Gail, Tata Power, BP To Join Hands

New Delhi, March 24 | Updated: Mar 25 2004, 05:30am hrs
Gail (India) Ltd is close to signing a development agreement with Tata Power Company (TPC) and British Petroleum Global Investments to jointly bid for the troubled Dabhol Power Company. (DPC).

Under the terms and conditions of this development agreement, cleared by the Gails board on Tuesday, it has been agreed that in matters related to the project including preparing any bid, Tata Power will lead all activities relating to the operation of power plant along with distribution and sale of power, BP will lead operation of the re-gassification terminal and LNG supply while Gail will lead activities relating to development of gas pipeline and transportation.

It is pertinent to point out that the revival of DPC is now receiving attention of all the stake holders including the Centre. IDBI, as the lead lender, has retained the services of leading international consultant N M Rothschild to work out the package, after resolving disputes and claims, for assets sales of DPC.

As against the sale of equity of foreign sponsors earlier, IDBI is now targeting outright sales of assets through a bidding process.

Under the agreement, it is also proposed that if the bid of Gail-TPC-BP combine is successful then LNG supplies for Dabhol power plant and non-Dabhol customers would be organised by BP at competitive rates. Depending upon the outcome of discussions, Gail will also consider undertaking purchase of LNG on a take or pay/ supply or pay basis from BP.

Gail will also provide transportation of re-gassifed LNG from Dabhol to customer of the project, including captive requirement of parties.

Confirming the move, Gail chairman and managing director Proshanto Banerjee said, it is anticipated that three companies will have equal participation in the project. While TPC will lead activities relating to the operation of the power plant, the distribution and sale of power and all other power related matters, it will also participate in LNG and gas-related matters. Similarly, although BP will lead activities relating to the operation of the regasification terminal, LNG supply and management and all other LNG-related matters, it will also participate in power and gas-related matters.

Likewise, Gail will lead activities relating to development of the gas pipeline and transportation of gas and will also participate in power and LNG-related matters.

Under the agreement, there is an exclusivity provision whereby Gail will discuss its participation in the project with TPC and BP and similarly TPC and BP will not discuss the association of any other gas transportation or pipeline company in the project during the term of this agreement.

DPC, set up by a consortium of Enron, GE, Bechtel and government of Maharashtra, ran into number of commercial and contractual problems and the project stopped generating power (Phase-I) in mid-2001 after operating for more than one year. Subsequently the construction work, pertaining to Phase-II of the power plant and LNG terminal, was also stopped by the project developers. The phase-II of power project is about 90 per cent complete whereas the LNG import terminal and re-gassification facilities are about 85 per cent complete.

Indian lenders, led by IDBI, have a huge involvement in DPC and a sovereign counter guarantee by GoI has supported this project.