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CLP returns to India Mangalore power project

BANGALORE: CLP International, a unit of Hong Kong's CLP Holdings Ltd, said on Saturday that it had parted ways with U.S. partner Cogentrix in the $1.3-billion Mangalore power project in southern India.

The 1,000 megawatt coal-fired project in Karnataka state will now be developed by CLP along with an Indian partner who is yet to be identified, a senior CLP official said.

"From our point of view, the Mangalore Power Company (MPC) has reconsidered the decision that was made at the end of last year and we intend to continue the development of the project," Tom Watters, business development director of CLP International and a board member of MPC told reporters.

An equal joint venture between CLP International and Cogentrix, MPC had in December announced that it was pulling out of the seven-year-old project in the coastal Mangalore region due to delays in obtaining required government approvals and agreements, and in resolving public interest litigation.

But MPC said it would review its decision to pull out after India's Supreme Court later quashed a public interest suit that had contributed to delays in the coal-fired project.

"Unfortunately Cogentrix, the American partner has decided, for various reasons, including the fact that they have better opportunities in America, to withdraw from MPC," Watters said after a meeting with Karnataka chief minister S.M. Krishna.

"CLP International has decided to take the lead in developing the project and it is our intention at some stage to bring on board a local Indian partner."

The MPC project was one of the first of the eight "fast-track" power projects initiated after India opened up its power sector to private players in 1992.

After the Supreme Court decision, India's federal government approved a financial guarantee for the project but Karnataka said an expert panel would examine MPC's demand for escrow cover.

The escrow cover, estimated at 4.5 billion rupees ($103.5 million), would guarantee payments from the electricity board for power purchased from MPC.

Private power project developers in India insist on financial guarantees and escrow covers to reduce risk of non-payment from financially-weak state electricity boards.

Karnataka chief minister Krishna had also said MPC may need to reduce the cost of power it would be charging the consumers.

Watters said on Saturday CLP had agreed to accept "minor amendments" to a power purchase agreement it signed with the state electricity board in 1997 and will also look at areas where it can bring down the cost of its power.

The CLP director saw the Mangalore project attracting finance soon.

"If we can get certain things cleared very quickly.we think we can finance this project within six months," he said. "We could then have the power plant up in operation within three-and-a-half to four years."

Chief Minister Krishna said CLP officials during the meeting had told him they would be identifying their Indian partner in the next 15-20 days, but the Hong Kong firm did not give details.

"That has not been decided," Watters said when asked what the new ownership ratio between CLP and the Indian partner would be.

He also said he would not like to reveal details of the commercial arrangement between CLP and Cogentrix following the latter's decision to pull out of the joint venture.

Krishna said the CLP officials will meet on January 28 with the state's expert panel to discuss the project's modalities.-Reuters