Plans to build a new £150 million sterling (#243 million) power station in Derry may be abandoned if the Northern Ireland Assembly fails to reach a decision on public funding for a crucial gas supply pipeline by September, industry sources have warned.

It is understood the private sector consortium comprising Coolkeeragh employees and ESB International must commit £5 million towards the project by September as a down payment to the manufacturer of the gas power station.

However it is believed that the consortium will be reluctant to commit the finance to the project unless the supporting infrastructure - the contract to build and operate the gas pipeline - is in place by that time.

The current uncertainty surrounding the future of the Northern Ireland Assembly has cast a question mark over the feasibility of the proposed gas station.

There is strong political and community support for the project, that would transform the energy market in the northwest, but key decisions have yet to be reached on fundamental issues about the gas pipeline that will supply natural gas to the power station.

The Northern Ireland industry regulator, Mr Douglas McIldoon, is currently reviewing the joint tender from the American group Questar and Bord Gais to build the transmission pipeline that will run from Belfast to Derry.

Mr McIldoon recently said he was confident that a contract would be awarded shortly, however his decision is only one part of the equation according to senior sources from the energy sector.

"The Northern Ireland Assembly has not yet agreed on the amount of public funding that the transmission pipeline should be awarded and tariff agreements have not yet been negotiated for the supply of natural gas to the North West.

"Both these decisions must be made and they must be made quickly if this project is to go ahead. The reality is that if ESB/ Coolkeeragh do not make the substantial deposit by September then the new power station will not be built. The developers are now up against the line," the industry spokesman said.

He said there were now "real concerns" that the uncertainty surrounding the future of the Northern Ireland Assembly could end up costing the North West the new gas-fired power station.

Mr Alan McClure is chairman of the North West Chambers of Commerce Initiative, the cross-Border private sector body that campaigns on behalf of the business community.

He is also world-wide president and chief executive officer of Perfecseal, a company that is currently investing £8.4 million in Derry.

He believes that the gas pipeline and new power station is vital to the area's economic success.

Mr McClure said it was clear that the gas-fired station cannot go ahead with out the gas pipeline first being secured.

"This is very important to the North West because energy is one of the highest costs for businesses in this area. "The proposed new power station would mean that costs would come down and it would make businesses in the North West more competitive and the region more attractive to investors.

"It would bring cheaper energy to the North West and mean that we would have some of the lowest energy charges in Ireland and for the first time it would also be on a par with energy prices in the UK," Mr McClure said.

He has urged the Northern Ireland Assembly to recommit itself to resolve the outstanding issues surrounding the gas pipeline before September.

"We cannot afford to let this issue drop - we need decisions to be made so that commitments can be honoured," Mr McClure added.

The North West Chambers of Commerce Initiative has also launched a campaign to persuade the Irish Government and the Northern Ireland Assembly to work together to extend the proposed gas pipeline to Letterkenny.

Mr Jack O'Herlihy of Letterkenny Chamber of Commerce is also vice chairman of the initiative.

He said the proposed gas pipeline might attract European funding if it was extended to a cross-Border project.

"The lack of reliable energy in Donegal is a significant deterrent to the growth of the region and to the development of our economy.

"The new power station can supply the entire region and give us a competitive advantage but in order to benefit we need the pipeline to extend to Letterkenny. "There is no reason why this cannot be a cross-Border initiative that will benefit both communities, " Mr O'Herlihy added.