Financial institutions have cleared the sale of PowerGen's residual 20 per cent stake in Gujarat Paguthan Energy Corporation to Hong Kong-based China Light & Power group.

This has paved the way for GPEC to become a wholly owned subsidiary of the CLP group.

The United Kingdom-based PowerGen had earlier given an undertaking to the lenders that it would not reduce its stake in GPEC to less than 17.6 per cent.

"Since the entire stake of about 80 per cent held by CLP is pledged with the lenders and the Hong Kong group would not be able to dilute its controlling stake in GPEC, we have given the go-ahead for the move," senior institutional sources said.

PowerGen's decision to sell its residual stake follows the decision by its new owner EON of Germany to get out of Asia.

Even before the change of ownership, PowerGen had decided to scale down investments in India. It had transferred its stake in all power projects in India to a 80: 20 joint venture with CLP.

The British company had cited inordinate delays and lack of clear cut policies in the power sector as the reason for scaling down investments in India.

Earlier, a number of power companies like Cogentrix, CMS Energy and National Power had quit the country citing similar reasons.