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May 24, 2001
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MSEB slaps notice on DPC, threatens to cancel PPA

Swati Kulkarni in Bombay

In a major retaliatory action, the Maharashtra State Electricity Board on Thursday slapped a legal notice on US energy major Enron's Dabhol Power Company to cancel its power purchase agreement with the multinational.

"The notice, which was served on Thursday, says that MSEB rescinds the PPA and accordingly sets it aside in rule of law," MSEB chairman Vinay Bansal said.

The notice signed by MSEB chairman Vijay Bansal has been issued to DPC managing director K Wade Cline.

Bansal, in the notice, stated that the MSEB on January 28 had instructed the DPC to deliver its fully declared baseload of 657 MW within three hours to meet MSEB's urgent requirements. However, DPC failed to deliver the energy required by MSEB and thus committed breach of PPA.

The DPC committed similar defaults on February 13 and March 29 last, the notice days.

The MSEB chairman said that in view of the said defaults, MSEB becomes entitled to a rebate as provided in the PPA in respect of each of the three occasions and claimed the same from DPC.

Bansal further stated that 'DPC failed and neglected to compute the rebate or adjust the rebate in the billing statement or to pay the same to MSEB'.

Bansal pointed out that the DPC in its letter addressed to the MSEB on January 28, had admitted that the Dabhol power plant did not confirm to the PPA and is not capable of meeting the contractual terms in respect of the crucial 'operating characteristics and dynamic parameters'.

In particular, the DPC had acknowledged and admitted that the actual performance and capability of the power station does not conform to the start up and loading profile curves.

The MSEB chairman added: "It is, thus, clear that the DPC had made material misrepresentations and the MSEB's consent to the PPA was caused, inter alia, by the representation on your part in respect of the capacity and capability of the power station."

"In the said circumstances, the MSEB has been advised that the aforesaid PPA is void and or is voidable at its option," Bansal added.

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