A resolution to the bitter dispute between Enron’s Dabhol Power Company and the Maharashtra State Electricity Board (MSEB), which looked a possibility following a recent visit to India by Enron’s Chairman Kenneth Lay, now seems less likely with the US energy giant issued a writ, challenging the authority of the Maharashtra electricity regulator.
The writ in the Bombay Supreme Court was issued on Wednesday by Enron’s Indian arm, the Dabhol Power Company (DPC). It follows attempts by Enron to pursue a course of arbitration in London, in accordance with the terms of the Power Purchase Agreement; to enforce the terms of the agreement made with the MSEB.
Enron owns 65 per cent of DPC, and is locked in a bitter dispute with its sole Indian client, the MSEB over $45 million in unpaid bills.
Changes in market conditions and pricing have resulted in the MSEB refusing to take the output from the Dabhol power plant, near Bombay which Enron views as a breach of contract. The MSEB in turn have claimed contract breaches by the DPC. In June the regulator issued an interim order that stopped DPC from pursuing arbitration proceedings.
Enron are know challenging the jurisdictional right of the Maharashtra electricity regulator. According to the Financial Times, a senior official at Enron on Wednesday said the company believed that a regulatory body created after the agreement with the electricity board “should not be in a position of potentially disrupting a contract through regulatory mechanisms”.
In May, Enron announced its intention to withdraw from the Dabhol project, which is only partway through completion. Potential foreign investors who will view the failure of this large project as an unfavourable signal are closely monitoring the dispute in India.
The Indian Power Minister has recently denied a suggestion that India’s National Thermal Power Corporation might be interested in taking over Enron’s stake in the DPC, were they to ultimately withdraw.