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Joseph Lo

CLP Power International has pulled out of a US$1.3 billion power-plant project in the southern Indian state of Karnataka, citing prolonged delays in securing government approvals and other agreements.

 CLP and US-based joint-venture partner Cogentrix Energy yesterday said they had jointly decided to cease development of the project in Mangalore.

 The decision is a setback for CLP's ambition of prising open the Indian electricity market as it seeks to diversify across Asia.

 CLP Power International is the international investment arm of CLP Holdings.

 The joint venture - in which CLP has been involved since 1995 - turned into a public relations nightmare for the company in India, where the project became the focus of a power struggle between local politicians and environmental groups.

 A CLP spokesman said: 'The decision to cease development of the Mangalore power project was not an easy one.

 'This project has been going on for quite a while and a lot has been accomplished over the past several years.'  Various stages of approval from the state government had been received, including approvals on finance, technology and environment issues.

 However, the project had been increasingly delayed, and there had been difficulty in obtaining further approvals.

 The CLP spokesman said: 'All developers want to see projects completed for the benefit of the country involved and for the benefit of the shareholders.

 'But unfortunately in this case, the project was delayed and delayed, until it was decided that the project was no longer viable.'  CLP and Cogentrix had secured a 30-year power purchase agreement from the Karnataka Electricity Board, but could not resolve public interest litigation against the project.

 One complaint was that the plant site, 2,000 kilometres south of New Delhi, was too close to a bird estuary.

 The two companies join a growing list of multinationals pulling out of the Indian state.

 A consortium including US company Raytheon last year pulled out of a project to build an international airport in Bangalore, also citing inordinate delays in the approvals process.

 CLP is not believed to have spent a large sum on the project.

 'We don't have an investment breakdown on specific overseas projects,' the CLP spokesman said.

 'But if you're worried that we'll have lost a large sum on this project, don't, because it never really got past the planning stages.

 'The only costs incurred were in the initial pre-financing stages. We haven't begun to build anything yet.'  Victor Sun, an investment analyst at GK Goh Securities, said he was 'glad CLP has decided not to proceed with the Mangalore power project'.

 'That project was supposed to start construction a year ago, but it's been delayed many times,' he said.

 'Now they might as well focus on some other areas instead of being distracted by Mangalore.'  The decision to abandon the project should not affect CLP's plans to continue to diversify out of the Hong Kong market, according to the company.

 The CLP spokesman said it 'remains committed to developing the power industry in India'.

 The company, with India's Tata Group, had jointly submitted a bid to develop the Pipavav power project in Gujarat, he said.

 CLP in September established a strategic partnership with YTL Power International of Malaysia to bid for generating assets to be privatised by the Malaysian Government.

 The company has been seeking growth opportunities elsewhere in the Asian region after seeing its mainland ambitions frustrated.

 A strategic relationship with Citic Pacific had promised to secure CLP privileged access to the mainland's power market, but this failed to materialise and the relationship was ended in August.



CLP quits Indian project