Fearing such penalties, Maharashtra State Electricity Board (MSEB) chairman Jayant Kawale has written to the Cabinet secretariat to take up the issue with Oman and Abu Dhabi through diplomatic channels and persuade them to withdraw. DPCs assets since have been transferred to Ratnagiri Gas and Power Private Ltd.
The high-level delegation to Abu Dhabi, Oman and Qatar for procurement of LNG for RGPPL (expected to leave sometime in the first week of December) may accordingly be briefed in this regard, said Mr Kawale in his letter.
According to a note attached with Mr Kawales letter, while MSEB, GE and Bechtel were the shareholders of DPC and jointly responsible for any dues against it, the liabilities on Maharashtra Power Development Company Limited (MPDCL) could potentially be 100% and not limited to the 15% shareholding as both GE and Bechtel have already walked out of the project in July this year.
In the settlement with GE and Bechtel, both firms were provided protection allowing them to proceed in arbitration against the government for any third party claims. No such protection was, however, given to MPDCL though it can potentially face up to 100% of this liability.
As per the note, MPDCL itself has no other assets except the shareholding in DPC and there is no guarantee that attempts will not be made to pierce the corporate veil and MPDCLs affiliates (MSEB and GOM) could be perceived as softer targets as against GE and Bechtel, it added. u
While the two LNG suppliers have already filed claims for $1.42 billion up to March 2005, it is likely that these may increase by another $500 million for the period after March 2005, considering the increase in crude prices, the note said.
Of DPCs total annual requirement of 2.1 million tonne of LNG for phase-I and phase-II, around 1.6 mtpa was contracted from Oman LNG and 0.5 mtpa from Ad Gas. These contracts had no cap with respect to crude price, which was linked to the Japanese crude with $18 as the floor price.
MPDCL, MSEB and GOM run the risk of continued exposure to a huge liability ($1.5-$2 billion) through the gas sales agreement (GSA) and the novation deed, the note said.