Search the Internet          Tips  Sites: Finance, Investment

Enron lenders to meet on April 23

US energy giant Enron Corp's Indian unit has called a meeting of its lenders on April 23 to discuss the ongoing payment row with the Maharashtra state government, a company spokesman said on Thursday.

The meeting will be in London and will be attended by international as well as local lenders of the Dabhol Power Company, he added.

The move comes amidst escalating tensions between Enron and Maharashtra over the inability of the state's utility to pay its monthly bills.

The Maharashtra State Electricity Board has been defaulting on payments since last October for electricity purchased from Dabhol's 740 MW power plant on the state's west coast. The amount outstanding totals Rs 2.26 billion.

In an effort to compel payment, Dabhol has twice invoked a federal government guarantee to cover payment defaults by the state utility.

Last week, Dabhol also issued a notice of political force majeure to Maharashtra. Force majeure is an event beyond the control of a contractual party that could not have been prevented.

The dispute has already caused Enron to freeze most of its investment plans in India and has also affected foreign investment in India's power sector.

"This meeting has been called to update the lenders about the situation," the DPC spokesman said.

The Business Standard newspaper reported that Maharashtra no longer intends to buy power produced by the second phase of the Dabhol project, which is nearing completion. The $1.86 billion addition will nearly triple the plant's output capacity to 2,184 MW.

"As far as Maharashtra is concerned, phase two is as good as scrapped," the financial daily quoted the Maharashtra Chief Minister Vilasrao Deshmukh as telling reporters in Bombay on Wednesday.

The state government signed a contract in the mid-1990's to buy the plant's entire power output. But a rise in the cost of naphtha, the fuel currently used to power the plant, and a decline in the value of the Indian rupee against the dollar, has inflated the cost of the power produced by the Dabhol plant beyond the price expected at the time the contract.

That has made the power produced by the Enron plant twice the cost of power produced by other suppliers in the state, fuelling popular and political pressure to scrap the contract.

YOU MAY ALSO WANT TO SEE:
DPC slaps 2 more notices on govt, MSEB
Godbole report hits out at DPC
DPC serves arbitration notice on Maharashtra govt
Govt should honour its obligations, says DPC
Godbole report tabled; moots renegotiation with Enron
Set up probe panel to look into Enron PPA: Godbole panel
Government to seek conciliation with Enron
Dabhol talks tough on guarantee
MSEB to pay Rs 1.13 bn Feb bill to DPC
DPC waits for MSEB's Rs 1.52 bn Dec bill
DPC invokes counter-guarantee again
Maharashtra asks Centre not to honour counter-guarantee to DPC
Sucheta Dalal on the Enron problem reaching a flash point
The Money Interview/Enron Action group