business

Obama-Modi Nuclear ‘Breakthrough’ Has CEOs Wary of Fine Print

President Barack Obama and Indian Prime Minister Narendra Modi hailed a breakthrough meant to spur a surge in civilian nuclear projects. Equipment suppliers are keeping the Champagne on ice.

Westinghouse Electric Co., the Monroeville, Pennsylvania-based nuclear builder owned by Toshiba Corp., will need to study an offer by India’s government to create an insurance pool that would help shield equipment suppliers from liability in the event of an accident, Chief Executive Officer Danny Roderick said. It will then look for commercial agreements with Indian companies to build nuclear power stations, he said.

“We need to understand what I’ll call the fine print of the insurance,” Roderick, who says he’s been traveling to India for 15 years trying to promote nuclear power stations, said in a phone interview from New Delhi. “Let’s look at the total package of all the things that the Indian government is talking about now on how they’re going to address nuclear liability.”

Modi’s administration on Sunday said it plans to set up a 7.5 billion rupee ($122 million) insurance pool to shield nuclear plant operators and suppliers from liabilities following accidents. India’s government would add to the pool at a later date “on a tapering basis,” according to the foreign ministry.

Obama said the nuclear agreement was a “breakthrough” on an issue that Modi called “the centerpiece of our transformed relationship.” Neither provided details on how it would work.

Bhopal Legacy

India is one of the few nations that doesn’t exempt nuclear suppliers from accident liability. That stems from the world’s worst industrial accident in the central Indian city of Bhopal, where more than 10,000 people were killed or injured in a 1984 chemical leak from a Union Carbide Corp. pesticide plant.

Public support for the liability legislation only hardened after the 2011 Fukushima meltdown in Japan, which forced 160,000 people from their homes and will cost an estimated $196 billion to clean up.

As part of the U.S. delegation, Roderick is scheduled to meet Modi and Obama on Monday evening. He plans to tell them his company needs “very strong government support to remove the obstacles so we can move this agreement forward and not hit another roadblock immediately for something else,” he said.

India needs more electricity, and plans a $182 billion expansion of its nuclear industry to provide it to the roughly 400 million people who live in the dark. Modi is looking to tap all forms of energy, including solar and wind, to ensure every home in the country can run at least one light bulb by 2019.

‘We Think’

“We think we came to an understanding of the liability” issue, U.S. Ambassador Richard Verma said. The deal “now opens the door for U.S. and other companies to come forward and help India develop its nuclear, non-carbon-based energy production.”

Roderick declined to say if the measures announced on Sunday were adequate, adding that the government would have to determine the size of the insurance pool. He said any liability should be channeled to the operator to help those affected immediately and avoid “years and years and years” of lawsuits.

GE Hitachi Nuclear Energy, a partnership between GE and Tokyo-based Hitachi Ltd. that provides reactors and services to the industry, applauded the move to resolve the issues even as it waits for more details.

“We look forward to reviewing the governmental agreement in due course,” GE said in a statement provided by spokesman Dominic McMullan.

‘Tremendous Asset’

“What they’re going to want to see is that there’s follow through,” said Ben Rhodes, U.S. deputy national security adviser, when asked what companies are looking for in the nuclear deal. “We’ll continue to share that information with them and to ensure that we are doing our best to advocate for our businesses. GE and Westinghouse would be a tremendous asset here in India.”

Westinghouse has been allotted a site in Modi’s home state of Gujarat to build a nuclear power station, Roderick said. The plant can have a capacity of 10,000 megawatts and will require about eight of the company’s AP1000 reactors, he said.

Two reactors will be set up initially following any commercial agreements. Westinghouse is unable to provide a final price for the reactors because the contract terms aren’t final yet, he said.

As part of the deal, the U.S. dropped its earlier insistence that it be able to track the nuclear material provided to India, a requirement that went beyond standard International Atomic Energy Agency safeguards, according to Indian press reports.

Unanswered Questions

“Tracking was never going to fly as Indian public opinion would see it as intrusive,” said K.C. Singh, a former diplomat.

It appears the U.S. “caved” on a legal requirement for extensive monitoring to ensure that no U.S. technology is diverted for Indian military purposes, according to Daryl Kimball, executive director of the Washington-based Arms Control Association, an advocacy group.

Still, for many companies it may prove inconsequential without clarity on what would happen if unlimited claims come in the wake of a disaster at a nuclear plant, according to Debasish Mishra, Mumbai-based partner at Deloitte Touche Tohmatsu.

“This is a government-to-government agreement and ultimately the final deals will be signed between companies,” he said. “There’s a feeling that not everything has been resolved.”

    Before it's here, it's on the Bloomberg Terminal. LEARN MORE