India's Dabhol Power Project May Restart

The Associated Press
October 18, 2002

NEW DELHI, India - The massive mothballed Dabhol power project that bankrupt U.S. energy company Enron Corp. built in western India could be running within a year, with a long-standing dispute over power charges close to being renegotiated, a government official said.

The $2.9 billion Dabhol project has been closed since June 2001 after its sole customer, the Maharashtra State Electricity Board, stopped payments following a dispute over the cost of power. The state utility accused Enron of charging some of the highest rates in the world. The dispute is being fought in the courts.

Power Minister Anant Geete said a state government committee has accepted the lenders' demand of 2.80 rupees (5 cents) a kilowatt-hour for the restart of the 740-megawatt first phase of the project.

Geete said the cabinet of the Maharashtra state, where the plant is located, must also approve the agreement.

"No exact time frame can be given," Geete told Dow Jones Newswires in an interview late Thursday. "But if all goes well, the Dabhol project may be restarted within a year. The federal government will provide all possible help and cooperation for the restart of the project."

Dabhol is India's largest ever foreign investment project. Houston-based Enron holds a controlling 65 percent stake in the Dabhol Power Co., while General Electric Co. and Bechtel Corp. hold 10 percent each.

The Maharashtra State Electricity Board holds the remaining 15 percent.

The project's Indian lenders, led by the Industrial Development Bank of India, have uncollected loans of close to $1.3 billion, while foreign lenders, led by the U.S.-based Overseas Private Investment Corp., have an exposure of about $640 million.

Several foreign investors have fled India after a decade of failed power reforms and policy wrangles, and domestic investors are wary of the power sector.

Last December, the U.S. company Mirant Corp. abandoned its power projects in India, citing a lack of market reforms.

Geete said the government is "committed toward improving the foreign and domestic investment climate in the power sector. It is, therefore, important that the protracted standoff in Dabhol be resolved as quickly as possible."

© 2002 The Associated Press

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