It’s advantage Enron as MSEB gives up

The decision comes at a time when there are serious doubts within the Government about the viability of the MSEB buying power from Dabhol’s phase I at exorbitant rates. The Government is in the process of setting up a review committee of experts to suggest remedial measures so as to lessen the burden of the MSEB from Dabhol.

Of course, the decision to allow Enron pick up the additional equity comes in the wake of MSEB’s own financial sins of the last few years, compounded by the huge bills from Dabhol since May 1999 when phase I went into production.

Following today’s approval from the Centre, Dabhol will enhance its equity investment from $ 886.9 million to $ 1119.9 million. As per the agreement, MSEB will be given the option to pick up its 30 per cent stake as and when it is in a position to do so at a mutually agreed price, Mahajan added. With the hike in equity of Enron, the share of MSEB holding has now been diluted to below 30 per cent.

In the enhanced foreign equity participation, $ 434.2 million will be for Phase I of the power project and $ 685.75 million will be for Phase II of the power project at Dabhol, he said.

Enron presently has 50 per cent stake in the $ 1.87 billion Dabhol Phase II, while the remaining is with Bechtel Enterprise and General Electric.

Mahajan said the Government had earlier allowed Enron to invest upto 100 per cent but under the renegotiated agreement it was decided that MSEB would pick up 30 per cent stake in both Phase I and Phase II of the power project.

While MSEB picked up 30 per cent stake in Phase I it expressed its inability to do so for Phase II. Hence, Enron offered to pick up MSEB’s stake.

As per Enron’s proposal, foreign equity of $ 1119.9 million will be contributed through Enron Mauritius Company, a wholly-owned subsidiary of Enron International.

Earlier, Enron had been issued an approval to set up, own and operate a natural gas fired combined cycle power station with a capacity of 1920 MW (expandable to 2550 MW).

Enron is setting up $ 2.8 billion, 2,184 MW plant in two phases, the second phase is still under construction along with a $ 494 million LNG gasification unit (also under installation).

MSEB has taken 30 per cent share in Phase-I where Enron has 50 per cent stake and General Electric and Bechtel Corporation hold 10 per cent stake each.

While the first phase uses naphtha as feed stock, the entire project would shift to LNG once the second phase is commissioned by December end. Enron, which is setting up a five million tonne LNG import terminal at Dabhol, would import about two million tonne of LNG for the power plant from the Middle-East for the power project.

Experts only: CM

Mumbai:The proposed committee to be set up by the State Government to review its power purchase agreement with Enron will not have representative of any political party, Chief Minister Vilasrao Deshmukh said today.

The panel would have only experts to review the controversial agreement, he added.