The Federal Government has withdrawn funding for a proposed brown coal-fired power station in Victoria's Latrobe Valley.

In 2007, the Howard government allocated $101 million to the power company HRL towards a coal drying and gasification plant.

The 600 megawatt plant was intended to produce power using brown coal and gas turbines. This would emit 30% less greenhouse gas than a comparable power station using brown coal alone.

But Federal Resources Minister Martin Ferguson today said the company had failed to meet conditions tied to the funding.

The Victorian Government is also considering terminating its $30 million funding deal with the company.