangement.While on one hand Anil Ambani’s Reliance Communication which was facing a liquidity problem has benefited by being free to sell a stake in the company,Mukesh Ambani’s RIL has gained even more. RIL has been a huge cash cow generating billions of dollars in free cash flow from its Energy businesses each year.However RIL was finding it itself hamstrung by the non-compete agreement which prevented the company from entering the areas in which ADAG ( Anil Dhirubhai Group ) operated in. RIL tried its hand at overseas acquisitions but was not finding much success.However with the Ambani Brothers burying the hatchet,Reliance find its hands free to enter the virgin territories of Telecom,Power and Financial Services which will be high growth areas in India’s booming economy

Reliance has firmed up its intentions in all Three Areas through acquisitions,JVs and greenfield expansion.

Financial Services

Reliance has made its move in this sector by signalling its intention through acquisition of a small private player JM Financial Services.With the private financial companies trading at decent valuations compared to the sky high valuations during the 2007-2008 this might be a great time to make acquistions.

Mukesh Ambani may buy MF firm – LiveMint

Mukesh Ambani, who controls India’s most valuable company Reliance Industries Ltd (RIL), is in talks to buy a majority stake in JM Financial Asset Management Pvt. Ltd, his first attempt to enter Anil Ambani’s territory since the estranged brothers scrapped a “non-compete” agreement between them a week ago.

Negotiations are under way for a deal that values JM Financial Asset Management, the money manager controlled by investment banker Nimesh Kampani, at around 8% of its assets under management, which equals Rs685 crore, said two officials close to the development who didn’t want to be named.

Power

Reliance is making forays into Power starved Indian Market by planning to set up Thermal ,Solar and Nuclear Energy Plants.With its superb project executions skills and rock solid Balance Sheet , Reliance is ideally situated to become a dominant player in this space

Reliance may foray into nuclear energy – report – Reuters

Petrochemicals-to-gas conglomerate Reliance Industries Ltd is looking to enter nuclear energy, the Economic Times reported on Monday, citing unnamed sources with knowledge of the matter.The energy major is believed to be in talks with Bechtel, the largest U.S. engineering firm, for a possible collaboration, the newspaper said.”RIL has indicated to the government that it is keen on generation and distribution of nuclear power,” it quoted an unnamed senior government official as saying, adding the plans are at a preliminary stage.

RIL may enter thermal power sector – Energy Business

For RIL power sector is not new as it is already supplying power to Jamngar refinery, Hazira petrochemical complex and Jamngar city through 800 Mw captive power plant, and said sources close to the family.
The company might enter in to the bidding process during next round of UMPPs are offered by the government. However it is unlikely that, RIL will enter in to telecom or financial service sector as RIL are a B2B company and not B2C company

Telecommunications

Reliance Industries had brought a revolution in the Indian Telecom space by introducing the “Monsoon Hungama” scheme which allowed poor Indians to go mobile at a  startlingly low cost of $11 ( Rs 500)  . This arm was hived off as Reliance Communications under the separation agreement between the two Ambani brothers.Now Reliance sees an opportunity to return to Telecom through the new wave of investments in 3G.

RIL to offer 3G, WiMAX devices – Financial Express

Five years after its exit from the country’s booming telecom sector, Mukesh Ambani’s Reliance Industries Ltd (RIL) is plotting the road map for a return trip. However, this time around, it won’t be plain vanilla telecom services that RIL will be interested in, but rather the emerging segments of 3G and WiMAX. According to executives familiar with the development, the initial strategy is not to enter as a telecom operator, though this cannot be ruled out in the long run.

Indian mega industrial groups led by Ambani brothers decided to rescind their non-compete agreement which allows oil and petrochemical giant Reliance  to enter the financial,telecom and power sectors.This deal is much more beneficial to Mukesh Ambani led Reliance Group then Anil Ambani’s led ADAG Group.This deal came about after ADAG lost a gas supply dispute with Reliance in India’s Supreme Court recently.

Power companies in India may face a formidable competitor

Reliance is a massive free cash flow machine as its oil and petrochemicals businesses are one of the most profitable around the world.Its  project execution abilities are also well known.I don’t think that Reliance would like to enter the Hyper Competitive Telecom market but it would make sense to enter the Power Sector where India faces a huge shortfall.It already has a some presence in power installing Solar panels for India’s Commonwealth Games and it would be logical to enter this field as power sector requires large capital outlays and project execution capabilities.Reliance also may want to enter the Financial Services field which  is growing rapidly.It could enter through acquisitions of india Infoline,Edelweiss or any of the myriad  private players to jumpstart their entry.

ADAG Group could be a Loser

ADAG has less to gain from this deal as entering the oil and gas sector might not be that profitable given the large amounts of capital and long gestation periods required .Note the ADAG Group is strapped for cash and facing headwinds in its telecom and power companies I think it has more to lose from competition in the power and financial sectors where it is quite dominant.However the full deal is not known and Anil Ambani might have received a big monetary settlement to free Reliance from the non-compete agreement

Mukesh-Anil Ambani scrap ‘non-compete’ agreement of 2006 – ANI

In a significant development, Reliance Industries Ltd. (RIL) and Reliance ADA Group companies on Sunday formally agreed to cancel all existing non-compete arrangements which the two groups entered in January 2006.The two groups have entered into a new simpler, non-compete agreement with respect to only gas based power generation.The new agreement has been approved by the board of directors of RIL and the respective Reliance ADA Group companies.

However, RIL has agreed not to enter into Gas Based Power Generation Business for the period upto March 31, 2022. An appropriate exception has been made in respect of RIL’s captive gas based power plants.It is believed that these developments will eliminate any room for further disputes between the two groups, on matters relating to the scope and interpretation of the non-compete obligations.