Last week's decision by the two US-based companies, General Electric and Bechtel, to buy out the bankrupt Enron Corp' 65 per cent stake in Dabhol Power Company is the latest twist in the ongoing Dabhol saga.
The latest development has led to the possibility of another round of legal battles among the stakeholders.
In June 1992, a memorandum of understanding was signed between Enron and the Maharashtra government for building a power plant with a capacity of 2000-2,400 MW.
The Maharashtra State Electricity Board was expected to pick up 10 per cent equity in the project. In December 2003, a power purchase agreement was signed between MSEB and the Dabhol Power Company to build a 2,015 MW power project in two phases.
Trouble started when the then ruling Congress government in the state came under attack from the Opposition BJP-Shiv Sena combine for sanctioning the project.
The 1995 Assembly elections in the state, which the Congress lost, were a virtual referendum on the power project. The project was scrapped immediately after the Sena-BJP combine came to power.
However, after intense negotiations, a re-negotiated deal was signed between the state government and Enron Corp. Not only was the project capacity increased to 2,184 MW - a 740 MW first phase and a 1,444 MW second phase - MSEB was to pick a 30 cent stake in it.
The project was further backed by a state government guarantee and a central government counter guarantee. In May, 1999, the 740 MW first phase became operational.
In 2000, the global prices of naphtha shot up. This, coupled with the fact that the rupee had depreciated sharply against the dollar since the project was originally envisaged in 1992, led to the cost of the power from DPC shooting up to around Rs 7 per unit.
By October 2000, MSEB had started defaulting on its payments and in December the state government announced plans to review the project on account of high tariffs.
This led to DPC invoking the state and central government guarantees. The refusal of the state and central governments to honour these guarantees led to a full-blown dispute erupting between the two sides.
The board of DPC authorised the management to serve the final termination notice and MSEB in turn rescinded the PPA. And in May 2001, the plant fell idle.
Enron, GE and Bechtel, which held a combined stake of 85 per cent in DPC, also decided to exit the project.
Even as lenders to the project were trying to find a solution, Enron went bankrupt in the US. Apprehending that DPC would be a made a part of Enron's bankruptcy proceedings in the US, domestic lenders obtained an injunction from the Bombay high court restraining such a move.
