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August 8, 2001
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Money > Business Headlines > Report August 8, 2001 |
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Enron offers to sell Dabhol stake at costBS Economy Bureau Enron has offered to sell to the government the foreign equity stake in the Dabhol power project at cost, without any profit or return. Further, it is willing to accept part-payment in cash, and the rest in staggered instalments over an unspecified period. However, this offer falls short of what the government seeks from Enron. Enron India's managing director K Wade Cline disclosed to Business Standard the offer that the company had made, in the wake of the statement recently by Enron chairman Kenneth Lay that the company wants to pull out of its Indian project. Enron owns 65 per cent of the Dabhol Power Company's equity investment of about $1 billion (Rs 47 billion), while General Electric and Bechtel hold another 10 per cent each. The Maharashtra State Electricity Board, which is contracted to buy Dabhol power, owns the remaining 15 per cent. As an alternative to selling out to the government or its nominee, Cline said Dabhol is ready to drop the tariff on the power sold by Dabhol to Rs 3.50 per unit. This is about 10 per cent below what the cost would be if the second phase of the project is completed and the power utility switches to gas as fuel. Cline said Rs 3.50 per unit was a lower cost than at any other new generating plant in the country, and added that the power cost could drop further, to the region of Rs 3.15, if oil prices fall to around $21 per barrel. The offer assumes at least 90 per cent capacity utilisation, which is difficult because MSEB now says it does not need so much power from Dabhol. The Enron offer falls short of what the Indian authorities and negotiators have been asking from Dabhol. Enron has been asked during official meetings to bring the tariff down to the region of Rs 2.50/Rs 2.70 per unit. Alternatively, it has been asked to sell the equity at a substantial loss (to neutralise the cost over-run on the project). Cline indicated that these terms were not acceptable. Lay had come to India last month for discussions with government authorities in Delhi and then Bombay, and is believed to have made the offer now made public by Cline. But he got a rebuff in that the Maharashtra government set up a commission of inquiry, to go into the Dabhol project, a day after Lay met the Maharashtra Chief Minister, Vilasrao Deshmukh. Work on the second phase of the project has stopped with 96 per cent of the work complete, while the completed first phase has stopped generation following absence of power offtake by MSEB. Revival and completion of the full project will take more than a year. Failure to reach a settlement on the disputes that have mired the controversial project will drive it towards arbitration. But arbitration itself is now caught in the legal system, with the Supreme Court on Monday tossing back to the Bombay high court the question of whether the Maharashtra Electricity Regulatory Commission has jurisdiction in the case. Powered by YOU MAY ALSO WANT TO READ:
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