By an OGJ Online Correspondent

MUMBAI, May 30, 2001 — The Maharashtra State Electricity Board’s decision to stop buying power from Enron Corp.’s Dabhol Power Co. (DPC) could have serious implications for the US energy company’s 2,184 MW electricity plant in India.

The plant currently produces 740 MW. A second phase is scheduled to produce 1,444 MW. The state board halted electricity purchases from the $2.9 billion 2-year-old naphtha plant Tuesday in a long-running dispute over prices. MSEB chairman Vinay Bansal informed Wade Cline, managing director of Enron India, of the decision.

As the sole buyer of power, the state body’s decision appeared likely to force DPC to shut down. Houston-based Enron holds 65% of Dabhol, once touted as an example of India’s ambitious plan to open its economy to private investment.

The Indian government issued a statement Wednesday saying it was committed to resolving the dispute between Enron and the MSEB.

After months of wrangling over a payment with the cash-strapped MSEB, DPC issued a preliminary termination notice. MSEB has already defaulted on about $48 million in scheduled payments. MSEB said DPC violated contract terms by taking 6 hr to fire its plant from a cold start, instead of the stipulated 3 hr.

The Maharashtra Electricity Regulatory Commission (MERC) adopted an interim order restraining DPC from activating an escrow account and issued a temporary injunction against proceeding to international arbitration.

MSEB sought the stay, fearing that DPC might activate the escrow account and go ahead with the arbitration proceedings. Dabhol filed for arbitration in London and demanded the government find a buyer for the project’s second phase.

The commission asked DPC to maintain the status quo until the next hearing June 14. Meanwhile, foreign lenders have scheduled a June 5-6 meeting in Singapore to discuss their options.