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War threat seen slowing Enron's Dabhol plant sale

Tension between India and Pakistan is likely to further delay the sale of Enron Corp's idled $2.9 billion Indian power plant, analysts said on Friday.

The simmering border conflict has slowed down business activity in the region and could test the patience of foreign bidders for collapsed energy trader Enron's largest asset in Asia and its most valuable property still on the block, analysts said on Friday.

"The sale will get delayed by at least another six to eight months. Companies in the West are not even looking at this part of the world in this situation," said Anant Katare, an analyst at Khandwala Securities. "It looks pretty bleak."

India and Pakistan have massed a million soldiers on their border, with New Delhi insisting that Islamabad stop fomenting separatist violence in Indian Kashmir. Pakistan says it provides only moral support.

The United States and Britain have urged their citizens to leave India and Japan has said it will charter a plane soon to help evacuate its nationals.

Dabhol Power Company, which owns and runs the project, is 65 per cent owned by Enron, 10 per cent each by GE and privately owned US contractor Bechtel Corp and 15 per cent by Maharashtra State Electricity Board, the Indian state utility that was its only customer.

The plant stopped generating power last June after MSEB defaulted on payments. In December, Enron filed for bankruptcy, the largest US corporate failure ever.

In January, the lenders, led by Industrial Development Bank of India, invited bids for the 85 per cent foreign equity holding in Dabhol.

Gaz de France, British Gas and Royal Dutch/Shell are the foreign bidders. The Indian companies in the race are Reliance Industries Ltd, BSES Ltd, Tata Power Co and the Gas Authority of India Ltd.

But disagreements between the foreign shareholders and Indian lenders has made the sale process a tortuous affair so far.

BIDING TIME

Multinational bidders are unlikely to quit right away, having hung on until now as the sale process inched forward, analysts said.

"Having bid, the multinationals will take a wait-and-watch policy as India is still a promising market," said Jaideep Goswami, head of equities at UTI Securities.

"If the situation is resolved quickly and does not escalate further, the multinationals will stay in; if it gets worse, the obvious thing to do is to get out of the region altogether."

Officials at French utility Gaz de France and Royal Dutch/Shell said they remain interested in Enron's 2,184 MW plant, located on the Indian west coast.

"I don't see anything moving right now ... There's no information from IDBI," said Herve Joude, general manager at Gaz de France's India liaison office.

"There is no urgent decision for us to take, which is fortunate as otherwise we may have had to consider the current situation on the border."

Marc Den Hartog, director of Shell India Pvt Ltd, said: "We remain optimistic that these tensions will get resolved. "We're involved in a long-term business and can't take short-term decisions."

Officials at British Gas, the third foreign bidder, could not be reached for comment, but a senior official at one of the lenders to the power project said it had shown no interest in pulling out.

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