Assurances notwithstanding, India must not enter into a contract with a bankrupt company

With Japanese conglomerate Toshiba announcing that Westinghouse, the American nuclear major it bought in 2006, has filed for bankruptcy, the road map of the India-U.S. nuclear deal is in jeopardy. Under the deal, Westinghouse is slated to set up six AP1000 nuclear reactors in Kovvada, Andhra Pradesh. The National Democratic Alliance government, after assuming power in 2014, had stood by the contours of the deal signed under the previous government and a preliminary work agreement between Westinghouse and Nuclear Power Corporation of India Limited (NPCIL) to build two reactors in Kovvada was being finalised at the time of the bankruptcy filing.

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The U.S. embassy in New Delhi has reaffirmed the commitment to civil nuclear cooperation with India, and Westinghouse is reported to have indicated that it continues to stand behind the reactor delivery model that it presented in its Technical Commercial Offer to India and looks forward to progress on an agreement in 2017. But these assurances notwithstanding, India must not enter into a contract involving billions of dollars with an American company that has already declared bankruptcy.

A history of project delays

Westinghouse had taken the contractual responsibility of two projects to build four AP1000 nuclear reactors in the U.S. Both these projects are delayed by three years or more and the costs have escalated by 40-50%. It has also been party to two Chinese reactor projects for the construction of four similar AP1000 reactors at two sites, and these too are behind schedule, and costs have also similarly exceeded much beyond the original estimates. In China, the first of these reactors was to have been set up in 2013. As of 2017, none of these reactors is near completion, and it may take another two years to finish all four.

For the reactors envisaged for Kovvada, no site work has started yet, and the local population is opposed to the nuclear power project.

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Westinghouse going into bankruptcy causes much larger problems than just the financial consequences. With the bankruptcy filing, no creditors will come forward to lend the approximately $7 billion needed to bankroll the India project in the first phase. During the time of the Barack Obama administration, India had hoped to get a U.S. Export-Import (Exim) Bank loan for the Kovvada project. But with Donald Trump assuming the U.S. presidency and Westinghouse perilously in the red, there is little chance that the new American administration will favourably consider an Exim Bank loan for an Indian nuclear project to be technologically executed by a bankrupt U.S. company. Even if the Trump administration is willing, the project is definitely not in the interest of the people of India.

Potential losses on all fronts

From personal contacts, I understand that senior and mid-level Westinghouse managers and technical staff have already started looking for other jobs. The company will find itself hard-pressed to handle the completion of the eight AP1000 reactors for the U.S. and China that it is committed to, let alone competently take on and complete a new two-reactor project in Kovvada. Besides, six-eight years from the start of construction, which competent Westinghouse engineering team will be around to help India start up these reactors and provide periodic assistance thereafter?

In terms of capital costs, each Westinghouse 1000 MWe reactor will cost approximately three times the cost of two 500 MWe India-designed heavy-water reactors today, and perhaps eight times the cost of equivalent coal-powered supercritical power plants. Lastly, not a single AP1000 Westinghouse reactor is in operation anywhere in the world today. Even when one of the eight reactors of this type which are under construction today starts operation, we have no guarantee how many years it will take from then to reach an assured level of reliability and safety before we can confidently deploy them in India.

In view of these difficulties, it is best to completely keep away from agreeing to purchase the Westinghouse AP1000 reactors. In fact, the current status of world energy technology does not warrant the inclusion and consideration of nuclear power of any kind in the energy basket of our nation.

A. Gopalakrishnan is a former Chairman of the Atomic Energy Regulatory Board of the Government of India. Email: agk37@hotmail.com