Bidders oppose DPC demand for earnest money

Mumbai, January 20: | Updated: Jan 21 2002, 05:30am hrs
The much-awaited signing of confidentiality agreements for carrying out the due diligence process for the cash-strapped Dabhol Power Company (DPC) is set to be further delayed with the company insisting on a $1,00,000 worth earnest money from the bidders - Tata Power, BSES, Gas Authority of India, Shell, and TotalFina Elf, the newest entrant into fray. However, Tata Power and BSES, which have attended a meeting convened by Industrial Development Bank of India (IDBI) to discuss DPC’s revised draft for the proposed confidentiality pacts on Saturday, vehemently opposed this condition.

Sources said the bidders for the 85 per cent foreign stake in the troubled DPC have, in fact, ridiculed the company’s demand for the earnest money. At Saturday’s meeting, DPC has made it clear that such a money should be deposited with it so as to meet the outgo on the due diligence process. It may be pointed out that DPC had initially shown reluctance to carry out due diligence following strong objections from sponsors, citing paucity of funds.

DPC has also demanded that the new bidder, TotalFina Elf, in view of the massive number of papers and documents, should not share and disclose its confidentiality pact with the public not before four years of signing the agreement. The bidders, strongly objecting this, termed the rider as unacceptable and impractical especially in a regulatory regime which emphases on transparency.

Earlier, it may be noted, DPC had warned the state electricity board with stringent legal action if it shared the various confidential documents with a third party, even after it was directed by the Maharashtra Electricity Regulatory Commission to do so.

Another issue which is delaying inking of the confidentiality pact is DPC’s insistence on going by the American laws. While, the Tatas and BSES have been insisting that the agreement should be based on Indian laws as DPC is an domestic company, DPC has been pressing for the US laws, which has been turned down by the bidders especially in the wake of the ongoing investigations against the parent company in the US.

Ironically, the IDBI-led lenders have failed to assert and take up the bidders’ point at Saturday’s meeting. Sources said the financial institutions (FIs) should carefully understand DPC’s gameplan and take necessary steps to salvage the situation as their own money was blocked in the project, and that if the lenders and Overseas Private Investment Corporation (OPIC) failed to intervene, “the project would have no takers”.

Sources also said DPC and the bidders so far had reached a consensus only on one point - of not separating the 5.1-million tonne liquefied natural gas (LNG) facility from the Dabhol project. Contrary to the Godbole panel report, Tata Power and BSES have been demanding that the power plant and LNG facility should be integrated.

However, according to sources, IDBI would further hold talks on DPC’s revised draft later this week to arrive at a consensus for signing of confidentiality pacts.