DPC invokes political risk cover, asks US insurer to release $200m

Sanjay Jog

Mumbai, Jan 6: The beleaguered Dabhol Power Company (DPC), which recently came under attack for taking away ‘e’ chip and certain crucial documents from plant site to Houston, citing security reasons, has, in a last ditch effort, appealed to the US government supported Overseas Private Investment Corporation (OPIC) to immediately release $200 million towards political risk insurance cover in a bid to transfer the shareholding rights and a control of Dabhol assets to OPIC.

DPC, which is reeling under severe financial crunch, is quite keen to get political risk cover so that OPIC would get a hold over “subrogation” rights. However, OPIC has yet to take a formal decision in this regard. DPC team led by Enron India managing director K Wade Cline assisted by in-charge of Dabhol assets, Jim Hughes and lawyers in a detailed presentation made on January 5 in Washington, pleaded that the release of the insurance would be necessary in view of the prevailing situation, especially when DPC has been pitted against Maharashtra State Electricity Board (MSEB) and Indian financial institutions in a series of legal battles.

Mr Cline made a demand for the insurance on the basis of a provision incorporated in this regard by DPC after the repudiation of Dabhol phase-I and termination of phase-II on August 3, 1995 by the previous Shiv Sena-BJP government. It completed renegotiations with DPC on November 16, 1995 and made the announcement on the revival of Dabhol project on January 8, 1996.

DPC achieved its financial closure for the revived project in February 1996 and during that time had included the provision of political risk cover in a bid to protect its finances.

Top sources tracking these developments told The Financial Express that if, OPIC, which had sent a three-member team in December to broker a deal with the Prime Minister’s office, power and finance ministries for an early resolution of the Dabhol tangle, concedes to DPC’s demand then it would get sufficient power to recover equivalent money from the government of India. Sources reiterated that OPIC, which has yet to recover $140 million of the total $160 million sanctioned to DPC, would be in a position to claim control over the Dabhol assets instead of MSEB.