FIs forecast DPC value below $500m

Our Corporate Bureau

Mumbai, Dec 3: The IDBI-led financial institutions, which have a total exposure of Rs 6,204 crore in the distressed 2,184mw Dabhol project, hope that the beleaguered Enron’s decision to file for bankruptcy will result in a substantial fall in the buyout price for the Enron stake.

Tata Power and BSES, the front-runners for the Enron stake in DPC, are closely watching the developments. Although, DPC had initially quoted a price of $1.2 billion “at cost,” it had offered to reduce it to $850 million. However, both the Tatas and BSES may go in for a hard bargain to reduce the price at less than $500 million in the changed circumstances.

However, DPC maintained that the bankruptcy plea will not have any effect on it as the company is not one of the 14 Enron entities included in the bankruptcy suit.

FI sources on Monday told The Financial Express, “we are closely observing the situation and it is a good sign for us as we expect the buyout price to be substantially low now”.

“There won’t be any problem for the Tatas and BESE in furthering their negotiations for buying out the Enron stake in the project,” said FI sources.

BSES chairman and managing director RV Shahi said, “today’s Enron move was expected as it was in the news for a few days. Its impact on DPC will have to be evaluated by the FIs. BSES, which has shown an interest in buying out DPC, will wait and watch the FIs’ response and their future course of action. BSES will also evaluate the legal implications”.

Analysts said DPC, in view of its fast deteriorating finances in India and also following the crash of its parent company, may further reduce the sale price. BSES has already sent in its comments for entering into a confidentiality agreement as insisted by DPC before carrying out due diligence.

FIs sources also said they are not perturbed over Enron’s decision to file for bankruptcy as DPC’s loans are pledged to the lenders and are covered with a security of mortgage. According to them, DPC is a special purpose vehicle and funded on a non-recourse basis. They also said there will not be much damage to the company.

“DPC is an Indian company and a separate legal entity and Enron is one of the four independent shareholders. Therefore, it functions independently of Enron Corp,” the DPC spokesman said while reacting to the news of Enron filing for bankruptcy.