Daewoo, Abb To Pull Out Of Korba East Project

Daewoo Power and Asea Brown Boveri (ABB) Energy Ventures have decided to withdraw from the $1.4-billion Korba East thermal power project in Madhya Pradesh. The joint venture, in which the partners held equal stake, was to develop the 1,070-mw project. The decision to pull out comes in wake of the partners' inability to tie up finances and frustration over a series of pending litigations. Other reasons were delays in clearances from the government and the Madhya Pradesh government's inability to provide escrow cover for the project. The partners are also upset about the refund by the state government of bid advance of about $30 million. Although Daewoo had initially decided to implement the project on its own, ABB was roped in to pick up the 50 per cent stake after the Korean conglomerate found itself unable to invest the entire amount because of the liquidity crunch faced by it. ABB was also the engineering, procurement and construction (EPC) contractor for the project. Financial institutions have been showing their reluctance in financing the project following a reduction in the escrowable capacity of the Madhya Pradesh Electricity Board (MPEB). Though the financial institutions had sanctioned loans totalling around Rs 2,000 crore for the project, these funds were not disbursed since the project could not attain financial closure. The state government has already awarded the contract to set up a transmission line system to evacuate power from the project to a consortium of KEC International and Crompton Greaves. Daewoo and ABB are the latest to exit from power ventures in India. Last month, Electricite de France (EDF) pulled out of the $1.4-billion Bhadravati power project in Maharashtra. In May, National Power of the UK announced that it putting a freeze on future investments in India. Last December, US giant Cogentrix had pulled out of the 1,000-mw Mangalore power project.