Search the Internet          Tips  Sites: Finance, Investment

Enron files India political risk claim with OPIC

A US government body that insured loans to Enron Corp's Dabhol power project on Thursday said it was evaluating the bankrupt energy giant's political risk claim, which if accepted could delay the process of selling the idle $2.9 billion plant and inflate the losses.

But a senior official of the Overseas Private Investment Corporation told Reuters that the agency, which provides insurance to US companies investing in "risk areas", was keen to find a buyer through the current bidding process.

"Enron's claim is under evaluation. We have not come to any conclusion. We want to focus on the bidding process," the senior OPIC official, speaking on condition of anonymity, said.

OPIC officials are in Mumbai this week to discuss the search for a buyer with the Industrial Development Bank of India, the lead creditor which is overseeing the bidding process.

"The approach is very positive. We want to work with everyone involved -- the government of India, the lenders and bidders -- and resolve this dispute," the official said.

But he indicated it was imperative for the many parties to the dispute to agree soon on terms that will lead to the plant being sold within the next two months.

"We think it needs to be done in six to eight weeks. The process of potential buyers performing due diligence, tabling bids and selecting a buyer with a workable offer needs to really move forward," the official said.

Indian power utilities BSES Ltd and Tata Power Company have expressed interest in acquiring the giant 2,184 MW power plant.

An IDBI official told Reuters on Wednesday that the due diligence by the two potential buyers will start soon -- possibly in the next 10 days.

The Dabhol power plant, located about 250 kilometers south of Mumbai, has been lying idle since June due to a tariff dispute with its sole customer, the Maharashtra State Electricity Board, the government-run monopoly distributor of electric power in the area.

Enron owns 65 per cent of Dabhol, General Electric Co and construction firm Bechtel Corp each won 10 per cent and MSEB the remaining 15 per cent.

The plant was almost complete when construction on the 1,444 MW second phase was halted after the MSEB fell $240 million behind in payments for power provided. The 740 MW first phase began operating in May 1999.

The OPIC official refused to say how much the claim was for from Enron, the Houston-based energy trader and onetime Wall Street darling that filed for bankruptcy early last month in the biggest corporate failure in US history.

Other officials familiar with the process said the amount involved could be at least $200 million.

The search for a buyer is becoming increasingly urgent amid reports that the Enron subsidiary created to build and operate the plant, Dabhol Power Co, no longer has enough money to maintain it.

From a workforce estimated to total 5,000 at one point, the DPC payroll has dwindled to under a hundred workers now. Almost all are security personnel, with just a handful of maintenance workers fighting a losing battle to prevent the plant's eight towering smoke stacks, fuel pipelines and other metal parts from rusting in the salty air from the nearby Arabian Sea.

Some experts have estimated at least another $250 million will have to be spent to complete construction of the project and to bring the plant back on line once a new operator takes over.

ALSO READ:
The Enron Saga