Enron may finally dump DPC

Mumbai: Is Enron finally dumping the Dabhol power project? It seems so. Two days back domain-B had reported that Enron was not willing to sell its stake in Dabhol for anything less than $1 billion and it had refused the offers, to that effect, made by Tata Power and BSES.

Enron, sources say, is now willing to sell its stake for anything between $700 million and $800 million and the buyers are likely to be the IDBI-led financial institutions. Why this turnaround in Enrons views is not clear, but it is understood that the company has accepted the fact that if it does receive $800 million as sale proceeds, then it has got its entire equity investment back.

The offers made by Tata Power and BSES were in the vicinity of $630 million. Earlier, FIs too had made an offer of $400 million, which was considered too low by Enron and therefore the deal had fallen through. Of the $1 billion exposure, which Enron says it has in DPC, the equity component, along with that of GE and Bechtel, is said to be in the range of $ 800 million.

The rest comprises of development expenditure of $200 million and retained earnings of $140 million. The last two components are controversial and chances are that Enron may have to forego them in order to let the deal go through.

The sources say two factors could make the deal happen - sooner than one thinks it could happen. 1) It is in Indias interest to amicable settle the DPC issue, as the imbroglio is the single largest factor to have adversely affected FDI inflows into India. Since Prime Minister A B Vajpayee is likely to visit the US in the third week of November, he would like to carry a clean slate, vis--vis Enron. 2) It is also in the interests of Indian FIs to settle the issue as early as possible as they have a large exposure to Enron, said to be in the order of around Rs 6,200 crore.

The FIs will be required to make the payment of the entire consideration in five equal annual installments to avoid the burden of one-time payment. They would warehouse their investment before they find a private buyer for the project.

Experts say legally Enron is on a very strong wicket and it would be in Indias interest to clinch the deal. The project too, they say, will become economically viable once the second phase gets completed, which would mean a supply of 2,100 mw of power into the state of Maharashtra. DPC has also build a residential colony for 10,000 people and a 50-km link road, connecting the project to the highway.