Larsen & Toubro and NPCIL Joint Venture to Set Up $750 Million Nuclear Integrated Melting and Forging Facility

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Researched by Industrial Info Resources (Sugar Land, Texas)--Indian engineering major Larsen & Toubro (BOM:500510) (L&T) (Mumbai) and the Nuclear Power Corporation of India Limited (NPCIL) (Mumbai) are likely to establish a $750 million joint venture to manufacture forgings for nuclear power plants. This month, NPCIL received an in-principal approval from Prime Minister Manmohan Singh, who is also the Minister in Charge for the Department of Atomic Energy, to develop an integrated melting and forging facility in partnership with L&T. A cabinet note has been prepared and the proposal awaits the consent of the Cabinet Committee on Economic Affairs.

India's forging requirements are currently being met through imports. However, international suppliers are reportedly flooded with orders for the next four to six years and are quoting high rates inclusive of opportunity costs for any new orders. Nonavailability of forgings is bound to create a major constraint in India's plans for developing nuclear power reactors in the coming years. India plans to set up eight 700-megawatt (MW) pressurized heavy water reactors and three 500-MW fast breeder reactors. It will also develop 10 light water reactors based on imported technology, subject to obtaining a waiver from the Nuclear Suppliers Group. The reactors require steel forgings of different sizes and shapes. Heavy dependence on imports will cripple India's nuclear plans and throw proposed projects off schedule. This makes it essential for India to have an indigenous manufacturing facility for forgings. L&T will invest $450 million for the proposed captive-components unit to be set up jointly with NPCIL.

With the imminent signing of the much-debated and long-delayed Indo-U.S. nuclear deal, global power majors like Areva (EPA:CEI) (Paris), General Electric (NYSE:GE) (Fairfield, Connecticut) and Toshiba's (OTC:TOSBF) (Minato, Tokyo) Westinghouse Electric Corporation (Monroeville, Pennsylvania) have begun talks with L&T for possible joint ventures to manufacture nuclear power equipment and generate nuclear power. The deal would permit international majors to supply fuel and technology to India to set up nuclear reactors. Inadequate supply of uranium fuel has limited operating capacities of nuclear reactors in the country to 55%. If the agreement goes through, it will allow India to generate up to 40,000 MW of nuclear power by 2020. India's government plans to ramp up nuclear production capacity from the present 4,120 MW to 63,000 MW by 2030. This implies a potential generation of orders valued at more than $10 billion for domestic power equipment manufacturers like L&T and Bharat Heavy Electricals Limited (BOM:500103) (BHEL) (Mumbai).

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