DPC CITIES SECURITY REASONS TO IDBI

Storm over removal of components from Dabhol site

Sourav Majumdar

Mumbai, Jan 3: A major controversy has broken out between the Indian lenders to the beleaguered Dabhol Power Company (DPC) and the company management, over the removal of certain components of the plant from the site by DPC. The Industrial Development Bank of India (IDBI) has got into the fray and sought an explanation about the developments at the site from the company.

Acting on an anonymous letter sent to it, IDBI sought an explanation from the DPC management on an urgent basis. The DPC managing director K Wade Cline has replied to IDBI clarifying the reasons behind the company’s actions and citing security reasons for taking out some critical components from the plant for use in the future. The developments have led to a debate about whether company officials can remove equipment without prior written permission of the lenders, since the property is mortgaged to the lenders. The covenants of the loan agreement between DPC and the lenders has therefore also come into sharp focus.

In the anonymous letter, it was alleged that last month the energy complex manager of the plant and his assistant removed E chips and various code CDs of the power plant. Thereafter the assistant left the country. The letter had also alleged that another operation was carried out where plant-related maps, manuals and other papers were burnt and some were taken out of the country. The letter, apparently written by someone ‘‘still working with Dabhol Power Company’’ in the security department, said the incidents were brought to the notice of some senior Indian managers who either ignored it or expressed inability to take any action.

In his reply to IDBI, Mr Cline said that while as a general practice DPC did not respond to or attribute significance to matters contained in anonymous letters, DPC was responding to these allegations since they were serious. Refuting the contention that the removal of various chips and code CDs had converted the asset into a dead one, he said upon various preparatory steps being taken, the asset is capable of being operated. ‘‘We owe you a response on those preparatory steps, which response has been delayed by the holidays’’, Mr Cline said in the letter.

He said since lenders and shareholders had not provided DPC with any new funds for the past several months, DPC had to reduce its staff at the Mumbai offices and the Dabhol site. This, the letter said, included a reduction in security personnel at the site. Given that it will take several weeks to get the plant ready to be operated, that all the senior site management of DPC and its former operator (offshore power operations) were being severed, and that the security force was going to be downsized, the company took steps to ‘‘secure various critical components of the project so that they could be used optimally in the future’’. Focusing mainly on the fact that the asset was not a dead asset, Mr Cline said the phase I of the project could be operated upon taking the preparatory steps.

On the second allegation relating to maps, manuals and sensitive papers being burnt or taken out of the country, Mr Cline said in the letter that since DPC has been in a major legal dispute with various Indian government authorities that require arbitration in London, all critical documents and records are in London with the company’s counsel in connection with this arbitration. No original documents had been destroyed, Mr Cline said, adding that from time to time, when duplicate records exist, the company did take steps to minimise storage costs and space and eliminates various duplicate records. On the preparatory steps required to operate the plant again, Mr Cline said these steps would include, among other things, a new operating and maintenance contract, new personnel being hired, new fuel being purchased and delivered to the site, a complete evaluation and walk-down of the plant by both DPC’s and the lenders’ engineering advisors, and generally getting the plant ready to be operated. This will also involve return of various components to the plant that have been removed for security reasons.

SITE SEEING

• IDBI seeks explanation from DPC on removal of components
• Wade Cline says asset not dead, can be operated again
• DPC says no original documents have been destroyed, but some duplicate records may have been eliminated to cut storage costs
• Steps taken to secure critical components owing to downsizing of security staff, says DPC
• Loan covenant comes into sharp focus