The change in the ownership of the beleaguered Dabhol Power Company is likely to increase its price tag to around $800 million, including the cost of restarting the project.
After acquiring a controlling stake of around 52 per cent in DPC, General Electric and Bechtel are in a position to ensure that their equity in DPC does not go cheap, whenever it is sold.
However, the domestic lenders to DPC are unfazed by GE and Bechtel's move to pick up a part of Enron's stake in the project.
Power outage
"The two US companies have acquired a stake in another overseas company. Our shares in DPC are pledged with us. We are not worried about this development," said an official in the domestic lenders' consortium.
Last Thursday, a US bankruptcy court allowed GE and Bechtel to acquire a significant part of Enron's equity in DPC for around $20 million in a two-stage process.
"Now that GE and Bechtel have a majority stake in DPC, their bargaining position has been strengthened. They are now in a much better position to call the shots in the sale process. For quite some time, the two US-based companies have been informally arguing in the favour of a formula, which entails selling the entire equity for $300 million," said a source in the lenders' consortium.
Further, sources said, the new owner would have to pump in $500 million to re-start the project. So, the total acquisition cost would work out to $800 million.
They said the lenders would have to make sacrifices -- the liabilities of DPC to the lenders would come down to $1 billion from around the $1.86 billion they actually lent.
"Other stakeholders will find it hard to ignore this formula," said sources in the lenders' consortium.
GE and Bechtel have been arguing in favour of this formula as it will bring tariffs down to around Rs 2.60 per unit, which is close to the benchmark figure of Rs 2.35 per unit arrived at by Indian banks and financial institutions for funding fresh power projects.
At one point, the power tariff touched Rs 7 per unit, which ultimately led to a payment dispute with the Maharashtra State Electricity Board and finally the decision of Enron, GE and Bechtel, which together held 85 per cent stake in the project, to exit it.
The Reliance and Tata groups have already indicated their interest in DPC, and the former had in fact submitted a bid of $25 million for Enron's stake, which was rejected by the US bankruptcy court on the ground that the Reliance group did not have any locus standi in the matter.
The other major beneficiaries are the foreign lenders. Since there is going to be a two-part deal, Enron's equity will not fall below the 26 per cent level.
This will ensure that the offshore lenders will enjoy the benefit of the counter guarantee of the Indian government for their exposure of around $90 million to the first phase of the project.