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The Cabinet Committee on Economic Affairs(CCEA) today gave its in principle approval for giving guarantee to Indian Financial Institutions (IFIs) who are settling the dispute with various stake holders of the Dabhol Power Plant. This, it is hoped, will help them to settle these issues early.
Dabhol Power Company was set up in two phases. Phase-I (740 MW), was initially based on naphtha but was to be switched to LNG. Phase-II (1444 MW) was based on LNG from the outset. The plant was envisaged as a base load station. A ‘take-or-pay’ Power Purchase Agreement (PPA) between MSEB and DPC obliged MSEB to purchase 90 per cent of the power guaranteed by DPC. The price was determined by a formula detailed in the PPA. The obligations of MSEB under the PPA, both for Phase-I and Phase-II, are guaranteed by Government of Maharashtra. Government of India has counter-guaranteed certain specified obligations of Government of Maharashtra for Phase-I of the project only. This was subject to a ceiling of US$300 million, in the event of termination and an annual ceiling determined by the counter guarantee of approx. Rs. 1500 crore per annum in respect of default in energy payments, but subject to the energy being owned by Government of India.
Enron Corporation is under liquidation. GE and Bechtel have recently bought 49 per cent of the shares of one shell company (M/s Offshore Power Production, a Dutch limited partnership) from the liquidators of Enron and have an option of purchasing the balance 51 per cent as well. GE and Bechtel now have a direct holding of 59 per cent, and effectively control 85 per cent of DPC. This purchase has been under judicial scrutiny and Bombay High Court has recently held it against terms of Dabhol Power Company agreement.
RK/DS/LV
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