6 Mar 2002 – A report from news agency PTI suggests that Enron, GE and Bechtel, the three major foreign shareholders in India’s Dabhol Power Company (DPC), may decide not to sell their 85 per cent stake in the project if the proceeds went to a Trust and Retention Account (TRA) rather than to them.
“All 3 companies have opposed the domestic and international lenders’ proposal. This could stall the due diligence process. If the lenders do not change their decision, the offshore companies may not be interested in participating in the sale, dumping the project in entirety”, financial Institutions sources told PTI on Tuesday.
A number of consortia, both domestic and overseas have expressed interest in acquiring the 85 per cent stake in DPC and have lodged a deposit enabling them to undertake the process of due diligence in London.
The Industrial Development Bank of India and US-based Overseas Private Investment Corporation (OPIC) have decided that proceeds of DPC sale would be deposited in TRA. After which they would transfer their portion of loans to themselves and the remaining would go to the sponsors.
The DPC promoters’ approach may stem from the fact that the company is now left with less than $8m in its account and the lenders have not even disbursed the sanctioned $1.7m to DPC as due diligence budget.
“Both the due diligence budget and care and preservation amount is yet to be given in hands of DPC,” sources admitted. The lenders’ decision to transfer the sale amount to TRA comes in the wake of potential bidders’ consistent questions as to who would be the recipient of the sale money.
In an unrelated move, the Mumbai High Court has ruled that the Maharashtra Electricity Regulatory Commission [MERC] has exclusive jurisdiction to adjudicate the payment dispute between the DPC and its partner, the state electricity board [MSEB].
In a landmark decision Justices Ajit Shah and Vijaya Tahilramani dismissed DPC’s petition challenging MERC’s jurisdiction, and ruled that the international arbitration agreement between the troubled company and MSEB stood. The judges also ruled that the Supreme Court’s August 6, 2001 and March 1, 2002 order concerning the Rs 1.36bn ($28m) letter of credit [L/C] would continue. On March 1, the Supreme Court had ordered that the L/C “shall not be enforced until after 6 weeks of the disposal of the writ petition by the Mumbai High Court”.
The MSEB had argued that MERC had powers to regulate PPA as well as adjudicate DPC’s dispute with MSEB over non-payment of dues, while the DPC argued that though the Electricity Regulation Act came into existence in 1998, the PPA between DPC and MSEB was signed in 1993 and hence MERC had no jurisdiction over the dispute.
However, the court has allowed the DPC to file an appeal in the Supreme Court.