Powergen too may dump MP project

Michael Bates, Britain8217;s Deputy High Commissioner in Mumbai, told Reuters Powergen was worried by litigation lodged with the Supreme Court to lower the level of escrow cover the state government has to provide against purchases of electricity by the state electricity board.

The company said it will not comment on its intentions before the Supreme Court makes its judgement, which it hopes will be delivered in mid-January. quot;Essentially the project has dragged on for years and is bogged down by litigation concerning the capacity for escrow cover,quot; Bates toldReuters.

quot;Powergen is considering pulling out,quot; he said, adding such a move would send a negative signal to investors in India. Bates conveyed the company8217;s concerns to Madhya Pradesh Chief Minister Digvijay Singh at an investment forum this week.

Madhya Pradesh Electricity Board has asked the Supreme Court to allow it to reduce the escrow cover from 2,651 mega watts mw to just over 900 mw under the terms of its power purchase agreements.

If the escrow cover is reduced, financial institutions will not disburse funds for the projects.