Prospects for the U.S. – India Civil Nuclear Commerce March 28, 2012 Vijay K. Sazawal, Ph.D. Director of Government Programs Disclaimer: Opinions expressed by the author are solely attributable to him and not to USEC Inc.

Page 2 Topics  Overview of the Indian Power Situation  Indian Nuclear Power Expansion Plans  Indian Civil Nuclear Program  Bilateral Issues of Interest  Current Business Climate  Global Market Trends  Concluding Remarks

Overview of the Indian Power Situation  India’s power situation is daunting:  40% of the population has no access to electricity on a sustained basis  40% of the population receives intermittent supply of electricity  Total power consumption has no where to go but up:  India consumes 6 th highest amount of electricity despite being the second most populous country  Per capita electricity consumption is 750 kWh as compared to global average of 2752 kWh  Electricity production in 2011 has been estimated at 724 billion kWh  The installed generation capacity is around 190 GWe, out of which nuclear component is about 2.9%  Power scenario, circa 2050:  The population is expected to stabilize around 1.6 to 1.7 billion  Individual power consumption will rise to about 5000 kWh  India will require 8000 billion kWh annually  India’s 12 th Plan (April 1, 2012 – March 31, 2017)  India will increase electricity production capacity by 76,000 MWe Page 3

Indian Nuclear Power Expansion Plans  The public mantra:  20,000 MWe by 2020  63,000 MWe by 2032  25% of electricity through nuclear power by 2050  In reality, plans have changed:  20 nuclear power plants produce about 4780 MW of electricity  “2020 Plan” has been fine-tuned to achieve 10,080 MWe by 2017 and 14,580 MWe by  7 Plants under construction to be completed in the 12 th Plan will generate additional 5300 MWe  Share of nuclear energy in the total power generation will rise from 2.9% to about 9% by  Groundwork has been laid for a huge expansion of nuclear power during and after the 12 th Plan:  10 reactors of indigenous design (700 MW PHWR’s), followed by 1000 MW PHWR’s (TBD)  10 reactors from foreign vendors (imported LWR’s)  Total investment is estimated at Rs.3 lac crores ($60 billion)  Imported Reactors will not be turnkey projects:  NPCIL is the Construction Manager for AES V-392, EPR’s and all domestic PHWR’s Page 4

Indian “Civil” Nuclear Program  India has concurrent civil and strategic nuclear programs, many of which share common facilities. Under the U.S.- India nuclear deal, India is separating the two programs. The “Separation Plan” is underway and will place all civil facilities/programs under the India–specific IAEA Additional Protocol by 2014  All LWR purchases are under the civil nuclear program. Moreover, these purchases will be made only in the Phase- 1 of India’s 3-phase nuclear program  India does NOT plan to have an indigenously designed LWR program (unlike China). So IP issues are not significant in the big picture. Phases 2 and 3 reactors are of indigenous design and rather futuristic. A prototype Phase-2 reactor (500 MWe) is under construction and will be commissioned in A prototype Phase-3 reactor design (300 MW) is nearly complete and undergoing regulatory review prior to construction  India will procure only a finite number of imported LWR’s. The number is based on a complex series of planning scenarios involving the success of indigenous 700 MWe and 1000 MWe PHWR’s, timing of MOX fuel needs for Phase-2 reactors, success of breeder fuel optimization program, and the start-up date of Phase-3 reactors, etc., etc.  Initial planning was based on importing a total of 40 GWe of LWR’s by 2022, but that is unlikely as the new plans call for a TOTAL nuclear generation of 27,480 MWe by then. The delay in the overall program may increase imports  India has designated Five (5) “Nuclear Energy Parks,” with a capacity of 10,000 MWe at each site, for imported reactors. Presently, two of the five sites have received environmental clearance, and one of the two has been approved for construction.  The U.S. has been granted two of the five mega-sites on which American/Japanese owned NPP’s will be built Page 5

Bilateral Issues of Interest  H.R. 7081, The United States-India Nuclear Cooperation and Nonproliferation Enhancement Act of 2008, and Henry J. Hyde United States Peaceful Atomic Energy Cooperation Act of 2006  Statements of policy (HR 7081, Section 103)  Nuclear Export Accountability Program  The Civil Liability for Nuclear Damage Act of 2010 (passed by the Indian Parliament), and The Civil Liability for Nuclear Damage Rules of 2011 (under consideration by the Indian Parliament)  Convention on Supplementary Compensation for Nuclear Damage (CSC), IAEA,1997  Article XII, Item 2, of the CSC, “Nothing in this Convention shall prevent any Contracting Party from making provisions outside the scope of the Vienna or the Paris Convention and of this Convention, provided that such provisions …..”  The NSG “Clean Waiver” to India allowing its entry in global nuclear commerce in September 2008, followed by a “derogation” by the NSG to exclude India from commercial transfer of ENR technologies in June 2011 (Cont’d …) Page 6

Bilateral Issues of Interest (Cont’d)  DOE-DAE Civil Nuclear Energy Working Group (CNEWG)  The CEO’s of Toshiba-Westinghouse and General Electric-Hitachi indicated in February 2012 that the “810 license issue” was the most immediate stumbling block to kick-start bilateral nuclear commerce  In any case, the critical path for either TW or GEH is the successful completion of “techno-commercial” negotiations. India negotiates on the basis of busbar price (Rupees per kWh) that has to be consistent with average regional energy price. Such negotiations can stretch to 3 years or more Page 7

Current Business Climate  Indian History 101  Indian Politics 101  Dealing With the Department of Atomic Energy (DAE), or, Mumbai Versus New Delhi  Dealing With the Nuclear Power Corporation (NPCIL)  Dealing With the AERB (to be replaced by the NSRA)  Dealing With Other Federal Agencies (Ministry of Environment & Forests)  Dealing With States  Dealing With Local Communities  Dealing With India News Media  Closing the Deal  Bottom Lines: - 1. No one gets …… Be …… Page 8

Global Market Trends  South Korea is becoming an increasingly important player in the export market  Russians are on the roll  Japanese are planning to focus mostly on exports  French may get a sweetheart deal in U.K.  Overseas nuclear vendors are obtaining the ASME “N” stamp certifications at the rate of 3.5 to 1  The U.S. domestic nuclear market may not see many more new reactors than presently planned in this decade. Future hope rests on SMR’s beginning in 2020 or possibly later  India is not seeking competitive bids for its imports, but the negotiations (as attested by the Russians and the French) are toughest of all  India will be an exporter of MW class PHWR reactors and offer a strong product line to compete against SMR’s  All countries, including India, consider Financing a key discriminator.  The U.S. nuclear export policies are under severe strain due to an emerging domestic political alliance between the far left and the far right. The problems get exacerbated because our international business competitors are either owned by governments or have tied national security objectives to their exports Page 9

Concluding Remarks  Indian nuclear market for civil commerce is for real and involves massive importation of LWR’s in the next 25 years  Indian pledge to purchase U.S. brand reactors is genuine. Let us not waste precious time arguing otherwise  Times have changed. NSSS vendors must change with the times. Each country has a right to develop its own approach to nuclear power development and U.S. vendors must demonstrate their time-tested ingenuity and business acumen to meet and exceed expectations of emerging customers  Above all, patience with new customers is paramount. A country that has lived through 40 years of nuclear isolation will not sign a contract simply because it has taken too long. Nor will it sign international legal instruments which more savvy global nuclear players like China, Canada, Japan or South Korea have not yet signed  Finally, India is one of the few large markets which has remained resolute in its support for increasing the role of nuclear power to provide electricity to its people while reducing greenhouse emissions. But more important than that, nuclear power symbolizes a way out for Indians to eradicate poverty in their nation  Nuclear power is critical to India’s future, and the U.S. has a big role in making that happen Page 10