Indian power project still alive despite Mirant withdrawal

The 3960 MW Hirma power project in the state of Orissa has not collapsed says the Indian government, despite the decision by co-developer Mirant to withdraw from the project last week.

Federal Power Minister Suresh Prabhu is reported as saying, “The project has not fallen. The pullout is not necessarily hastened by power sector related issues but could be related to overall corporate planning”.

Mirant was to have jointly developed the power station with Reliance Industries but has now decided to quit the country saying that Mirant had failed to “achieve certain milestones”, including assured coal supplies and certainly of payment for power from the state electricity boards.

Although the project had not reached financial closure, discussions had been ongoing for several years and Mirant’s decision will be a further blow to the Indian government’s ambitions to grow electricity generation with the aid of foreign investors, following the failure of the Dabhol Power project in Maharashtra State.

Mirant has also pulled out of the 500 MW Balagarh project in West Bengal, said country manager Sanjay Kapoor. “While we believe these projects are sound, we have concluded that there is considerable uncertainty in the market to financially continue the development of these projects.”

But the power minister argued that new payment mechanisms for the schemes were under discussion by a group of ministers and that the Atlanta-based energy company, like many others may be holding back on expansion in the wake of the September 11 terrorist strikes.

Mr Harry Dhaul, director general of the Independent Power Producers’ Association of India, said Mirant’s decision was inevitable because “large projects cannot be financed without security of payment – especially in the context of DPC – and similar assurances on power offtake.”

Meanwhile, a spokesperson of Reliance, Mirant’s joint venture partner in Hirma, said that “The company is examining various options and is in discussions with concerned authorities.”

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