Areva Keen to Expand Indian Operations with Plans to Increase Investments

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Researched by Industrial Info Resources (Sugar Land, Texas)--In a bid to consolidate its nuclear power operations on the Indian subcontinent, Areva SA (EPA:CEI) (Paris, France) has joined forces with local companies such as Nuclear Power Corporation of India Limited (NPCIL) (Mumbai), TCE Consulting Engineers Limited (Mumbai), and Bharat Forge Limited (BSE:500493) (Pune, Maharashtra). In addition to the $11.26 billion deal for the supply of nuclear reactors to NPCIL's upcoming plant in Jaitapur, Maharashtra, Areva has entered into a joint venture with Bharat Forge to manufacture nuclear reactor forgings on a large scale. The company has also finalized the terms of an engineering service agreement with TCE, a subsidiary of Tata Sons Limited (Mumbai), which is scheduled to be signed shortly.

By means of these local alliances, Areva is consolidating its position in the nuclear power sector of India, which has an investment potential of $60 billion. As India progresses toward its target of generating 60,000 MW of additional nuclear power by 2032, Areva is using its capabilities along the nuclear supply chain to move from nuclear fuel supply to plant installation and collaborative ventures in manufacturing.

As a part of the joint venture with Bharat Forge, Areva is expected to invest $411.24 million in two manufacturing companies. Bharat Forge will hold a majority stake of 51% in the first company, which will be involved in the production of steel smelting and forgings, while Areva will be the major shareholder of the second company, which will build assembly lines for nuclear forgings. The heavy steel forgings produced by the joint venture will also cater to the conventional power generation sector for the manufacture of generator rotors, steel plant rolls and turbines. Operations of the plants are scheduled to commence by 2012 and expected to supply 8-12 forgings in the first year. The joint venture's manufacturing plants, requiring a land area of 200 acres, are being planned for a coastal location, with three possible sites having been shortlisted: Dahej, Gujarat; Krishnapatanam, Andhra Pradesh; and Visakhapatnam, Andhra Pradesh. The joint venture's infrastructure includes an integrated steel mill and a modern 14,000-ton-per-year open die-forging press, along with other related equipment.

Under the contract with NPCIL, Areva will supply the first consignment of two 1,650-megawatt (MW) European Pressurized Reactors for the Jaitapur plant, which has the capacity to accommodate six such units. In addition to providing technical assistance for the venture, Areva is also bound to supply nuclear fuel for the reactors throughout their active lifespan of 60 years. Areva has also submitted a preliminary agreement to NPCIL for finalizing the capacity and design of the reactor components. The first reactor is expected to be commissioned by 2017, while the second will go on stream a year thereafter.

Additionally, Areva has offered NPCIL a stake in its uranium mining operations in order to secure a steady supply of fuel for nuclear projects in India. NPCIL is expected to invest in as many as four mines, including ventures in Nigeria and South Africa, which are under various stages of development. According to NPCIL sources, the company is likely to fund about 26% of the project costs.

Meantime, an offer from Bharat Heavy Electricals Limited (BSE:500103) (BHEL) (New Delhi) is also in the pipeline. BHEL has approached Areva and Bharat Forge to create a joint venture to manufacture forgings and castings, for which BHEL has already signed up Sheffield Forgemasters Engineering Limited (Sheffield, United Kingdom) as a technical partner.

Although Areva has decided to exit from transmission and distribution operations in India, it is forging ahead with its nuclear power plans in the region. With India's nuclear power scenario receiving a tremendous boost after the Civil Nuclear Agreement, Areva's ventures in the country give it an edge over other competing technologies from General Electric Company (NYSE:GE) (Fairfield, Connecticut) and Westinghouse Electric Company LLC (Monroeville, Pennsylvania), which is owned by Toshiba Corporation (TYO:6502) (Tokyo, Japan).

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