Dabhol Power goes to PM with equity sale offer

After failing to gain the support of the power and finance ministries for a buyout of its troubled project by central power utilities, the Dabhol Power Company (DPC) which is 65 per cent owned by Enron, has made a direct approach to prime minister A.B. Vajpayee. DPC has offered to sell its equity in the project to the Government for $1 billion on a no-profit no-loss basis.

Prospects for the sale do not look good. The Power and Finance ministries have taken the view that their role in resolving the issue would be restricted to finding buyers for phase II of the power project which has a capacity of 1415 MW. The company has aleady tried at least twice to sell its stake to the government – in March this year, informally, when the event, though reported in the national press, was denied, and in June this year, when Enron worldwide chief Kenneth Lay met with the power minister, Mr Suresh Prabhu. His proposal that the government buy out the project was again rejected. Now the company has sent a proposal directly to the prime minister, seeking his intervention in favour of the same deal at the same price. In Parliament, meanwhile, the Union minister of state for power, Ms Jayawantiben Mehta, stated that the government does not propose to buy DPC’s holding in the project.

While DPC is talking to the government, the project lenders are talking to the stakeholders (Maharashtra State Electricity Board, DPC and central utilities) in an a bid to reduce the tariff so as to find buyers for the power from the second phase. Possible revenue losses if the duty on the LNG terminal is waived are likely to run to Rs 3000 million. The other variable is the transmission charges for transfer of power to the neighbouring purchasing states. However DPC is known to be against any tariff reduction. By the counter-guarantee agreement between the centre, the state and the DPC, central government’s liability is restricted to payment of outstanding energy bills incurred by DPC (for power sales to MSEB) and payment of foreign debt up to $300 million.