BSES to complete DPC due diligence by January

Our Infrastructure Bureau

New Delhi, Nov 19: BSES Ltd will begin due diligence of the 2,184 mw Dabhol power project in a fortnight. The process, aimed at assessing the right price for buying 85 per cent stake in the Enron-promoted Dabhol Power Company’s (DPC), will be completed by January. Speaking to reporters on Monday, BSES chairman and managing director RV Shahi said, “The due diligence process will take six to eight weeks after signing of the confidentiality agreement.”

According to Mr Shahi, his company would be signing the confidentiality agreement, a pre-requisite for beginning due diligence, in another ten days. BSES has sent its comments on various clauses of the agreement to DPC. The company would appoint three separate consultants for doing technical, financial and legal due diligence of the $2.9-billion project, he said on the sidelines of a seminar on natural gas.

It would also be constituting an internal task force for doing parallel ground work. The whole exercise would involve assessing the value of DPC’s assets and liabilities besides finding out further investment needed to complete the 1,444 mw Phase-II.

Stating that the Dabhol power project as its stands was not viable, Mr Shahi said that BSES will be going in for financial re-engineering and renegotiation of the gas supply agreement for Phase-II before taking over the project. DPC had signed a 20 year contract with Oman LNG for 1.6 million tonnes per year and Abu Dhabi Gas Liquification Company for 480,000 tonnes. He said the total cost of power generation has to be brought down to Rs 2.60-2.70 per unit for making it viable. For this fuel cost and capital cost has to be brought down, he added.

BSES has shown interest in acquiring 85 per cent stake of Enron, Bechtel and GE in the Dabhol project at the recently concluded Singapore meeting convened by the Indian financial institutions. It will fix a price for taking over the stake once due dilligence is completed. After signing the confidentiality agreement BSES will formally look into the financial books of DPC, its loans, sponsors and other assets and legal wrangles. Before taking any decision on the acquisition price of the distressed company.