The Centre's counter-guarantee for the Mangalore power project would be valid even if Cogentrix and China Light & Power withdrew.

According to Union power ministry officials, this was because as per the Cabinet clearance, the cover was extended to Mangalore Power Company (MPC), the venture set up for implementing the 1,000 mw project. That is why, the guarantee would be valid even if new promoters were to take over.

Both Cogentrix and China Light & Power have not officially communicated to the Centre their decision to withdraw, announced on December 9. Officially, MPC has merely asked the Centre to clear a draft counter-guarantee.

Cogentrix and China Light & Power hold 60 and 40 per cent in MPC, respectively.

The Union Cabinet cleared the counter-guarantee on December 22. Both Cogentrix and China Light & Power are expected to take a final decision in the first week of January.

Union power minister P R Kumaramangalam had stated that there were many companies in the fray for the project.

Though it has been cleared as a coal-based project, some companies have expressed interest in setting up a gas-based unit at the same site.

Under the counter-guarantee, the Centre offers a sovereign cover for the outstanding foreign debt in case the power purchase agreement (PPA) with the state government is terminated.

This form of counter-guarantee has been offered to five of the seven fast-track power projects. However, only Dabhol Power Company has been provided a tariff-based counter-guarantee, covering both debt and equity of the promoters.

After announcing their withdrawal, Cogentrix president and chief operating officer Mark Miller had said his company would review the decision to withdraw if the Centre sent a draft counter-guarantee and the PPA signed in November 1997 was upheld. or BSE