Dabhol Power Corporation (DPC), the company part-owned by troubled US energy trader, Enron Corporation, said Thursday that it had was forced to lay off its Indian employees as a result of its dispute with the local Maharashtra power authority. It has only retained managing director K Wade Cline and a few contract personnel.

“DPC was compelled to take this step due to continuing defaults by the Maharashtra State Electricity Board,” it said.

But the Maharashtra State Electricity Board (MSEB), which has been refusing to accept power from the $2.9bn plant, said it was not responsible for the 150 job losses. “We have been up-to-date with our payments, including interest payments to DPC up until May 23, 2001, before rescinding the Power Purchase Agreement. In fact, it is they who have not paid our Rs12bn ($250m) rebate claim,” MSEB chairman Vinay Bansal said.

A spokesman for the DPC said that Enron’s US bankruptcy filing was only one of the factors which led to the decision concerning staff at the plant.

Enron owns 65 per cent of Dabhol, General Electric Co and Bechtel hold 10 per cent each and the state electricity board owns the remaining 15 per cent.

MSEB had contracted to take 100 per cent of the output from the 2184 MW plant but, when power prices declined, it claimed that the DPC price was too expensive and not all the output was needed.

MSEB and DPC were unable to resolve the dispute leading to a refusal by MSEB to make scheduled payments in December 2000. MSEB have claimed that DPC was in breach of its terms under the PPA.

Work on the virtually-completed second phase of the power plant ceased in June of this year after several more defaults. The parties are engaged in arbitration proceedings following Dabhol’s decision to give notice to terminate its involvement in the project.

The failure of the high-profile undertaking is an embarrassment to the Indian government which had hoped to attract more foreign investment on the back of the project. It is also worrying Indian lenders including the Industrial Development Bank of India (IDBI) which has a Rs62bn exposure to the project.

Enron is hoping to realise its investment by selling its interest in Dabhol. Power utility Tata Power Company and BSES have expressed interest but have yet to sign confidentiality agreements in order to undertake due diligence. The IDBI said yesterday that

The IDBI said that Enron would not be allowed to sell its stake in the Dabhol Power Company until it settles its debts with local financial institutions. “Enron is free to sell its stake in DPC to anybody, anytime and anywhere, but only after it settles the dues, running into several hundred billions, to the Indian lenders”, a senior FI official said Thursday.