Karnataka For Mangalore Escrow Terms Waiver

The Karnataka government has asked the Union power ministry to amend the counter-guarantee extended to the $1.2 billion Mangalore power project by waiving off the escrow cover requirements stipulated under the guarantee scheme.

In a letter to the ministry, Karnataka said the Centre should not insist on the escrow cover terms as the state electricity board was not in a position to provide such protection to any of the independent power producers.

The counter-guarantee from the Centre for the 1,000 mw fast-track thermal project puts the escrow cover from the state government as a precondition for the guarantee to be operational.

This condition has been in-built for the other counter-guarantees that have already been cleared by the Centre.

As the counter-guarantee for the Mangalore power project has been extended on the same terms, the state government is required to provide the escrow cover to the project.

However the present move to ask for an amendment in the counter-guarantee comes after a state-sponsored committee had recommended against giving escrow cover for all IPPs in the state. Added to this, in the case of Mangalore power project, the counter-guarantee will have to be issued a fresh because of change of promoters and several other parameters necessitating the need for another PPA.

CLP Power International and Tata Electric Company (TEC) are the main promoters of the Mangalore power project. Tata Electric Company picked up a 30 per cent stake in the project after Cogentrix Inc walked out of the project citing delays in its commissioning.