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Dabhol bidders offer $400m for Enron pie

George Smith Alexander & S Ravindran

The three US based companies -- Enron, General Electric and Bechtel --which hold a combined 85 per cent stake in the Dabhol Power Company may end up taking a 50 per cent hit on their investments.

The three companies have collectively invested about $ 800 million in DPC equity but the bidders for their stakes are not willing to cough up more that $ 400 million.

"The prospective bidders for the stake are willing to put in around $ 400 million for the 85 per cent stake. The final price will be arrived at through the competitive bidding," senior institutional sources said.

Institutional sources also said that Enron is unlikely to get the insurance claim from OPIC as the cover was to protect the promoters from political risk. However, Enron's proposed exit from DPC has nothing to do with political risk.

If actually the stake is sold at around $400 million, the cost of power per unit will drastically come down to less than Rs 3 a unit and make the project viable. This may encourage MSEB to lift power from DPC.

Six companies have thus far evinced interest in buying the DPC stake. The list includes Tata Power, BSES, GAIL, Shell, TotalFinaElf and Gaz de France.

At least two of them are expected to sign the confidentiality agreement any moment now and kick of the due-diligence in London in the first week of February.

Financial institutions led by the Industrial Development Bank of India are planning to invite bids. The draft of the confidentiality agreement between DPC and the prospective bidders is being hammered out now.

The domestic lenders-led by IDBI have an exposure of about Rs 60 billion to the project and are facilitating the proposed sale. They have already mandated, three merchant bankers, Rothschilds, DSP Merrill Lynch and PricewaterhouseCoopers for finding a buyer.

The three US-based companies have decided to exit DPC following a payments dispute with the Maharashtra State Electricity Board.

Incidentally, the balance 15 per cent stake in DPC is held by MSEB and the board may buy power from the project if the price falls to below Rs 3 per unit.

MSEB contended that the purchase of power from the near complete 2,184 mw power project would cripple it financially and refused to pay its bills. DPC invoked the state government and Union government guarantees but to no avail. This has led to DPC being involved in a legal tangle battle at the Bombay high court.

The 2,184 mw power project is the world's largest greenfield power project. At $3 billion it also represents the largest foreign direct investment in India. Even as the legal battle rages in India, the Houston- based Enron Corp which holds 65 per cent in DPC has filed for bankruptcy.

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