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Offer for Enron stake only after two months

Lola Nayar, in New Delhi

The future of US energy major Enron Corporation's Dabhol Power Company in Maharashtra will take time to be settled as one of the two suitors in the fray expects to make a firm offer only after two months.

Bombay Suburban Electric Supply Ltd, which along with Tata Power has offered to buy out the stake of Enron, hopes to finalise a price after a detailed study that will take two months.

"We are planning to engage three consultants to do studies on the technical, financial and legal aspects of proceeding with the move and finalising a price for taking stake in the project," said R V Shahi, chairman and managing director of BSES, in New Delhi on Monday on the sidelines of a gas conference.

The commissioning of a due diligence study on the technical, financial and legal aspects of the takeover would be preceded by "the signing of a confidentiality agreement with Dabhol Power Company within 10-15 days," said Shahi.

The study will also look into the viability of Enron's 5 million tonnes per annum liquefied natural gas terminal set up for energy fuel supply from the Middle East as also the cost of completing the 2,184-MW power plant.

BSES will also undertake an internal assessment of its own to study before finalising its decision.

"We will have to look into the rearrangement of the fuel supply. Unless we are able to cut down the cost of power generation, the project will remain unviable," said Shahi.

As the project stands it is not viable. "We have to study what sacrifices the various partners will have to make in order to make the project viable," he added.

Set up with an estimated cost of $2.9 billion, the second phase of the power project got held up after the Maharashtra State Electricity Board, which holds 30 per cent stake in Dabhol phase-I (740 mw), stopped payment on grounds of high power tariff. This soon snowballed into a legal battle between MSEB and Enron.

MSEB has already suspended power purchase and rescinded the power purchase pact with the DPC. The other partners in the project are General Electric and Bechtel.

After months of waiting, the Indian financial institutions moved in this month to protect their funding in the project. The two-day talks at Singapore on November 10-11 to find a solution coincided with energy provider Dynegy Inc taking over Enron in a $9.5 billion deal.

Enron, which initially said it would sell the Dabhol project for $1.2 billion, has now offered to settle for nearly $800 million.

At the Singapore meet, BSES made known its interest in acquiring the stake of the three multinationals - Enron, Bechtel and GE in the Dabhol project.

Indo-Asian News Service

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