Centre all set to put GE business under scanner

New Delhi, March 27 | Updated: Mar 28 2005, 06:24am hrs
The government is set to take a relook at General Electrics (GEs) business interests in Indias power sector given the US companys intransigent attitude in reviving the Dabhol power project.

Despite serious attempts by the negotiating team of Indian lenders, GE and Bechtel continue to be adamant in their approach towards settling their contractual claims. In fact, they increased their earlier demand of $290 million to $350 million.

Top government sources told FE that at a meeting in New York on March 18, Indian lenders tried their best to convince GE/Bechtel and had even agreed to revise their earlier offer of $213 million to an upfront payment of $250 million.

GE and Bechtel remained obdurate in the negotiations held on March 18. However, they have sought one to two weeks to come back possibly with a revised offer, said a senior official.

Taking serious note of GEs behaviour, the finance ministry has moved a Cabinet note, where besides proposing issuance of a central guarantee of $219 million for buying out OPICs debt and political risk insurance claims, it says, In view of the intransigent behavior towards restructuring of a distressed project and litigous attitude of GE, it may become necessary to take a re-look at their close involvement in our power sector development.

The note points out GE has substantial interest in the power sector. It has a major stake in NTPC investments as it had supplied equipment for the Kayamkulam and Kawas power plants and in a recent bid for 2,600 mw projects, GE and BHEL were the lowest bidders, it says.

The finance ministry has simultaneously proposed four options, with their pros and cons to settle the ongoing dispute with GE and Bechtel (See chart). The future stratgey will be decided accordingly.

In their latest offer, GE and Bechtel have sought a payment of $350 million before July 1.

In return, they will drop all pending litigation proceedings and will transfer shares in Dabhol Power Company (DPC) to the proposed SPV for reviving the project.

They have further asked the Centre to indemnify them against claims of LNG supplier (Oman Gas post-settlement, GE and Bechtel have insisted on being paid customary commercial rates by NTPC for completing the power project.