India's Nuclear Power Plans $1.2 Bln Spending on Uranium Mine


May 30 (Bloomberg) -- India's nuclear power company plans to spend $1.2 billion on a stake in a uranium mine to support an expanded atomic power program, entering international bidding for the reactor fuel by nations including China and Japan.
Nuclear Power Corp. of India approached Australian and Canadian companies on a possible joint venture in uranium mining, Chairman S.K. Jain said, without naming them. India may compete with China for deposits of the metal, he said.
``Many uranium mines are not being fully exploited today'' and they will be expanded because of demand from India and China, Jain said in a phone interview from Mumbai on May 24. ``This may lead to a temporary peaking in uranium prices.''
The uranium is needed to run about 28 reactors that India plans to build after the U.S. and other countries end an international embargo on the sale of atomic technology to the world's second-fastest-growing major economy. India has doubled its nuclear power generation target to 40,000 megawatts by 2020.
Prices for uranium, used to generate about 16 percent of the world's electricity, have gained about 80 percent in the past year as demand from utilities rises faster than output. Uranium for immediate delivery was last priced at $43 a pound on May 26, according to Metal Bulletin.
Higher oil, gas, and coal prices and new controls on emissions have prompted utilities to build nuclear reactors. More than $200 billion may be spent on the plants worldwide by 2030, according to the International Energy Agency in Paris.
India's Nuclear Plans
India is planning to spend as much as $40 billion over the next 16 years to buy nuclear reactors from suppliers such as France's Areva SA, Electricite de France and U.S.-based General Electric Co. and Westinghouse Electric Co., Jain said in an earlier interview on May 16.
Nuclear Power Corp. is seeking a joint venture in which the state-owned company and the foreign partner will each invest $200 million and $800 million will come from loans, Jain said. ``We are looking at investments of $1.2 billion per mine.''
The cost of acquiring energy resources has risen because of increased competition between China, the world's fastest-growing major economy, and India.
China outbid India for oil field assets worth $5.6 billion in Kazakhstan and Ecuador in the past year and purchased a $2.27 billion stake in a Nigerian field that the South Asian nation deemed too risky to buy.
China Vs India
The rivalry between the two countries increased prices of energy assets, Subir Raha, then chairman of Oil & Natural Gas Corp., India's largest explorer, said on Dec. 13. ``There is a logical case to work together because by competing we only benefit the seller.''
Uranium may become a new area of competition as India follows China in seeking uranium to generate nuclear power to feed increasing electricity demand.
``The Chinese are trying to engage Australian companies, and in fact any company in the world that's dealing in uranium,'' said John Borshoff, managing director of Paladin Resources Ltd., Australia's biggest uranium explorer. ``We are aware that the Indians are looking at potential sources, although it is very preliminary.''
Uranium, a heavy metal, is concentrated through an enrichment process to produce fuel for a reactor. India would need about 700 tons of uranium a year from overseas because local reserves are insufficient to meet local demand, and are three times more expensive than imported supplies, Jain said.
`Makes Sense'
``It makes sense,'' said Gavin Wendt, senior resources analyst at Fat Prophets Funds Management in Sydney. India's Aditya Birla group's acquisition of a copper mine in Australia and GAIL (India) Ltd.'s accord this year to develop coal-seam gas projects along with Brisbane-based Arrow Energy NL are instances of India's search for resources, he said.
``It would be a logical progression that would then flow on into uranium, particularly with the U.S. recently seeming to support the Indian nuclear power industry,'' Wendt said.
U.S. President George W. Bush has agreed to ask Congress to end nuclear sanctions against the world's second-most populous nation. The U.S. is also asking the Nuclear Suppliers Group, including France, Russia and Australia, to exempt India from the list of countries banned from receiving nuclear technology.
Australia may lift its prohibition on selling uranium to some countries that haven't signed the nuclear Non-Proliferation Treaty, because of a U.S. accord that will bring India's atomic industry under international supervision, Prime Minister John Howard said in Dublin on May 22.
`Current Policy'
``Our current policy is not to sell to countries that don't adhere to the treaty, but we are interested in the U.S.-Indian agreement,'' Howard said in response to questions from students at University College Dublin.
Australia's government, which last month agreed to export uranium to China, wants to expand mining of the nuclear fuel to tap rising global energy demands. Restrictions including mining bans by state governments have limited output in Australia, which has 41 percent of the world's uranium reserves, to 21 percent of global demand.
The sanctions against India were prompted by the nation's testing of a nuclear weapon in 1974. The explosion conducted in a desert in western India prompted the formation of the Nuclear Suppliers Group. Another round of tests by India in 1998 led to the U.S. choking trade with India by disallowing the Export- Import Bank and Overseas Private Investment Corp. to guarantee loans for projects in India.
The U.S. removed the economic sanctions in 2001 after the Sept. 11 attacks to bolster support for its campaign against terrorism. The U.S. decision to give India access to civilian nuclear technology was initiated during Prime Minister Singh's visit to Washington in July and concluded during President Bush's visit to India seven months later.
To contact the reporter on this story:
Archana Chaudhary in Mumbai at achaudhary2@bloomberg.net.
Last Updated: May 29, 2006 14:30 EDT