Enron, GE, Bechtel oppose due diligence by Tata Power, BSES

Sanjay Jog

Mumbai, Dec 9: The Dabhol power project’s promoters comprising Enron, GE and Bechtel have opposed the proposed due diligence to be carried out by Tata Power and BSES for picking up Enron stake in view of "their inability to shell out funds for this purpose."

The move has further raised uncertainty over the sale of Enron stake in the Dabhol project. The Dabhol Power Company (DPC), which is reeling under severe financial crisis especially after Maharashtra State Electricity Board (MSEB) has suspended power purchases since May 29, would officially send a communication in this regard to the Indian rupee lender consortium, the Industrial Development Bank of India (IDBI) early this week. DPC insiders confirmed this move and told The Financial Express that it would reply to a letter sent by IDBI chairman PP Vora asking the status on the due diligence. IDBI, in its communication sent in last week wanted to know what steps have been initiated by DPC on the due diligence front and when it would be commenced. IDBI, which had taken an initiative in convening the three-day Singapore meeting with DPC, Tata Power and BSES from November 8, was eager to know what initiatives DPC had taken to launch due diligence. It was agreed during Singapore meeting that both Tata Power and BSES would have to enter into separate confidentiality agreements with DPC before launching the due diligence.

Interestingly, Tata Power and BSES had favoured a due diligence before making a formal bid to pick up Enron’s stake in the distressed Dabhol project. Both these utilities had also given their consent to ink a confidentiality agreement as demanded by DPC for this purpose.

BSES has already sent its comments to DPC for entering into a confidentiality agreement. Tata Power is also believed to have prepared its draft. DPC insiders said that it would send a communication early this week, probably before the December 13 meeting to be held in Singapore between Indian financial institutions, Dabhol offshore lenders, Tata Power and BSES, that the due diligence may not even take place in view of inability shown by Dabhol promoters.

According to DPC insiders, as far as the Dabhol promoters especially Enron is concerned for them, they don’t see any future prospects for the Dabhol project and thus are least interested to pump in any amount. "Enron, being a 80 per cent equity holder in the Dabhol phase-II along with 10 per cent each by GE and Bechtel, was until recently bearing expenses but has expressed its inability to shell out further funds both due to default on MSEB’s part and non-disbursement of funds from lenders," sources said.

Meanwhile, as reported in The Financial Express, DPC, which has laid off its staff due to poor finances, will not be invited for the Singapore meeting scheduled to commence from December 13. The meeting, which will be termed as a "confidence building" exercise, will be attended by IDBI, ICICI, SBI, IFCI and Canara Bank whose total exposure in the Dabhol project is around Rs 6,200 crore along with Dabhol offshore lenders comprising Bank of America, ABN Amro and Citibank.