Indian Oil Corp will do nuclear power generation. IOC, a Fortune 500 company and India’s largest oil refiner-marketer with $58 billion (Rs. 2,85,337 crore) in sales, has informed the government that it would form a joint venture with Nuclear Power Corporation of India (NPCIL). IOC will hold a stake of between 26 and 49 per cent.

This venture is on the back of the Indo-US nuclear deal, that can help in getting nuclear fuel.

The Nuclear Power projects listed by IOC for joint participation with NPCIL are proposed as follows:

• Rs 14,000-crore nuclear power project at Kakrapar in Gujarat with a capacity of 1,400 mw
• Rs 14,000-crore nuclear power project at Rawatbhata in Rajasthan with a capacity of 1,400 mw
• Rs 18,000 crore project at Kundakulam in Tamil Nadu for 2,000 mw
• Rs 28,500 crore project at Jaitpur in Maharashtra for 3,300 mw

So, a total of 8,100 MW of nuclear power projects are planned.

IOC’s chairman and managing director Sarthak Behuria said:

This is a step towards becoming a integrated energy major.” “We have held preliminary discussions with NPCIL and are currently working out the modalities.

A senior Petroleum Ministry official said an investment of Rs 220-825 crore per annum would be required depending on the equity option chosen by IOC. Investments would be required for a span of 5 years beginning 2010.

The official said the company has discussed the proposal with the ministry and IOC’s board on Monday approved plans to have a memorandum of understanding with NPCIL. “We have asked IOC to concentrate more on its core area of business which includes refinery, petrochemicals and marketing. It has assured us that the fund requirement for equity participation with NPCIL is comparatively small as compared to the investment in core areas,” the official said.

Source: Hindustan Times

We feel, IOC’s balance sheet should have no problem funding this venture, and in return, IOC will add a long term assured cash flow generating business, that could one day, have its own IPO. This development makes IOC’s stock a Buy on any near term correction.