Enron to back out of deal with MSEB?

By Mahesh Vijapurkar

MUMBAI, APRIL 22. The Enron-sponsored Dabhol Power Company is all set, sources say, to authorise its managing director, Mr. Neil McGregor, to call for termination of the power purchase agreement (PPA) with the Maharashtra State Electricity Board even as the State Government is to urge the Centre to step in, initiate the re-negotiation process and salvage the situation by helping trim the cost of the power supplied by the independent power producer.

Though the proposal to retire from the PPA figures in the agenda for the meeting of the DPC's board of directors meeting, called at short notice in London on April 25, it may not be easy to end either the company's misery or that of the MSEB's at once. It would lead to a six-month suspension of the PPA when protracted discussions would commence between the DPC and the MSEB. In short, it could be just another move in the current battle.

The DPC has made no statement, but the move could be not so much a desire to stop supplying power to a resource- starved MSEB, as it would be to speed up re-negotiations. Earlier, the DPC had notified the State Government and the Madhav Godbole Committee of its willingness to re-draft the PPA. ``They now want to tie us down in legal wrangles,'' sources quoted DPC officials as saying.

The DPC's international lenders were quite worried, sources said, about the direction the issue was taking and sought legal steps. Apparently, the DPC, given the findings of the Godbole Committee, felt it had to make some seemingly strong moves without suggesting that it would not talk to the various participants in the project to trim the tariff. A meeting between the DPC and the lenders is scheduled for tomorrow in London.

Apparently, the force majeure clause invoked by the DPC on April 9, a day before the Godbole Committee submitted its report, was a starting point of this elaborate procedure by the independent power producer. It may not be carried to its logical end, in all probability. Neither would the State Government want it to happen since it would lead to a demand for enormous compensation calculated on the basis of potential revenue losses over the residual period of the contract and the value of the plant itself.

A day before the three DPC directors nominated by the MSEB proceed to London, the Chief Minister, Mr. Vilasrao Deshmukh, would be meeting the leaders and officials in New Delhi seeking that the Centre promptly step in and help start the negotiations. Since the Godbole Committee refused to re-negotiate the PPA, the Centre would have to ask either the Energy Secretary or the Finance Secretary to lead such talks. The MSEB's equity is worth about Rs. 1,100 crores.

The MSEB was reluctant to attend the DPC board meeting at short notice but it was advised by the Government to be present and present its case - it has a dual role, one of power from DPC and a stake-holder - and not allow decisions to be taken unilaterally by other interests. Bechtel and General Electric are the other partners in the project though Enron holds a majority stake. As of now the DPC has issued notice of arbitration and conciliation to the Central Government for not honouring its counter-guarantee and to such notices to the State Government for not honouring guarantees following non-payment of bills by the MSEB. The latter contends that the odd bills from DPC are to be set off against claims made on the independent power producer on one instance of non-performance to contracted levels of power generation in January.

Experts' panel

PTI reports:

To resolve the imbroglio over the payment crises between the MSEB and the DPC, the State Government will set up ``an experts' committee for negotiations''. ``We are now going for negotiations and will form an experts committee in which Maharashtra expects the Centre to participate,'' Mr. Deshmukh told reporters after attending a condolence meeting to pay tributes to the late NASSCOM president, Dewang Mehta, here.

``All the four parties - the State Government, the Centre, Enron and the MSEB should come together for negotiations, otherwise it cannot be a complete exercise,'' the Chief Minister added.

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