New Delhi: Nuclear Power Corp. of India Ltd.(NPCIL) will proceed with its first foreign bond sale to build the world’s largest reactor complex, even as Japan battles to stop radiation spewing from a damaged plant.
India’s sole atomic energy firm plans to raise Rs 3,000 crore this year through a mix of bonds and loans, locally and overseas, finance director Jagdeep Ghai said in an interview last week, without revealing more.
The extra yield investors demand to hold its five-year rupee debt over government notes has fallen 38 basis points (bps) to 136 from a two-year high on 21 March after Japan averted a meltdown and Kazakhstan promised India 2,100 tonnes of uranium by 2014. A basis point is one-hundredth of a percentage point.
“NPCIL should allow concerns over safety to settle down before planning a bond issuance,” said London-based Raj Kothari, a fixed-income trader at Sun Global Investments Ltd. “If it hits the market after a couple of quarters, it should get a good reception.”
Yield spreads on the Mumbai-based state company’s debt touched 174 points last month, the widest since February 2009, after an 11 March tsunami that followed a 9-magnitude earthquake knocked out cooling systems at Tokyo Electric Power Co. Inc.’s (Tepco) Fukushima Daiichi nuclear plant, causing the worst nuclear disaster since Chernobyl. Tepco’s relative yield has surged 24-fold since to 273 points from 11.5 before the temblor.
The relative yield on China National Nuclear Corp.’s 4.9% yuan-denominated notes due July 2019 climbed 5 bps since 11 March to 201 on Monday, Chinabond prices show. The spread on similar-maturity 4.375%, euro-denominated debt sold by Areva SA, the largest provider of nuclear equipment and services, widened 31 points to 164 on Monday, BNP Paribas SA prices show.
Indian companies have issued $3.5 billion (Rs 15,645 crore) of bonds overseas in 2011, compared with $2.3 billion in the same period last year, as they sought cheaper funding after the central bank raised the benchmark interest rate eight times since March 2010 to 6.75%.
The average yield for Indian dollar debt has fallen 8 bps in the past month to 5.1%, according to HSBC Holdings Plc indexes. India’s nuclear power company should offer a coupon of 4-5% to draw investors, said Kothari.
Suppliers including General Electric Co. and Areva are looking at contracts in India after a civilian nuclear treaty with the US in 2005 helped lift international restrictions imposed nearly four decades ago when the country tested its first atomic bomb. Prime Minister Manmohan Singh’s government won access to fuel and technology in September 2008 from the Nuclear Suppliers Group on a proposal made by former US president George W. Bush.
“Our board approved overseas borrowing in 2008, when people didn’t care much for us,” said NPCIL’s Ghai. “Things have changed now after the deal with the US and people outside are taking note of India’s nuclear energy programme,” he added.
India and China, undeterred by the Fukushima accident, are betting on nuclear power in their quest for alternative energy sources amid rising crude oil and coal prices.
Opposition to some of the Indian generator’s projects from anti-nuclear activists and villagers may damp appetite for the bonds, and some investors may demand a higher yield to compensate for the risks, said Pierre Faddoul, a Singapore-based credit analyst at Aberdeen Asset Management Plc.
“It will come down to pricing at the end of the day,” Faddoul said in a phone interview on Monday. “A good discount would be required to compensate the negative headwinds coming from Japan. It could stretch from a handful to maybe 100 bps.”
Mango farmers and fishermen are opposing what would be the world’s largest nuclear power plant near Jaitapur on the western coast of India, arguing that hot water discharged from the reactors poses a risk to prawns, mackerels and king fish that are exported to markets including Europe, Thailand and Japan. One person was killed on Monday as protests turned violent.
India plans to spend $175 billion by 2030 on nuclear generation, according to estimates by the US-India Business Council, while China was constructing 27 reactors as of 1 April, according to the website of the World Nuclear Association.
The two Asian nations plan to boost their share of global atomic power sevenfold to 30% by 2030 to meet demand and emission goals, according to securities and research firm Sanford C. Bernstein and Co. Inc.
India plans to increase its nuclear capacity 13-fold to 60 gigawatt (Gw) by 2030, according to the nation’s Planning Commission, while China is planning a sixfold expansion to 70 Gw in nine years, according to the National Development and Reform Commission.
Rupee bonds, with a 0.7% drop this month, are the worst performers among local-currency debt in Asia outside Japan, HSBC indexes show.
The yield on the most-traded 8.08% bond due August 2022 slipped 1 bp to 8.24% as of 11.32am in Mumbai, after reaching the highest level in two months on Monday. The rate has risen 16 bps this month, the most since February 2010. The rupee slid 0.7% to 44.63 a dollar.
Archana Chaudhary, Kartikay Mehrotra and Rakteem Katakey in New Delhi and Anurag Joshi in Mumbai contributed to this story.