Enron Corp moves closer to pulling plug on India plant<\/p>\n
BOMBAY (Reuters): U.S. energy giant Enron Corp's Dabhol Power
\nCompany (DPC) on Saturday took a major step towards pulling the
\nplug on a controversial power project in India that has cost both
\nthe company and the country dearly.<\/p>\n
Dabhol, 65 percent owned by Houston-based Enron Corp, said it
\nhas issued a preliminary notice to terminate its contract to sell
\npower to India's Maharashtra state.<\/p>\n
\"After months of working with the Maharashtra State
\nElectricity Board (MSEB), and the governments of Maharashtra and
\nIndia to find solutions, it is apparent that they are unwilling
\nto honor their offtake commitments for the entire power station,\"
\na DPC statement said.<\/p>\n
The move comes after months of wrangling between Dabhol and
\nMaharashtra state over payment defaults by the state utility,
\nMSEB, and is likely to further tarnish India's image as lousy
\nplace to set up power projects.<\/p>\n
Four foreign companies have already pulled out and the plans
\nof other local companies have either been scrapped or shoved into
\ncold storage due to bureaucratic and legal delays.<\/p>\n
If the termination takes effect, it will also cost India
\ndearly as it will have to pay damages to Enron and other foreign
\nlenders.<\/p>\n
The Indian lenders stand to lose the most from the
\ncancellation because their loans are not covered by any guarantee
\nfrom the federal government unlike the overseas lenders whose
\nloans are covered by a federal guarantee.<\/p>\n
Enron is India's largest investor -- its 2,184 megawatt power
\nplant on India's western coast was supposed to be the world's
\nlargest natural gas-fired project power project when fully
\ncompleted.<\/p>\n
The first phase of 740 MW is already up and running, while the
\nsecond phase of 1,444 MW is scheduled to start generation next
\nmonth.<\/p>\n
The loss-making MSEB, which originally agreed to buy the
\nentire capacity, has reneged on its commitment, forcing Dabhol to
\nissue the termination.<\/p>\n
A report in Press Trust of India on Saturday said the federal
\ngovernment will have to pay Dabhol 28.50 billion rupees ($607
\nmillion).<\/p>\n
Quoting power ministry sources, the report said the amount
\nwill include one year's payment for electricity purchases and a
\ntermination fee of $300 million.<\/p>\n
Senior government officials in New Delhi were not immediately
\navailable for comment.<\/p>\n
But in Bombay, capital of Maharashtra state, the reaction was
\nswift and strong.<\/p>\n
\"It was improper on Dabhol's part to issue the termination
\nnotice,\" state chief minister Vilasrao Deshmukh said.
\nAnti-Enron activists were jubilant.<\/p>\n
\"This is best thing that could have happened to MSEB and
\nMaharashtra. We only wish that MSEB had given the notice first,\"
\nsaid Pradyumna Kaul, convenor of Enron Virodhi Sangarsh Samiti,
\nan anti-Enron movement told Reuters.<\/p>\n
The notice now begins the start of a six-month cooling period
\nunder the purchase agreement, during which the contracting
\nparties are expected to try and resolve the dispute, failing
\nwhich the termination will take effect.<\/p>\n
DPC said it issued the termination notice after what it said
\nwere failures by the federal and state governments to honor their
\ncontractual commitments.<\/p>\n
The statement added that DPC was still open to \"constructive
\ndiscussion on solutions\" but added that a lasting and feasible
\nsolution was possible only if the parties contractually bound to
\npurchase the power were willing to either buy it themselves or
\nfound other creditworthy buyers.<\/p>",
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