Cogentrix gets its counter-guarantee, but is this enough?

Vol 3, PW 25 (19 Jan 00) Midstream & Downstream

After the high-drama of December, when Cogentrix announced it was quitting India, an uneasy lull has set in between the US power company and the Indian government.

As Petrowatch goes to press, it is not entirely clear if Cogentrix promoters of a 1,013-MW coal fired power project near the port of Mangalore in Karnataka - will carry out its threat to pack its bags and go. The reason for this is manifold: first the Indian government has backed down over the companys principal demand for a counter-guarantee to cover the $751.57m foreign debt component of the project.

(A counter-guarantee provides a safety mechanism, which protects the promoter if his Power Purchase Agreement (PPA) with a State Electricity Board (SEB) is terminated). On (Wednesday) 22nd December (the deadline issued by Cogentrix) power minister Rangarajan Kumaramangalam requested the Indian cabinet to grant the counter-guarantee, following receipt of what he described as an encouraging letter from the Cogentrix board, reaffirming its interest in the project.

The cabinet agreed. In the past few days, however, Petrowatch learns of a simmering disagreement between Kumaramangalam and Cogentrix, which could still derail the project.

The Indian power minister has been quoted as saying that Cogentrix is asking for Enron-like terms in its counter-guarantee, and that this is unacceptable. Cogentrix is baffled at Kumaramangalams stance.

We are not asking for Enron-like terms, whatever that means, a source tells Petrowatch. In private Cogentrix suspects Kumaramangalam has been influenced against Cogentrix and is trying to create a pretext to ease the company out of India by depicting it as an unreasonable negotiating partner.

Cogentrix suspects the hand of the LNG lobby and points the finger at a multinational with LNG ambitions in Karnataka. So will Cogentrix stay, or will it go The short answer is: we dont know yet.