Bowing to pressure from Tata Power Company (TPC), BSES and the rupee lenders’ consortium leader Industrial Development Bank of India (IDBI), the beleaguered Dabhol Power Company (DPC) has agreed that dispute resolution during the confidentiality agreement period would be done on the basis of UK laws and not on New York laws as insisted by DPC. Incidentally, TPC and BSES, which were, since the beginning, opposing New York laws in favour of Indian ones, have ultimately shown their readiness for UK laws in a bid to avoid a repeat of the Enron muddle in the country.

Top sources told The Financial Express that DPC has prepared a six-page draft of the proposed confidentiality agreement signed by its chief financial officer S Mohan Gurunath after incorporating various changes and sent it to IDBI. Sources added that the draft would now be forwarded to TPC, BSES, Gas Authority of India (Gail) and Shell and it is expected that the agreement would be formally signed by Friday or over the weekend.

The due diligence is expected to commence from February 15 and should be over by March 15 or latest by the end of March.

Tata Power, BSES unhappy with IDBI

TPC & BSES are believed to have expressed surprise over IDBI’s decision to seek expressions of interest from Indian and global players to pick up 85% stakes held by Enron, GE and Bechtel in the Dabhol project. They have reportedly pointed out that IDBI, which itself is an interested party, should have given the mandate to any well-known merchant banker. IDBI’s move may lead to legal problems in the ongoing exercise. Both TPC & BSES declined to make an official comment on Wednesday’s development.

TPC and BSES have also scored a victory at this juncture following DPC’s readiness to accept their condition with regard to reduction in the confidentiality period from six years to three years. TPC and BSES were of the view that under the regulatory regime in India wherein emphasis was given on transparency and openness it would be difficult to accept DPC’s condition of not sharing any information or making it public for six years.

Moreover, DPC has also admitted that if one of the bidders would be awarded 85 per cent stake, that bidder would not be subject to confidentiality agreement. However, the other contenders would come under it.

Top sources told The Financial Express that TPC and BSES have also made DPC withdraw its condition of holding an individual director responsible for breach of the agreement. DPC has now agreed that the onus would be on the bidding company.

TPC, BSES and Gail have brought to the notice of IDBI that three days would be a shorter period for going through relevant documents, supply agreements, warranties and guarantees in London during the ensuing due diligence. They have demanded that the time period should be increased.