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Enron may move out by November

Shiv Kumar in Bombay

US power major Enron Corporation may exit from its controversial project in Dabhol, Maharashtra by November, even as state government sources said the power plant could soon be classified as a sick unit.

According to the sources, a section of the government has mooted the idea of providing a rehabilitation package for Enron's subsidiary -- the Dabhol Power Company -- after the US power major offloads its share to another investor.

No decision, however, has been taken on this as yet, the sources said.

So it is not yet clear if the DPC plant will be brought under the Board for Industrial and Financial Reconstruction and whether a rehabilitation package is being prepared to rescue the project.

The 65 per cent stake Enron has in the DPC project has been valued at $1 billion. The Maharashtra government has already contested this valuation, claiming it is inflated. It, however, has not provided its own valuation of the project.

There are a number of suitors wanting to pick up Enron's stake in the project. US-based AES Transpower had expressed interest a few months ago.

Ratan Tata, chairman of the Tata group, also expressed interest, saying the conglomerate may consider picking up Enron's stake when the time comes.

What could, however, stymie DPC's future is the high power tariff charged by it. At peak production, DPC's power was originally priced between Rs 4 and Rs.5 per unit. Last July when the offtake of power by the Maharashtra State Electricity Board fell sharply, it was asked to pay Rs 7.90 for each unit of power.

Since then, Enron has agreed to reduce the tariffs to Rs 3.75 per unit, but has not found any takers from among the country's state electricity boards.

Sources said that initial negotiations with financial institutions to the project indicate that funds for the project may be provided at lower interest rates.

At a later stage, agreements signed by DPC with the suppliers of equipment and raw material like naphtha and liquefied natural gas would have to be reworked to bring down prices.

So far, Enron has refused to consider this scenario. Recommendations made by former bureaucrat Madhav Godbole, who is heading the committee that is looking into the power purchase agreement signed between the DPC and the MSEB, have been debunked by Enron.

The $3-billion project has run into trouble after the MSEB defaulted on payments to Enron, saying the tariff charged was too expensive.

The plant initially generated 740 mw of power in the first phase and had enhanced its capacity to 1444 mw. Its original schedule was to attain the full capacity of 2,184 mw in October after the completion of its second phase.

The plant has now been shut down after MSEB stopped purchasing power from DPC.

Indo-Asian News Service

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