NINTH INDIA-EU SUMMIT: €100 BILLION OPPORTUNITY

--- Nuclear Energy Assumes Focus at This Year’s India-EU Summit

--- France Takes Lead By Inking Civil Nuclear Cooperation Agreement: Sets ground for €20 Billion Worth of Contracts Over 15 Years


Ninth India-European Union summit in Marseille, France highlighted the growing trade between the two regions, which is set to reach €100 billion ($140 billion) in two-way trade value over the next five years.

Discussions on harnessing nuclear energy took centre stage at the summit against a backdrop of the increasing oil prices and India’s concern with a deficit in power generation from conventional sources.

“There is compelling need for the two economies to come closer and explore joint initiatives for mutual advantage, increased energy production and relaxation of infrastructure bottlenecks,” says Bundeep Singh Rangar, Chairman, IndusView Advisors Ltd, Europe’s fastest-growing Indian mergers and acquisitions firm.

The India-EU summit brings together a region that generates an estimated 30% share of the world's GDP at $16.8 trillion on one hand and on the other, the world’s second fastest growing economy and the EU’s largest emerging markets trade partner grossing $80 billion in trade.

Trade between India and the 27-nation European Union has more than doubled to €55.6 billion ($80 billion) last year from €25.6 billion ($36.7 billion) in 2000. The participation of European companies in building India’s power generation capacity will help achieve the €100 billion ($140 billion) trade target by 2013 set at the India-European Union Summit.


Opportunity Defined

India’s power deficit entails an estimated investment of up to $250 billion by 2012, significantly more than the $44 billion investment the sector has received during the first six months of the current year. To meet the growing demand, the government plans to add 78.57GW over the same period to its existing generation capacity of 140GW. Of the planned augmentation, only 7.26GW has been commissioned. The slow pace of development due to technology and resource constraints calls for investments estimated at $80 billion over the next five years across alternate energy sources such as wind, solar and nuclear energy.

India will become a lucrative market for nuclear energy equipment makers as soon as The United States-India Peaceful Atomic Energy Cooperation Act of 2006 between India and the U.S. gets officially implemented.

Nuclear energy makes up only 3% of total installed capacity in India and its domestic uranium reserves are also limited. India’s Atomic Energy Commission estimates that domestic resources could support only 10 GW of installed nuclear capacity, signifying the potential of a multifold ramp-up.

In mid-2008, Indian nuclear power plants were running at about half their capacity due to a chronic shortage of fuel, according to the World Nuclear Association, an industry body. That situation was expected to persist for several years if the civil nuclear agreement had not been reached. India plans to raise its nuclear capacity 10 times from the present 3GW to 30GW by 2022.

“India-European Union civil nuclear energy cooperation will pave the way for new joint ventures, civil nuclear research and development initiatives and technology sharing arrangements as India looks to combine foreign and homegrown expertise.”

“As India plans to build eight new civil nuclear energy plants, it provides a ready market for global power producers in search of friendly investment destinations.” adds Rangar.

The Beneficiaries

India and France have been exploring such avenues and indicated willingness to share future technology to develop civilian nuclear energy. The two countries took the lead by inking a landmark agreement on civil nuclear cooperation. The agreement will pave the way for French companies such as Areva SA, Alstom SA and Électricité de France (EDF) to win contracts worth €20 billion over 15 years.

Areva has been committed to developing India’s civil nuclear energy initiative for sometime now. That was symbolized by the visit of Anne Lauvergeon, Chairperson of the executive board of Paris-based Areva SA, the world's largest manufacturer of nuclear reactors in January this year along with the French President Nicolas Sarkozy, during his state visit. This was Anne’s second visit to India in less than two years.

Other companies vying to enter India’s nuclear energy market include General Electric Co., the world's second-largest company by market value, Russia's state-owned nuclear company Rosatom State Nuclear Energy Corporation and Toshiba Corp., a diversified Japanese conglomerate, among others.

With the civil nuclear energy corporation agreements coming in to force various Indian companies have shown interest in this field of energy generation, such as Tata Group, Reliance Power Ltd, GMR Infrastructure Ltd, GVK Industries Ltd and state run National Thermal Power Corp. Ltd.

Other Indian companies that will stand to gain are suppliers and builders, such as Hindustan Construction Co. Ltd, Bharat Heavy Electricals Ltd, Larsen and Toubro Ltd, Gammon India Ltd and Godrej & Boyce Manufacturing Co. Ltd.

Merger & Acquisition Deals

Merger & Acquisitions (M&As) in the power sector having accounted for $5 billion, or 19%, of total M&A value of $26 billion this year compared with about $4 billion last year representing a 7.4% share of the total deal value of $51 billion.

The sector witnessed two deals worth more than $1 billion, that of the U.K.’s Imperial Energy Plc, one of the leading oil companies with assets in Russia by India’s state owned oil company ONGC Videsh Ltd, subsidiary of Oil & Natural Gas Corporation (ONGC) Ltd for $2.8 billion; and the acquisition of InterGen NV, a Dutch power company by Indian infrastructure company, GMR Infrastructure Ltd.