Enron Proposes 3-Stage Payment For Dabhol Equity

Enron has proposed to sell the foreign equity in Dabhol Power Company to the Indian financial institutions (IFIs) through a three-part payment structure extending up to January 1, 2003. While Enron holds 65.86 per cent stake in DPC, MSEB holds 14.14 per cent, with Bechtel and GE each holding 10 per cent.

Under the structure, Enron has asked for payment of 40 per cent of the purchase price of the foreign equity as first instalment at the time of commencement of renegotiation with the construction operators. The second instalment of 50 per cent has to be paid at the time of re-commencement of construction of the second phase, or by April 1, 2002, whichever is earlier.

The third and final instalment of 10 per cent of the purchase price has to be paid at the time of mechanical completion of the 2,144-mw power plant and regasification facility, or by January 1, 2003, whichever is earlier.

In its proposal submitted to Prime Minister Atal Bihari Vajpayee, Enron has said that in the event of the Centre not directly purchasing the foreign equity, it should guarantee the payment obligation in full.

The $3-billion Dabhol project has an equity component of $1 billion, with foreign players, including Enron, contributing $858.6 million. IFIs have a total exposure of over Rs 6,000 crore to the Dabhol project.

Sources said as per the Enron proposal, purchase price of the foreign equity portion has to be paid in cash in US dollar or it should be fully convertible into dollar without any exchange risk.

They added that the proposal also envisages inclusion of the additional cost of the offshore sponsors into the purchase price. All the future funding to the project would have to be met by the IFIs, according to the Enron plan.

It also asks for co-ordination among the offshore sponsors, central government and IFIs to lower the completion cost of the second phase through changes in the scope of the project and its financial structure.

Power ministry sources said the IFIs, currently preparing a roadmap for early revival of the project, were considering the Enron proposal.

They, however, added that the government was not in favour of giving Dabhol a mega power project status.