India’s National Thermal Power Corporation (NTPC) will not be buying out Enron’s stake in the troubled Dabhol Power Company according to Power Minister, Suresh Prabhu. Speculation that this might be a solution to the impasse arose following the visit of Kenneth Lay, Chairman of US energy and trading group Enron Corporation, to India last week during which he held discussions with senior politicians, officials and businessmen.
Although details of the meetings were not released, it is believed that Lay debated various options. These included an exit route in which the government takes over the beleaguered $3 bn Dabhol Power project, either through the NTPC or a Special Purpose Vehicle involving NTCP taking over the plant and selling power to the national grid.
Ruling out the option, Prabhu had pointed out that there was no question of NTPC buying Enron’s stake in DPC saying, “The NTPC was not in the business of taking over sick companies.” Enron’s Indian unit, Dabhol Power Co., and state utility Maharashtra State Electricity Board, have been locked in a wrangle for more than six months over payments.
During his visit, Lay reaffirmed his support for India but insisted contract obligations owed to its Dabhol Power Company (DPC) subsidiary must be met.
Lay said he was hopeful of a solution to the dispute, in which Enron accuses the state-run power utility of defaulting on payments. The utility denies that it defaulted and accuses the DPC of charging exorbitant prices.
The second phase of Enron’s liquefied natural gas power plant was scheduled for completion at the end of the year at Dabhol, 335 kilometres (210 miles) south of Bombay.
“The whole idea is to resolve the problem,” said Lay, “It’s a very large project and the country badly needs power. Once the LNG project comes up, power will be much cheaper.”