14 Jan 2002 – The Maharashtra State Electricity Board (MSEB) in India will not resume offtake from the Dabhol Power Company (DPC) while beleaguered US energy giant Enron is involved with the $2.9bn project, according to an MSEB official. “We want Enron out. Unless the foreign company goes, we do not want to participate in the DPC rescue package,” said the official.
Relations between the MSEB, sole customer for the Dabhol plant, and bankrupt Enron have hit rock bottom with their long-running dispute over contracts for power now being pursued through arbitration and legal proceedings.
Enron is the largest (65 per cent) stakeholder in the DPC in which MSEB has a 15 per cent stake, but production at the plant has been halted since May and plans to finish a second phase of construction put on hold whilst Enron take steps to withdraw from the project.
The MSEB said that they would only consider resuming offtake if the consortium of financial institutions led by the Industrial Development Bank of India (IDBI) was successful in buying out the foreign interests. Such a transaction would involve selling the interests on to an Indian investor, such as Tata Power or BSES, which have expressed interest.
The official said MSEB had communicated its position to IDBI and was awaiting a reply.
The financial institutions that have lent money to the project are anxious to see production recommence in order to generate income to secure phase two of the project. MSEB said it would not bow to this pressure and would “definitely default in its payments and given the reputation of the present Enron management in DPC, the board would immediately be slapped with legal notices and payment claims”.
MSEB said it was ready to work with a prospective Indian buyer rather than Enron, which was enforcing contractual terms involving the conduct of all disputes in London.
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 IDBI which has a Rs62bn exposure to the project.