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CMS says Ennore LNG project now stalled

US firm CMS Energy Corp's LNG-based power project at Ennore in southern India is now completely stalled for want of a credit support mechanism from the Indian government, a top firm official said on Friday.

Rodney E. Boulanger, CMS Generation Co's president, said in a statement e-mailed to Reuters that the firm though "not threatening to withdraw" from the project was "losing heart".

The firm's statement comes against a backdrop of a bitter payment row between US energy giant Enron Corp's $2.9-billion, 2,184-MW Indian unit, the Dabhol Power Co, and the state-run utility in Maharashtra.

CMS, along with India's Grasim Industries, leads a consortium to build a $1.6-billion LNG-terminal-cum-1,850 MW powerplant at Ennore port, just north of Madras.

"The Ennore project is essentially stalled until the government can design and implement a solution that will cause lenders to provide loans to the project," the statement quoted Boulanger as saying.

"In the meantime, we must simply wait for these government actions to occur without which the project cannot go forward."

In May, a CMS spokesman said the firm was disappointed with delays in getting a promised bankable guarantee from the Indian government and said that it was evaluating its options.

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Boulanger said the credit support mechanism or lenders pledge, guaranteeing that project lenders would be able to get their money back if the project cannot collect payments for power produced, was absolutely vital for the project's progress.

In January, the finance ministry indicated it may scrap a plan to extend sovereign guarantees to three mega power projects, including the Ennore LNG project.

The Ennore project has been promoted by the Dakshin Bharat Energy consortium which also includes Germany's Siemens, Australia's Woodside and Unocal Corp.

India opened up its generation sector almost 10 years ago but investment has been scarce as most of the country's power distribution is done by cash-strapped, state-owned utilities.

The CMS-led consortium won the LNG project from the Tamil Nadu state government in 1998 and plans to build a 2.5-million tonnes a year LNG import, storage and regasification terminal.

The LNG is to be imported from Qatar's RasGas and the electricity from the power plant will be sold to the federal government-owned Power Trading Corp of India.

CMS' other projects in India include ownership of a 49 per cent equity stake in a 200 MW diesel-fired GMR Vasavi power plant at Basin Bridge in Madras and construction of a lignite-fuelled 250 MW plant in the southern town of Neyveli.

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