Enron wants Indian govt to buy its Dabhol stake

Enron wants Indian govt to buy its Dabhol stake

BOMBAY (Reuters): U.S. energy group Enron Corp said on Saturday it wants to sell its stake in the Dabhol Power Company either to the Indian federal government or to the project's lenders.

"As the largest investor in the DPC, Enron believes that selling its interest either to the government of India or to the project's lenders is the best approach to resolve the protracted dispute," a spokesman for its Indian unit told Reuters.

This follows comments made by Enron chairman Kenneth Lay in Friday's issue of Financial Times that Enron is looking to exit from its Indian venture.

The Dabhol Power Company (DPC), 65 percent owned by the Enron Corp, is currently locked in a bitter dispute with a local utility over a payments default.

"We want out," said Enron's Chairman Kenneth Lay in an interview with the Financial Times.

DPC which is India's biggest direct foreign investment, had signed a contract to supply power to a state-owned utility, the Maharashtra State Electricity Board (MSEB), from its gas-based plant on the state's west coast.

But MSEB stopped buying power in May calling it expensive and defaulted on payments jeopardising the project's future.

"We have made it pretty clear to the government leadership we are now at a point where we would like to be taken out and we think most of our partners do," Lay said in the Financial Times interview.

Besides Enron, the other shareholders in DPC are U.S. group General Electric and Bechtel which own 10 percent each and MSEB with 15 percent.

Earlier this month Lay had a meeting with India's Finance Minister Yashwant Sinha to try and resolve the issue but talks ended without any solution.

"We have fought this once before, put it back together, fixed the contracts, but we don't want to do that again and have the same problems in a few years," Lay was quoted by the paper as saying.

DPC's power plant is being built in two phases. The first phase of 740 MW is up and running and the second phase of 1,444 MW is 97 percent complete.

Some analysts say India's attempts to resolve the Enron dispute is a test case of its ability to attract more foreign investment.

Last week U.S. assistant secretary of state on South Asian affairs, Christina Rocca, said the problems surrounding India's investment climate could be summed up in a five-letter word, "Enron".

"I have to emphasise that it will be difficult for international investors to view India favourably until it (Enron issue) is resolved and in a reasonable manner," she told a meeting in New Delhi.