French firm seeks sovereign guarantee from India for nuclear power project

Mumbai: French major EDF, which has got the contract for building nuclear reactors for the Jaitapur power plant, has said India will have to provide a sovereign guarantee to two other state-run firms of France for providing financial assistance for the project.
The EDF, which will construct the country’s largest nuclear power park comprising six atomic power reactors of 1,650-MW each in coastal Maharashtra, had submitted a techno-commercial offer to the Nuclear Power Corporation of India (NPCIL) in December last year.
What is sovereign guarantee?
Sovereign Guarantee is a promise by the Government to discharge the liability of a third person in case of his default. Sovereign Guarantees are contingent liabilities of the Central and State Governments that come into play on the occurrence of an event covered by the guarantee.
Costs confidential
The NPCIL, a PSU under the Department of Atomic Energy, operates over 20 nuclear reactors in the country. India is yet to respond to the techno-commercial offer, sources said. Replying to a question on the financial aspect of the project, Vakis Ramany, Senior
Vice President at EDF, in an e-mail interview to PTI, said the total cost of the project is ‘confidential and may not be disclosed’ at this stage.
Ramany also declined to divulge the tariff per unit. According to the initial negotiations carried out by Areva, which was later taken over by EDF, India is looking at a tariff of Rs 6.50 per/unit when the plant starts generating electricity.  “Our pricing assumptions are of a commercially confidential nature. The offer is currently under review. It would be premature at this stage to provide numbers. Our focus is to make sure that electricity generated remains competitive over decades,” he said.
Who provides loans
He said EDF would only act as the Evolutionary Power Reactor (EPR) technology provider and not be an investor itself but would facilitate financing discussions as much as possible.

“Capital contributions from NPCIL and lenders will secure financing. Under a French government export credit scheme supported by two well-established French financial institutions, namely BPI France and SFIL, lenders and banks will provide a significant portion of the required loans. A sovereign guarantee from the Government of India should secure the whole package,” Ramany said.

The Rafale connect
Both BPI France and SFIL are French government-owned financial institutions.  Loan is a major component of EDF and NPCIL negotiations. It will have an impact on the pricing of the project and tariff for the electricity generated from the plant. Incidentally, while negotiating the Rafale fighter jet deal, France had given a ‘Letter of Comfort’ to India instead of sovereign guarantee, a move that was criticised by the Comptroller and Auditor General of India while auditing the aircraft deal.
Why we need it
The six EPRs will be able to produce more than 75 terawatt (TWh) per year which is enough energy to power 70 million Indian households based on current energy consumption.  The Jaitapur Nuclear Power Plant was envisaged under the Indo-French nuclear deal signed in 2008.

But, one of the reasons behind the delay in signing the General Framework Agreement (GFA) was non-completion of Flamanville 3 reactor in France, which has been the reference plant for the Jaitapur project. Without an operating reference plant, the Atomic Energy Regulatory Board (AERB), the nuclear power watchdog in the country, will not give go-ahead to the project.

Also, In 2016 India signed the international convention on nuclear civil liability, referred to as CSC. And, in response to the concerns over clauses under the Civil Liability Nuclear Damage (CLND) Act 2010, often cited as very stringent by foreign nuclear companies, Ramany said India should offer a level of protection equivalent to that in other countries.

NT Bureau