Cms Energy Blasts India For Delay In Providing Guarantees

Government inertia in clearing Neyveli project

Top officials of US energy giant CMS Energy have blasted the Indian government and bureaucracy for the delay in providing counter-guarantees for its Neyveli power project in Tamil Nadu.

Vic Fryling, president and CEO of the Dearborn, Michigan-based firm, said yesterday, Last year, when we had this meeting, counter-guarantees for Neyveli were mentioned. Today, we are saying that counter-guarantees for Neyveli are still being mentioned.

In a meeting with reporters here to discuss CMS Energys development activities around the world, including in India where it has two projects with GVK in Andhra Pradesh and Neyveli in Tamil Nadu Fryling said the bureaucracy in India tended to be tardy because there seems to be no urgency on the part of the government to get the plan under construction.

He said it was four years since the contract was signed, but the promised counter-guarantees were still to see the light of the day and that is our biggest concern.

Fryling acknowledged that CMS had received a draft of a counter-guarantee (for Neyveli), (but) it needs minor negotiation. He explained, One requirement is that it needs to go back to Tamil Nadu (government) to sign off.

We hope to get the counter-guarantee by the end of the month, he added.

Fryling said that the GVK project in Andhra Pradesh was running very well and we are looking at doubling the size there.

But he said the biggest issue with regard to this project was the pipeline capacity to transport the gas supplies.

We are asking the (Indian) government to show me this is a good place to make an investment. We are still waiting for it to happen, he said.

CMS chairman Bill McCormick, who also participated in the meeting, said there was no doubt India can be an excellent and exciting place to make an investment.

But the limitation is not on our part. We are interested, we are ready. The problems that weve had in India have mainly been how slow the government approvals are in coming.

McCormick said if the government can speed this process, we can be there making investments. We are there now.

Fryling said CMS was willing to do power projects in India without counter-guarantees, but this would not be feasible with regard to Neyveli.

That was the deal in which CMS gave up certain economic parameters and lowered our return requirement because we had this (the counter-guarantee) to offset, he explained.

He said CMS had accepted some risk factors in the (Neyveli) contract, which the company had done solely depending on the counter-guarantees by the government.

Fryling said the company was well aware that any future projects would not have counter-guarantees and said this should not pose a problem because we can co-finance them at the commercial level.

When a reporter asked why CMS was whining for counter-guarantees when the maxim of the capitalist credo was to take risk, Fryling said, What is happening in India is the utilities that are purchasers of power are bankrupt.

He said when the company went to the banks for loans on the envisaged projects they would want to see the projected revenue for the next two years so that they can make sure that the loan would be repaid.

Fryling said this was in stark contrast to other developing countries like Brazil and Argentina where we are selling to power companies that are credit-worthy (and) solvent and in those cases we dont need a counter-guarantee.

He noted it was different in India because the SEBs (State Electricity Boards) do not have any creditworthiness at all.

You need something to substitute for credit-worthiness and that is what the central government gives in the form of counter-guarantees.

There are a couple of other projects we are working on, Fryling said, adding that the company would be making presentations on them during their next meeting in India.