Spinoffs from nuclear deal: Who could benefit?

NSG’s green flag to the import of nuclear material by India may help improve the load factors of existing nuclear plants, as well as may provide a huge boost for the country to set up more nuclear reactors to meet the country’s power deficit. It spells clear business opportunity for several engineering and infrastructure companies, over the medium term.

Apart from sourcing of raw materials such as uranium from foreign countries, setting up of nuclear power plants would broadly involve supply of key equipments such as the nuclear reactor, boiler, turbine generator (BTG) and other components such as pumps, valves, pipes and tubes. Providing the electrical, mechanical and other integration work, also known as Balance of Plant (BOP) is another key component of a power generation plant. Civil structuring, which takes up as much as 30% of the project cost also requires specialised skills given the safety requirements.

In the equipment category, while foreign players such as Areva or GE would be the key providers of nuclear reactors, companies such as BHEL and L&T (which is in talks with foreign players for equipment manufacturing) could be major beneficiaries from BTG order flows. Here again, the likes of Mitsubishi Heavy Industries, Areva, GE and Toshiba’s arm could be global competitors in the BTG segment.

Areas such as forging or supply of other equipments may however leave more room for purely Indian players. Players such as Kirloskar Brothers have already received a good portion of the orders from NPCIL for supply of pumps. L&T has also been in talks with NPCIL for a joint venture for forgings, given the shortage in this segment even on an international level.

The civil and BOP works could also provide enhanced opportunities for Indian companies given their prior qualification. In the civil structuring space, Indian players such as Hindustan Construction, L&T and Gammon India have proven execution skills for specialised civil works.

It, however, needs to be kept in mind that the opportunity arising from the deal would not convert into near term revenues for any of the players, given the long lead time required for the manufacture of equipments and construction.