U.S. Exim Bank to Loan Reliance Power $600 Million for Sasan Project

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Researched by Industrial Info Resources (Sugar Land, Texas)--Only a week after rejecting plans to finance a massive coal-fired power plant at Sasan in Madhya Pradesh, India, the Export-Import Bank of the United States (U.S. Exim Bank) (Washington, D.C.), the official credit agency of the U.S., has reversed its decision and will provide a $600 million loan guarantee to Reliance Power Limited (BSE:532939) (Mumbai).

On June 27, the U.S. Exim Bank rejected an application for finance for the project during preliminary considerations of projects that could potentially lead to high emission levels of greenhouse gases. The Obama administration previously had promised to limit export financing for environmentally harmful projects.

The massive ultra-mega power project (UMPP) is being developed by Reliance Power's wholly owned subsidiary, Sasan Power Limited (Waidhan, Madhya Pradesh), which was incorporated in February 2006 to build, own, operate and maintain the 3,960-MW pithead coal-based power project.

The first stage of the Sasan UMPP is scheduled to begin generating 1,320 MW of electricity by March 2012, with two further capacity units being brought online at three-month intervals. The project has been awarded three captive coal blocks at Moher, Moher-Amlohri Extension and Chhatrasal, all three in Madhya Pradesh, for fuel supplies.

The project has been estimated to create between 26,000 and 27,000 tons of carbon dioxide emissions when fully operational, which caused the original rejection after strong complaints from environmental organizations, such as the Sierra Club (San Francisco, California), which claimed that providing finance for the project would undercut the Obama administration promise.

However, several lawmakers and influential Congressman Jim Sensenbrenner, who serves on the House Committee on Energy Independence and Global Warming, said the decision could cause major job losses to American companies, forced the U.S. Exim Bank to reconsider.

In a letter to President Obama on June 29, Sensenbrenner said: "Denying jobs to American workers is no way to address climate changes or energy independence. India will still build the coal-fired plant, just not with U.S. money or equipment." He continued, "The mining equipment will still be manufactured, but it will likely be built in China, where the associated emissions are much higher."

Reliance already had contracted Bucyrus International Incorporated (NASDAQ:BUCY) (Milwaukee, Wisconsin), a designer and manufacturer of mining equipment, to supply mining equipment worth about $600 million over a three-year period. However, the contract was dependent upon Reliance receiving U.S. Exim Bank's support.

The contract is expected to provide jobs for up to 1,000 employees of Bucyrus and its supply company chain, which extends to 13 states. In a phone call to the CEO of Bucyrus, Tim Sullivan, U.S. Exim Bank Chairman Fred Hochberg is reported to have confirmed that the bank now had a broader understanding of the other renewable power-generation facilities that Reliance Power is developing and can approve the application on environmental grounds.

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