Since US Enron Corporation pulled out of the Indian Dabhol Power Company (DPC) last April, its chances of selling its 65% stake in the company are becoming ever more remote. With a further slow down in the world economy compounded by the terrorist acts in New York, now is certainly not the most favourable time to buy. Even prior to the September 11 incident, the Indian power ministry had rejected a demand from the local government of Maharashtra that the state-run National Thermal Power Corporation buy Enron's share in the project. Few interested parties have appeared – if any. Industry sources suggest the US power company, AES Corporation, is looking to the company. However, AES is already attempting to pull out of power distribution in the eastern state of Orissa and it is unlikely to want to make fresh investments into India given the slump in the US economy. On the home front, Reliance Industries has already ruled out the possibility of acquiring any part of DPC, leaving the Indian Tata group as the only company to express publicly some interest in the company.
Enron is seeking $1.2 billion for its stake, which it says is the cost of its investment alone, waiving any profit. It has also stated that the buyer will need to purchase the offshore lenders' debt for approximately $1.1 billion. DPC is already in default on its interest payments to overseas creditors including Citibank, Bank of America, US Exim Bank and Japan's Overseas Private Investment Corp.
Meanwhile, DPC is hauling the central government in New Delhi before the international arbitration courts in November for not honouring its obligations under a counter-guarantee agreement. DPC's sole customer, the Maharashtra State Electricity Board (MSEB), has failed to pay dues amounting to some Rs2.13 billion. If DPC is successful, the $2.9 billion project will be terminated, with both the central government and the MSEB forced to cough up a lot of money, well beyond its means.
"MSEB's liability if the project is terminated could be between Rs150 billion and Rs200 billion. This would include the central government's liability of Rs25 billion," Vinay Bansal, MSEB chairman, confirms.