Gail, Tata Power to tie up for stake in DPC

Sanjay Jog

Mumbai, Jan 1: The state-run Gas Authority of India Ltd (Gail), which enjoys a long-standing relationship with Tata Power Company (TPC), will soon join hands with it to pick up 85 per cent stake in the beleaguered Dabhol Power Company (DPC).

Gail on Tuesday formally submitted an expression of interest to DPC for taking over the Dabhol project.

Tata Power sources did not rule out the possibility of “coming together of two giants to pick up equity in the distressed Dabhol project.” They told The Financial Express that TPC was not surprised by Gail’s bid as the two companies had a long-standing relationship, with Gail supplying gas to TPC’s Trombay power plant.
In addition, the duo has also been jointly exploring business opportunities in the power sector.

Analysts tracking the Dabhol project said that the proposed alliance would pose a threat to another competitor — BSES, which is supported by Reliance Industries. Both TPC and BSES, through their strategic partners, would be keen to acquire hold not only over the 2,184 mw power generating capacity but also on re-gassification facilities for liquified natural gas (LNG) with a capacity of 5 million metric tonne per annum (mmtpa).

According to the Dabhol power purchase agreement (PPA), the plant has contracted for only 2.1 mmtpa of LNG. The balance LNG DPC has been allowed to supply elsewhere. Sources said that TPC and BSES would be quite eager to utilise the balance 3 mmtpa capacity across the country and make their fortunes especially when the country is facing shortage of LNG.

Leader of the rupee lenders’ consortium Industrial Development Bank of India, which has been given mandate by the Centre for an early buyout of 85 per cent stake, has welcomed Gail’s entry into the fray. “More the merrier,” opined IDBI sources. The development bank had, in a recent communication after September 7 report submitted to the Centre on road map to resolve Dabhol impasse, also called for active involvement of Gail.

The Madhav Godbole renegotiation committee had also recommended that the involvement of union ministry of petroleum and natural gas and Gail in managing the fuel venture in Dabhol project would be critical.

DPC and Maharashtra State Electricity Board (MSEB) have separately welcomed Gail’s decision to submit an expression of interest in this regard.