4 Jan 2002 – Gas Authority of India (Gail), the state owned energy company is in preliminary discussions with the consortium of Tata Power and BSES which is planning a bid to acquire a major interest in the $2.9bn Dabhol Power project.
Troubled US energy trader Enron has a 65 per cent stake in the project which it was trying to unload prior to its filing for Chapter 11 bankruptcy protection.
Gail chairman Prashanto Banjerjee said on Wednesday that the discussions were underway and that KPMG were carrying out due diligence following a formal expression of interest by Gail earlier in the week.
The Dabhol project consists of a 2184 MW power plant near Bombay in the Maharashtra State. It also owns a 5m-tonne-a-year LNG facility which is the object of Gail’s interest.
It is likely that the Indian consortium will also seek to acquire the 20 per cent held by Bechtel ands General Electric in the Dabhol Power Company. The Maharashtra State Electricity Board (MSEB) holds the remaining shares.
Enron’s dispute with the MSEB over the cost of electricity production led to the mothballing of the plant since when Enron have been attempting to find a buyer for its stake with the Indian government being its preferred buyer.
The price tag of $1.2bn set by Enron in September was rejected by Tata Power and Reliance Industries-owned BSES, who are now reported to be offering only half that amount in the context of the fire sale of assets now taking place at Enron.
The Dabhol power project is India’s largest foreign investment although a number of local banks and financial institutions will be anxiously awaiting the outcome of discussions, having extended loans to the project.