Enron Corporation has held exploratory talks with Indian conglomerate Tata Power which has expressed interest in buying out the US power group’s 65 per cent stake in the troubled Dabhol Power Company.
Enron has publicly stated that it wishes to exit the $2.9bn project, which is India’s biggest foreign investment. Enron is in dispute with the local state electricity board over the power purchase agreement signed between them. The plant has remained idle since late May, when the Maharashtra State Electricity Board (MSEB) authority ceased to accept power from the plant.
Enron has refused to confirm the talks and is reportedly holding out for a deal whereby it retrieves the $1bn incurred building the now-defunct Dabhol plant. Enron has sought to interest the Indian government in taking over its interests or alternatively, one of the Indian financial backers of the project.
Tata Power, part of the Bombay-based industrial group, has written to the Indian government expressing interest in the plant. However, it said any deal would have to address the high tariff structure and interest rate burden on the project. It is understood that Enron is considering an offer price of about 80 cents to the dollar.
Enron is looking for a quick exit on terms that will be seen as adequate. Enron has seen its stock market valuation drop 60 per cent in the last 12 months and Kenneth Lay, Enron’s chief executive and chairman, has set about cutting costs – announcing 500 European job losses last week.
Meanwhile, a commercial court in London has restrained an MSEB from blocking international arbitration proceedings by Enron to recover claims of up to $5bn.
The company said Friday that the court injunction was meant to prevent the Maharashtra state government from initiating a legal action that would delay arbitration of the disputes over Enron’s Dabhol Power Co. project.
The London injunction obtained Wednesday is separate from a case between Enron and the MSEB that is pending before the state-owned Maharashtra Electricity Regulatory Commission. An Indian court has ordered a stay on that matter until a decision is reached on whether the commission has jurisdiction.
The contract included a federal government guarantee to cover any non-payment. Enron has said that guarantee has not been met, despite two notices to the federal government.
The second part of the project, more than 90 per cent complete, involves building a new plant to produce electricity from liquefied natural gas, and a container ship port to import it. Houston-based Enron says that it has halted construction for the second phase and it was costing hundreds of millions of dollars.