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BSES eyes Enron's stake in Dabhol

S Ravindran

Power major BSES is eyeing Enron's controlling stake in the Dabhol Power Company but, will add a string of riders before it takes the final plunge.

BSES chairman and managing director RV Shahi told, "the capital cost of the project has to be brought down. The fuel cost too has to be decreased and delinked from the dollar. These are the fundamental issues which need to be sorted out before prudent investors can touch the project."

When asked whether these prudent investors included BSES, Shahi said: "Yes."

Shahi made it clear that there was no question of touching Enron's DPC stake under the present project structure. He pointed out that the "excessive" capital cost of the $2.9 billion project coupled with the high cost of dollar-denominated fuel resulted in power tariffs, which were not affordable by any consumer. A complete financial re-engineering will have to be done before the project becomes viable, he added.

BSES's expression of interest in the project comes close on the heels of the Tata and Hinduja groups evincing interest in the project. Enron has publicly announced its plans to exit the project in the wake of a payment wrangle with the Maharashtra State Electricity Board and the refusal of the state and the Union governments to honour their guarantees.

At present, the project is caught in a judicial tangle, with Enron arguing that various disputes among itself, MSEB, the state and the Union governments can only be decided through international arbitration.

MSEB, the state and the Central governments are pressing for a resolution by the power regulator, the Maharashtra Electricity Regulatory Commission. The Bombay high court is now slated to decide on the issue of jurisdiction.

If BSES acquires the Enron stake in DPC, it would fit BSES's plans. The Rs 20 billion power utility has drawn up a 10-year corporate plan (2002-2012) which includes adding 9,000 mw of power. Industry observers point out that BSES need not take the greenfield route to achieve its ambitions.

The capacity addition will come about through a series of special purpose vehicles. The acquisition of the 2,184 mw Dabhol power project, they add, will significantly further its plans.

Enron has a 65 per cent stake in the company while the US-based General Electric and Bechtel hold 10 per cent each. The remaining 15 per cent stake is held by MSEB. BSES as a matter of policy insists on a minimum 51 per cent stake in any joint venture.

The Reliance group has ruled out acquiring the Dabhol power project but is the single largest shareholder in BSES, with a stake of 30 per cent.

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