New nuclear reactors at India's Kudankulam face 55% cost surge as delays mount

The cost of four new units at India's Kudankulam nuclear plant, being built by Russian state nuclear company Rosatom, has surged 55% to $14.4 billion after nearly three years of construction delays, India's Atomic Energy Ministry has said, with analysts blaming multiple factors for the delay.

Kudankulam-3 and -4 are now scheduled to enter service between June 2027 and June 2028, with Kudankulam-5 and -6 to follow between June 2029 and March 2030, the ministry estimated in a statement July 27. Under the original schedule, all units were to be operational by 2027.

The cost of constructing Kudankulam-3 and -4 has risen by 73%, while the cost of Kudankulam-5 and -6 has jumped by 40%, the ministry added.

Construction of Kudankulam-3 and -4 commenced in 2017; that of Kudankulam-5 and -6 started in 2021.

Over the past several years, Indian authorities have attributed the delays to a combination of factors, including the coronavirus pandemic, difficulties in sourcing certain materials and equipment, and problems faced by contractors. They have also pointed to the fallout from the war in Ukraine and Western sanctions against Russia, which have disrupted supply chains and complicated the delivery of equipment and materials for the project.

Rosatom initially denied that Western sanctions on Russia following its February 2022 invasion of Ukraine had had any meaningful impact on the construction of the Kudankulam plant.

In 2022, Andrey Lebedev, president for Indian projects at Atomstroyexport, Rosatom's engineering division, estimated that the company had mitigated "98% of sanction-related risks." The restrictions prompted Rosatom to make adjustments to equipment production, forcing the company to partly relocate it to "more comfortable places," Lebedev said.

The Rosatom press office declined to comment Aug. 5.

Multiple contractors

Rosatom is not the only company taking part in the plant's construction, Dmitry Baranov, a senior analyst at Finam, a Moscow-based financial consultancy, said in an email Aug. 7.

"The increase in costs may have occurred on the side of other contractors, driving up the overall price of the project," Baranov suggested, adding that financial difficulties and a lack of working capital among contractors can delay a nuclear plant's construction.

"When payments from the customer are delayed, contractors start cutting back on procurement and staffing," Baranov said. "This creates a chain reaction: Suppliers refuse to ship materials without advance payment, contractors are unable to complete the next stage of the work, the customer delays the next payment, and the cost estimate then has to be revised."

Alexander Uvarov, director of the AtomInfo Center, a Moscow-based think tank, said in an email Aug. 7 that the Indian side had given multiple reasons for the construction delay.

"For example, last year they listed the non-availability of rock products following the district administration's suspension of quarry operations as one of the factors," Uvarov said.

There are similarities in the Kudankulam project with other Rosatom foreign construction projects, which have suffered construction delays, Uvarov said. These similarities include payment difficulties and the need to adjust logistics, but Kudankulam also faces challenges specific to India, Uvarov said.

"The plant is not being built on a turnkey basis," Uvarov said, adding that Indian customer Nuclear Power Corporation of India Ltd. (NPCIL) "plays a significant role in the project, including in the selection of contractors for construction work."

Still, sanctions are one of the factors behind the Kudankulam delays.

"COVID-19 caused the initial disruption, while the geopolitical situation, external restrictions and logistical problems turned it into a systemic delay," Baranov said.

A range of factors

The delays in Kudankulam's construction have arisen from multiple factors arising from a combination of geopolitical, logistical, financial, and administrative challenges, an official at NPCIL said in an interview Aug 10. The official spoke on the condition of anonymity as he is not authorized by his company to speak to the media.

The official cited supply chain disruptions early in the project for the delays, adding that the pandemic had further slowed construction progress. As the life cycle of a nuclear project is long, spanning five to six years from pre-project activities to commissioning, any disruption at one stage has repercussions across the entire timeline, the official added.

Additional hurdles included disputes with state governments over quarrying permissions, financial constraints faced by contractors, and further delays when a shift in component production was made to local manufacturers with limited capacity, the NCPIL official said. These factors collectively have significantly prolonged the project's execution, and raised the overall cost, the official added.

The 1-GW Kudankulam-1 entered service in 2013 and the 1-GW Kudankulam-2 in 2016. Both reactors are Russian VVER-1000 units.