Blazing a green trail

Investment opportunities beckon in India’s renewable energy sector, writes Valérie Demont of Baker & McKenzie

Investors in the renewable energy sector should hail the approval of the US-India Nuclear Cooperation Approval and Nonproliferation Enhancement Act by the US and India. The agreement mandates cooperation between the US and Indian governments on the peaceful uses of nuclear energy. It also ends 34 years of Indian isolation from the international nuclear community.

India has yet to become a party to the 1968 Nuclear Nonproliferation Treaty, which it refused to sign despite conducting its first nuclear test in 1974. The approval of the new act, however, constitutes an acceptance by the Nuclear Suppliers Group (NSG), of which the US is a member, of India’s de facto status as a nuclear weapons state. The NSG is the international cartel that controls trade in nuclear weapons fuel and technology. The agreement also constitutes an acknowledgement by the US of India’s voluntary compliance with the treaty’s principles.

These moves have more than political significance. The agreement allows India’s scientists to take part in international nuclear research activities and opens up India’s multibillion-dollar market for the sale of capital and technology-intensive equipment. This may be a significant factor in helping some US manufacturers out of their current doldrums.

More specifically, the agreement clears the way for American nuclear corporations to bid for contracts reportedly worth US$27 billion to build between 18 and 20 nuclear reactors in India.

Nuclear energy represents about 2% of India’s current energy mix, but occupies a prominent part of the government’s energy plan. According to the Indian government, India is capable of increasing its nuclear power output to at least 63,000 megawatts by 2031. The participation of private entities in the generation of nuclear power is currently prohibited in India, but fresh efforts are being made to open the sector up for private investment.

This article was written by Valérie Demont, a corporate and securities partner, with additional research by Ata Dinlenc, a partner in the New York office of Baker & Mckenzie, and Smiti Saha, an advocate from the infrastructure team at the Mumbai office of Economic Laws Practice.