CONTROVERSIAL plans for a new "clean coal" power plant have been dealt a blow following a decision by the scheme's backers to withdraw its investment.

CONTROVERSIAL plans for a new "clean coal" power plant have been dealt a blow following a decision by the scheme's backers to withdraw its investment.

Danish power giant Dong Energy said the global downturn had forced it to abandon its partnership with UK firm Peel Energy, with which it was developing the coal station at Hunterston in North Ayrshire.

The project's remaining backer insisted the proposal would go ahead regardless, but the claim was dismissed as "not credible" by environment campaigners.

Dong Energy - majority-owned by the Danish government - said it had no choice but to pull out of plans for three new coal power plants around Europe.

"It's because of the financial situation, which affects our power production - due to fewer sales and falling prices," the firm said.

However, Peel Energy, operating jointly with Dong under the name Ayrshire Power Ltd, vowed to press on with the plans.

Owen Michaelson, chairman of Peel Energy, said: "Ayrshire Power's overall strategy for the project is unaffected by this decision."

The Hunterston planning application is expected to be lodged at Holyrood later this year.

Friends of the Earth Scotland chairman Duncan McLaren said the collapse of Dong Energy's plans at Hunterston was proof that the green message was beginning to get through.

Mr McLaren said: "It seems unlikely that this project would go ahead even if it gets planning permission."

Activists working under the banner Communities Opposed to New Coal at Hunterston said the move confirmed their complaints.

Group spokesman Tim Cowen said: "The fact that Dong has withdrawn at this critical stage also highlights what we have been arguing all along - that carbon capture is not yet financially or technically viable on a commercial scale. Clean coal is a myth."