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Enron has no plans to sell Dabhol stake

Enron Corp has no immediate plans to sell its stake in the troubled $2.9 billion Dabhol power project in Maharashtra, the energy giant's chairman said on Tuesday.

"We're not in any discussion right now on selling the plant," Enron Chairman Kenneth Lay told reporters after the company's annual meeting. He did not say whether the company planned to sell the project in the future.

Enron has said in the past that it is unlikely to sell the plant until its payment disputes are resolved.

"The lenders have sent the government of India a letter indicating the various things both the government of Maharashtra and the government of India need to do to come back into compliance with the contract."

The Houston-based company and the government of Maharashtra have been locked in a payment battle for months, with the state's electricity board balking at paying Enron what it considers too high a rate for electricity.

The fight is also now with the national government of India, which is contractually bound to cover defaulted payments by Maharashtra, but has since changed that position.

At present, Maharashtra's State Electricity Board owes the Dabhol Power Plant, of which Enron is a 65 per cent stakeholder, some $48 million for power.

The Dabhol project, the single largest foreign investment in India, consists of two phases, the already-built 740 megawatt power plant and a 1,444 MW plant that is expected to be finished this year.

The second phase could be finished later if the payment issue remains unresolved, Lay said.

"The construction activity is being scaled down, so it is impacting operations, but its still not too late to stop any damage from that if the governments step up and honour the contracts," he said.

Last week, Dabhol's board authorised the plant's managing director to issue a preliminary notice of termination of service to MSEB. The notice, which has not been issued, would be the first step for Enron to pull out of the project.

Both governments have a few more weeks to respond to the letter from the creditors, Lay said. Enron has already declared political force majeure, a legal manoeuvre that allows a party to break a contract because of situations beyond their control, such as coups or civil war.

India can ill-afford the very public fight Dabhol has become, Lay said.

"It sends a very bad signal to the rest of the world as to the difficulties of investing in India, which is not what India needs right now," Lay said.

India needs a lot of foreign investment if the country expects to build up its infrastructure, he said.

Finance Minister Yashwant Sinha on Monday said, "there is no need for us to think that because there is a problem with Enron it is necessarily going to act as a dampener to foreign direct investment."

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