Daewoo, ABB pull out of Korba power project

Daewoo Power India Limited has pulled out of the 1,070 mw Korba (east) thermal power project, becoming the third foreign firm to withdraw from Indian power projects this year.

The firm, an equal joint venture between South Korea's Daewoo Power and ABB Energy Ventures Limited, withdrew from the project following refusal by the Madhya Pradesh State Electricity Board to grant escrow cover before the project attained financial closure, a senior ABB official said on Thursday.

The cost of the project is estimated to be above $1 billion.

The official said the electricity board had insisted that the project attained financial closure before it could be granted an escrow cover.

"But which lender would have given funds to the project without the escrow cover. Daewoo Power India had paid a security deposit of $28 million. For them to recover this security deposit, it was necessary to terminate the power purchase agreement," he said.

ABB Energy Ventures Limited is part of the Swiss-Swedish engineering group ABB.

The project is due to come up at Korba in Madhya Pradesh.

The withdrawal is the third this year by foreign companies from power projects initiated after India opened the power sector to private players in 1992.

In January, US-based Cogentrix Energy Inc pulled out of a joint venture with Hong Kong-based China Light & Power Company for a $1.3 billion 1,000-mw power project in Karnataka.

In July, French state-owned Electricite de France withdrew from a $1.1 billion, 1,000-mw joint venture in Maharashtra.

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