US Exim gives preliminary nod to Reliance's Sasan project

The US Exim bank on Wednesday gave its preliminary approval to finance Reliance Power's 4,000-MW project in Sasan, Madhya Pradesh.

The bank had earlier turned down the proposal on concerns over huge carbon emissions from the coal-fired project.

However, the Exim Board reversed its decision in the wake of a MoU by Reliance to develop a 250 MW renewable energy facility in India and a commitment to cap the emission from the Sasan project to 850 grams of CO2 per kilowatt hour.

"We are pleased that Reliance is making this commitment to renewable energy, which allows us to sustain US jobs and promote both conventional and renewable energy exports," said Exim bank Chairman and President Fred P Hochberg in a statement soon after a Board meeting.

The bank said the Board of Directors has approved a full financial, technical and environmental review of an application by Reliance Power for financing its coal-fired power plant.

The application is still subject to final review and approval, it said.

On June 24, the Board voted not to proceed with further review of the application for the Sasan project, based on environmental concerns.

Subsequent to that vote, Reliance Power has executed a memorandum of understanding (MOU) with Exim, indicating its intent to develop a new 250 megawatt renewable energy facility, which when built will rank among the largest renewable energy projects in India.

The proposed $600 million Exim loan guarantee will support the sale and export by US firm Bucyrus International and help save hundreds of jobs at Bucyrus and its sub-suppliers.

The Exim said it reviewed information about the effects of financing on US energy exports and related employment.

"This data, along with the executed MOU with Reliance, led the Board to conclude that a full review of the project should proceed. This vote paves the way for a full financial, technical and environmental due diligence process.

Following that, the Board will vote on whether to approve the application," it said.

"This transaction was also made possible because of Anil Ambani's leadership and vision in diversifying Reliance Power's production portfolio of energy projects in India," said Hochberg.

Meanwhile, US environmentalist have charged the US Export Import Bank of succumbing to intense lobbying.

Environmental groups led by Friends of the Earth have said that the reversal of the Sasan decision would set a dangerous precedent for other coal projects in the Exim Bank pipeline, including the 4,800 megawatt Kusile coal power project in South Africa, which would emit 30.5 million tonnes of carbon dioxide annually.