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Nuclear ‘breakthrough’ has CEOs wary of fine print

US President Barack Obama and Prime Minister Narendra Modi hailed a breakthrough meant to spur a surge in civilian nuclear projects. However, equipment suppliers are keeping the champagne on ice.

Westinghouse Electric, the Monroeville, Pennsylvania- based nuclear builder owned by Toshiba, says it 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.

“We need to understand what I’ll call the fine print of the insurance,” Roderick, who says he’s been travelling to India for 15 years trying to promote nuclear power stations, said. “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 $ 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 Modi called “the centrepiece of our transformed relationship.” Neither provided details on how it would work.

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 Bhopal, where at least 10,000 people were killed or injured in a 1984 chemical leak from a Union Carbide 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.

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, US Ambassador Richard Verma said. The deal “now opens the door for US 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 the government would have to determine the size of the insurance pool. He said any liability should be channelled 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.

‘”What they’re going to want to see is that there’s follow-through,” said Ben Rhodes, US 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 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 US 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.

“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 US “caved” on a legal requirement for extensive monitoring to ensure no US 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.”

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