GLOBAL ENERGY NEWS | Thu Sep 22, 2016 | 5:05pm IST
EXCLUSIVE - India seeks loan from U.S. for nuclear reactors, snags remain

By Sanjeev Miglani and Douglas Busvine | NEW DELHI

India is negotiating with U.S. Export-Import Bank for an $8-9 billion
loan to finance six Westinghouse Electric nuclear reactors, two
sources familiar with the talks said, although a lending freeze at the
trade agency threatens progress.

(For graphic of nuclear power plants in India click here )

The mega-project, the result of warming U.S.-India ties in recent
years, could open up billions of dollars of further investment in
India's nuclear power sector, which was for decades shut out of the
global market.

India now targets a tenfold expansion in capacity to 63,000 MW by
2032, and U.S., French and Russian companies are among those chasing
the business.

The Westinghouse deal, however, is contingent on financing and Ex-Im
cannot approve loans of more than $10 million, owing to a row in the
U.S. Congress over board appointments stemming from a campaign by
conservatives to close the government lender.

Only two of five seats on Ex-Im's board are filled and the appointment
of a third director - the minimum needed to clear board decisions - is
on hold due to opposition from the Senate Banking Committee Chairman,
Republican Richard Shelby.

"Financing of the reactors is the critical piece; everything is down
to this," said one source involved in protracted negotiations to build
the reactors in Andhra Pradesh.

The source, requesting anonymity because of the sensitivity of the
talks, said Indian negotiators and Ex-Im officials were trying to set
the terms of the financial package in the hope that the freeze on the
bank, affecting potential sales of several major U.S. companies, would
lift soon.

Westinghouse is owned by Japan's Toshiba Corp (6502.T) but is based in
the United States.

In addition to U.S. Ex-Im, India is also seeking funding from Japan
and South Korea for the reactors to be built in Kovvada, two sources
familiar with the talks said.

Ex-Im had asked a South Korean export credit agency if it would be
interested in partly financing the Westinghouse deal, since some of
the nuclear equipment and materials are expected to come from South
Korea, an official at the agency with direct knowledge of the
discussions told Reuters.

The agency was willing to fund a part if a Korean contractor was
involved, with Ex-Im providing the majority of the total, the official

The U.S. bank had not made any request to its Japanese counterpart to
extend loans to the nuclear project in India, a source with direct
knowledge said in Tokyo.


Both U.S. President Barack Obama and Prime Minister Narendra Modi have
been promoting the nuclear deal, which was stuck for years because of
an Indian law that made nuclear equipment suppliers liable in case of
an accident, and not just the plant operators as is the global norm.

India has since set up an insurance pool to indemnify suppliers, and
both Westinghouse and India's state-run operator Nuclear Power
Corporation of India (NPCIL) are working to a June 2017 deadline to
sign the contract laid down by Obama and Modi.

"The goal right now is to get that financing done during President
Obama's tenure, knowing full well that it may or may not stick in a
new administration following the ... presidential election," said
industry veteran Vijay Sazawal, principal of International Atomic
Energy Consulting in Washington D.C.

While negotiators are unlikely to nail down a contract under Obama,
who steps down in January, their challenge will be to come up with
concessional financing terms that will make Westinghouse's AP1000
reactors affordable.

Westinghouse did not respond to a request for comment, while a U.S.
Ex-Im Bank spokeswoman declined to comment. An NPCIL official said the
firm had nothing to say at this stage.

Democratic lawmakers in the U.S. Congress were pushing this week to
include a provision in a must-pass spending measure that would lift
the board quorum requirement for deals above $10 million.

But negotiations between party leaders were dragging on and
congressional aides and lobbyists said on Tuesday it was unclear
whether the Ex-Im provision would prove too controversial to make it
into the final spending extension package, needed to avoid a
government shutdown on Oct. 1.

The deal with Westinghouse would be the first since a landmark 2008
U.S.-India nuclear pact that allowed New Delhi access to foreign
technology and finance even though it has not signed the nuclear
Non-Proliferation Treaty and runs an active weapons programme.

Under the rules of non-proliferation, no U.S. or Japanese firm could
engage in nuclear trade with a non-signatory, but since Washington
made an exception for India, Tokyo has also signalled its assent.

The nuclear agreement crafted by the George W. Bush administration was
seen initially as an attempt to build India into a military and
economic power to counter China, but has since become linked to
Washington's effort to wean major economies such as India off fossil
fuels to cleaner forms of energy.

India is also in talks with Russia to build four more reactors on top
of the two already completed in Kudankulam in Tamil Nadu, as well as
with France's EDF (EDF.PA) for the construction of six reactors of
1650 MW each in western India, which would be the world's biggest
nuclear power complex.

But talks with Westinghouse are more advanced than those with the
French, with the two sides aiming to sign an early works agreement
next month, sources familiar with their progress said.

A delegation from the U.S.-based firm visited New Delhi earlier this
month to finalise the pact that would include the timeline and
up-front costs such as land acquisition and site preparation, said a
source familiar with the matter.

(Additional reporting by David Lawder in WASHINGTON, Joyce Lee in
SEOUL, Kentaro Hamada in TOKYO; Writing by Sanjeev Miglani; Editing by
Mike Collett-White)

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