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CLP Power committed to Mangalore project -- Status quo till financial package is in place

Our Bureau

Bangalore, Dec. 8

CLP Power International has conveyed that there would be no change in the status of the $1.3-billion Mangalore power project despite its acquisition of PowerGen's assets in the country.

CLP Power and Tata Electric companies are the joint equity holders in Mangalore Power Company (MPC). Both companies together hold 50 per cent of the equity each in the company to be financed on a 73:27 debt equity ratio basis.

Sources indicated that despite the change in the status, the equity partners would not be in a position to go ahead with the 1013 MPC project without a firm financial security package in place.

This is one of the main hurdles in the implementation of the project and finalisation of fresh engineering procurement and construction contractors. The previous EPC contractors, the Mangalore Consortium led by the US-based Blake & Veatch, had exited fro m the project swamped by delays in finalising a firm financial security package.

Finalising fresh EPC contractors has also become difficult without the State Government's commitment to such a package without which the Ministry of Finance is not prepared to clear the counter-guarantee proposal.

At the last meeting with the Minister for Power, officials of the Karnataka Government were clearly told to finalise a financial security package to qualify for the counter-guarantee.

The delay in finalising the package by the State has also affected the extension of the financial package in the techno economic clearance by the Central Electricity Authority.

The hurdles notwithstanding, CLP Power International has committed itself to the implementation of this project once the State government is able to come out with a clear stand on the security package.

This is because coal-based stations are likely to emerge as the cheapest source of IPP power for meeting base load requirements, something which even the World Bank has endorsed.

The current acquisition of all the PowerGen assets in the country have been made through a 80:20 joint venture, with CLP Power International holding 80 per cent stake.

But the sources said that another option that CLP Power was likely to examine is the feasibility of setting up a single holding company so as to warehouse all the holdings of the various projects, which include, Rosa Power, Bina and Phaguthan.

In all these three projects, the respective State Governments have committed to firm financial security packages and they are comparatively in an advanced stage of implementation. In some of the new ventures proposed, which include gas-based Pipavav and the Haryana distribution projects, CLP is one of the short listed bidders.