Enron under fire in India
The Texas based company Enron, which operates the Dabhol power plant in India, has been hit by accusations of being a profiteering multinational.
The $2.2bn Dabhol plant is contracted to sell power exclusively to the Maharashtra State Electricity Board (MSEB).
Criticism has arisen within India of the tariff that has more than doubled since 1993 and is now three times the rate charged by other independent power producers.
The rise is largely attributable to the depreciation of the rupee against the dollar and the high price of naphtha fuel. There is an additional fixed charge of Rs970m ($20.7m) per month payable by the state which now faces a bill of Rs1.6bn for December 2000.
Since the start of 2001, the MSEB has not purchased a single megawatt of power from the Dabhol plant claiming that it was ‘a loss-making and uneconomical proposition’.
The situation resulted in an emergency meeting between Enron and an international consortium of banks that includes ABN-Amro, Citibank and the State Bank of India.
The lenders are said to have threatened to pull out with phase two of the project still incomplete. A top offical at Enron India, Wade Cline said that: ‘It would be a major disaster if the [phase two] project were suspended now’.
Thailand generates IPP interest
UK-based International Power Plc, along with Sumitomo Corp. of Japan and Switzerland-based Electrowatt-Ekono, has stepped up its power generation plans for Thailand. These moves conflict with an announcement made by state power company Egat to postpone the scheduled purchase of power from some Independent Power Producers (IPPs), citing lower than expected power demand.
The renewed IPP interests are based on claims that electricity demand is returning to its normal growth path.
Egat said that it would ask IPPs that had not yet signed contracts to postpone supplies to 2007 instead of the initially envisaged 2004 and 2005.
International Power is seeking stakes in existing IPPs and small power producer (SPP) schemes in Thailand by means of acquisitions and mergers. Sumitomo Corp. is also on the look out in the Asian market.
Napocor gets busy in Luzon
The National Power Corp. (Napocor) of the Philippines has committed to undertake at least seven power generation projects commencing in 2001. Six of these will be based in the Luzon region and two of the projects are expected to be implemented this year.
Officials from Napcor claimed that the Asian Development Bank (ADB) is likely to contribute around $500m towards the total funding requirement. Additional funding is likely to be drawn from a loan syndication of private banks.
It is unlikely that the ADB would disperse any funds until the Power Reform Bill is passed by parliament. The bill’s passage had been delayed by the trial of the former President.
Malaysia checks power strategy
The state owned power firm Tenga Nasional Bhd has announced that it will halt further divestment of its power plants as part of its business strategy. Communications and Energy Minister, Leo Moggie, denied claims that the decision was a step backwards in the government’s privatization policy.
Tenaga, which is already privatized, is still majority-owned by the government. It has monopoly power on transmission and decides how much electricity to purchase from Independent Power Producers (IPPs) to resell to the market.
The state power firm said that it did not want to give up control of its plants to IPPs and later fight with them on pricing. Referring to the move as purely commercial, Moggie said that: “If we are not careful, the same thing that happened in California and India recently could take place here,” pointing to the electricity costs and outages that have resulted from liberalization measures.
India to revamp transmission and distribution sector
The Indian government has drawn up plans to revamp the transmission and distribution (T&D) system with an injection of funds amounting to Rs400bn ($8.8bn). Some Rs20bn is to be allotted to all states on an annual basis under the Accelerated Power Development Programme.
Union power minister Suresh Prabhu said that: “Efforts will also be made to improve the machine capacity of hydro generating power plants and qualitative improvement of the life spans of thermal power stations in the country”.
On 3 January 2000 northern India’s main power grid collapsed, shutting down essential services, telephone networks and causing hospitals to switch on emergency generators.