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Foreign firms pulling out of power projects

By Alok Mukherjee

NEW DELHI JULY 7. Most of the foreign companies who had planned massive investments in Indian power projects have pulled out, forcing the Union Ministry of Power to organise a stock taking meeting and to work out fresh plans for creating more generation capacity over the next 10 years. The Ministry's stated intention is to add another one lakh MW of power generating capacity so that power is available on demand by 2012. Most of the projects initially proposed by the foreign companies, which have now pulled out, were to have materialised during these years.

Information available from the Power Ministry indicates that Mirant Asia Pacific Limited has withdrawn from 6 x 660 Hirma Thermal Power Project which is being developed as a mega project. The foreign company has withdrawn on grounds that several key milestones relating to payment security mechanism, fuel supply arrangement, implementation agreement and the transmission services agreement had not been met.

In the case of the 1,070 MW Korba East Thermal Project, Daewoo Power (India) Limited gave a termination notice to the Madhya Pradesh Government citing inability of the State Electricity Board to provide payment security. Similar is the case with the 420 MW Bakreshwar thermal power project in West Bengal where the joint venture company formed to implement the fourth and fifth stages has been wound up because of the exit of Ogden Energy Asia Pacific.

The Maheshwar hydel project in Madhya Pradesh also saw the pulling out of Bayerwerk View for non-project specific reasons. Subsequently, Ogden Energy of the U. S. also exited from the same project, but due to its own internal restructuring and changed business focus. Another project in West Bengal also saw one of the foreign partners pulling out and now the West Bengal Power Development Corporation is taking up the Gouripore thermal project with a revised configuration of 2 x 125 MW.

Earlier, Cogentrix Energy Inc. had withdrawn from the Mangalore Thermal Power Project after doggedly trying for a number of years and fighting various cases in courts to set it up. Similarly, Electricite de France, a French power company, had withdrawn from the 1,082 MW Bhadrawati thermal project in Maharashtra, citing inordinate delay in getting clearances from various authorities and lack of proper arrangements for payment security.

Ironically, the only foreign company, which fought numerous political and legal battles to set up a power project, was the Enron Corporation. But here too, the Dabhol project ran into trouble with the Maharashtra Government leading to arbitration by which time the principal company collapsed in the U.S.

With these foreign promoters pulling out, the Union Power Ministry realised that India's power development programme will eventually have to be shouldered by the Central and State Government utilities and the Indian private sector to the extent it participates in the endeavour. Besides, additional power is to be generated through modernisation and renovation of existing power plants.

It is against this background that the Power Ministry has organised the first-ever conference on capacity addition in the power sector during the Tenth and Eleventh Plan periods. To be held over two days beginning Monday in New Delhi, this meeting is scheduled to bring together representatives from Central Ministries such as coal, petroleum, railways, programme implementation and the Planning Commission. The State Governments will participate through chairpersons of their electricity boards as well as Power Secretaries and the private sector has also been invited to the meeting to discuss their problems in setting up power projects in the country. Leading financial institutions, which will provide the crucial funding for these large-value projects, will also be attending.

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