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Dabhol Power goes to PM with equity sale offer

Balaji C. Mouli

NEW DELHI, Aug. 9

AFTER failing to elicit the support of both the Power and Finance Ministries for a buyout of its troubled project by Central utilities, the Dabhol Power Company (DPC) has approached the Prime Minister, Mr A.B. Vajpayee, with a similar proposal, according to top sources.

In a letter to the Prime Minister, DPC has offered to sell its equity in the project to the Government for $1 billion on a no-profit no-loss basis.

Interestingly, when contacted, DPC chief, Mr Wade Cline, told Business Line that `a private letter' to this effect had been recently sent to ``the Power and Finance Ministry representatives.'' Mr Kline clarified that so far no company has approached them for buying out their stake in DPC.

The Union Power Minister, Mr Suresh Prabhu, however, maintained that the Power Ministry had not received any such communication. The Power and Finance Ministries have been of the view that their role in resolving the issue would be restricted to finding buyers for phase II of the power project which has a capacity of 1,415 MW.

Even as DPC has knocked at the doors of the PMO, the lenders to the project are at present talking to the stakeholders -- MSEB, DPC and the Centre-- for reducing the tariff so as to find buyers for the power from the second phase.

Informally, the Centre has been consulted on the possible revenue losses if the duty on the LNG terminal is waived. This is likely to be of the order of around Rs 300 crore. The other variable is the transmission charges for transfer of power to the neig hbouring purchasing states.

As per the counter-guarantee agreement between the Centre, State and the DPC, which alone binds the Centre contractually, the Centre's liability is restricted to payment of outstanding energy bills of DPC (for past power sale to Maharashtra State Electri city Board) and payment of foreign debt up to $300 million.

The sequence of events leading up to the DPC communique to the Prime Minister are worth recalling.

Sometime in March this year, the company had informally sent a proposal to the Government to sell its equity in the project for $1 billion. The report published in this paper was, however, denied.

On June 9 this year, when Enron worldwide chief, Mr Kenneth Lay, met with the Power Minister, Mr Suresh Prabhu, his proposal to the Centre to buyout the project was again shot down. Further, the Enron chief's request to meet with the Prime Minister did n ot fructify.

Now, nearly two months later, the company has sent a proposal directly to the Prime Minister, seeking his intervention for the Centre to buyout the project for $1 billion.

In Parliament, meanwhile, the Union Minister of State for Power, Ms Jayawantiben Mehta, stated that the Government does not propose to buy out the DPC's equity-holding in the project.