Thursday, June 07, 2001, http://www.financialexpress.com/fe20010607/news1.html
Vajpayee says state, Enron should resolve Dabhol crisis themselves 


Thursday, June 07, 2001, http://www.financialexpress.com/fe20010607/news4.html
...but Deshmukh insists Centre should help resolve the dispute 

Similar articles as above also appeared in the following newspapers:


Thursday, June 07, 2001, http://www.economictimes.com/today/07infr01.htm
Enron dispute will be solved, says Vajpayee

THE ASIAN AGE, Thursday, June 07, 2001
'MSEB-DPC Crisis To be Resolved'


Thursday, June 07, 2001, http://www.timesofindia.com/today/07busi28.htm
Enron imbroglio will be solved: PM 
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Thursday, June 07, 2001, http://www.economictimes.com/today/07infr02.htm
DPC lenders to continue talks on Thursday 
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Thursday, June 07, 2001, http://www.financialexpress.com/fe20010607/top4.html
DPc foreign lenders to hold their horses , Sanjay Jog & Sitanshu Swain
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Thursday, June 07, 2001, http://www.indian-express.com/ie20010607/bus2.shtml
FIs buy more time in DPC lenders meet
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Thursday, June 07, 2001, http://www.economictimes.com/today/07edit01.htm
A step forward
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Thursday, June 07, 2001, http://www.business-standard.com/today/corp17.asp?Menu=2
Dabhol to challenge MERC order in high court, Arijit De & S Ravindran 

The above article also appeared in the following newspaper:


Thursday, June 07, 2001, http://www.financialexpress.com/fe20010607/news5.html
DPC challenges MERC order in high court 
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Thursday, June 07, 2001, http://www.business-standard.com/today/state1.asp?menu=32
DPC to continue billing MSEB for Phase II power, S Ravindran 
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Thursday, June 07, 2001, http://www.financialexpress.com/fe20010607/news6.html
'Captive, decentralised power projects are the answer to power shortage problem', Rajeev Jayaswal
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THE FINANCIAL EXPRESS, Thursday, June 07, 2001 
Vajpayee says state, Enron should resolve Dabhol crisis themselves 
 PRIME Minister Atal Behari Vajpayee on Wednesday passed on the buck to the Maharashtra state government and Enron to find a way out to resolve the Dabhol impasse. Hoping that both the parties will solve the imbroglio mainly concerning the disposal of costly power, he said the steps initiated by the state government and the Dabhol Power Company (DPC) are in the right direction of resolving the issue.
Addressing a press conference immediately after his arrival at the Mumbai airport, Mr Vajpayee shared the state government's sentiments on the purchase of the "costly" Dabhol power. The prime minister admitted that there are difficulties in finding a solution to the Enron issue, but he was confident that it would ultimately be found. By putting the ball in the court of the state government and DPC, the prime minister has made it amply clear that the Centre would not like to associate itself directly to either purchase Dabhol power or its despatch to various states until tariff is reduced after renegotiation. Mr Vajpayee's remarks have come as a major setback to the state government as it has been appealing to him for the takeover of the Dabhol phase-II in view of its inability to bear the mounting burden.
Chief Minister Vilasrao Deshmukh, in his recent communication to Vajpayee on February 6, April 17 and May 10, repeatedly demanded that Dabhol's surplus power be disposed by national organisations such as the NTPC and the Power Trading Corporation in power deficit states. "The negotiations with DPC with a view to reducing the tariff hinge around the question whether the entire power from this project at 90 per cent PLF would be purchased. DPC may be willing to reduce tariff from the existing high levels, provided they get such an assurance from the government of India," Mr Deshmukh had said. 
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THE FINANCIAL EXPRESS, Thursday, June 07, 2001 
...but Deshmukh insists Centre should help resolve the dispute 
 THE Maharashtra chief minister Vilasrao Deshmukh on Wednesday said that his government's stand that the state cannot afford to buy "costly" Dabhol power has ultimately been vindicated by Prime Minister Atal Behari Vajpayee. "We stick to our position that the Centre should step in to bail out the state as we cannot bear the additional burden. The purchase of additional 722 MW from block b of Dabhol phase-II is simply out of question as the state has not drawn more than 300 MW from the Dabhol phase-I of 740 MW," Mr Deshmukh said. Mr Deshmukh was reacting to the prime minister's statement that if Maharashtra cannot purchase such costly power who else would buy it.Mr Deshmukh told reporters after the weekly Cabinet meeting that something would emerge from the ongoing renegotiations between the Maharashtra State Electricity Board (MSEB) and the Dabhol Power Company. "However, DPC will have to sacrifice something and the MSEB will also have to do some balancing act for the resolution of the Dabhol issue," he added.
Mr Deshmukh admitted that the he has been consistent on his demand that the Centre should take over Dabhol phase-II which is the only way in which the complex problem of this project can be resolved. The chief minister said that his government will seek legal opinion on how to tackle the arbitration proceedings initiated against it by the DPC. He added that at present the MSEB has got stay from the Maharashtra Electricity Regulatory Commission on implementation of arbitration process by the DPC. "Let the DPC take action on this front against the state government, we will take the necessary steps after seeking legal advise," he added.
On making the Dabhol papers open for public, Mr Deshmukh said that his government will also seek legal advise in this regard and take necessary action thereafter. At present, DPC has declined to release certain documents on the grounds of "confidentiality." Mr Deshmukh ruled out any possibility of adverse impact on receiving foreign direct investment in the state in view of the ongoing Dabhol imbroglio. "The question does not arise, as according to the power purchase agreement between DPC and MSEB, the latter was entitled to purchase all power. In case of FDI, the state is not entitled to buy the products of the FDI investor," he added. 
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THE ECONOMIC TIMES, Thursday, June 07, 2001, 
DPC lenders to continue talks on Thursday 

THE talks between Indian and foreign lenders of the Enron-promoted Dabhol Power Company will continue Thursday in Singapore. The DPC is reported to have made a presentation at the meeting Wednesday and explained its disputes with Maharashtra State Electricity Bord and the pending case in the state regulatory commission, financial institution sources said here. 

Thursday's meeting is scheduled with foreign banks. 

Earlier, in a desperate bid to convince foreign banks to not invoke guarantees issued by them, Indian lenders to the Dabhol Power Company assured intervention by the central government in salvaging the project. Institutional lenders run the risk of guarantees worth Rs 2,463 crore being invoked by foreign lenders, who are under pressure to prevent their loans from going bad. During the DPC lenders' meet in Singapore on Tuesday, Indian lenders asked foreign ones to not take "individual decisions" in respect of loans to the project. Instead, they should wait for the outcome of negotiations. The lenders meeting was also attended by senior DPC officials. Among foreign banks, senior officials from Citibank, ABN Amro, ANZ Grindleys, Bank of America and Opec were present. 

The 2,184-MW power project, with an estimated cost of $2.9bn, stopped generation last week following MSEB's decision not to buy power from the DPC. This has aggravated the matter, making it difficult for the lenders to adopt a softer stand. Indian lenders have guaranteed loans by foreign banks and institutions to the extent of $524 million (Rs 2,463 crore). The guarantees given by lead institution IDBI alone is around Rs 1,528 crore while its total exposure to the project stands at Rs 2,158 crore. The other major Indian lenders include ICICI, State Bank of India and Canara Bank. Indian lenders are worried that foreign banks would invoke the guarantee if the current stalemate continues. "However, lenders have to depend on the central government, MSEB and the DPC to resolve the issue. Indian lenders can only mediate between the government and DPC and also plead with foreign lenders not to pull the plug," said an analyst. Officials who attended the meeting said, 

"We hope to arrive at some decision by tomorrow." DPC is expected to make a presentation to the lenders on Wednesday while small foreign banks will be meeting on Thursday. Asking foreign banks not to take an individual decision is because of the fear that foreign lenders are considering invoking the guarantee. "Although Indian banks maintain that foreign banks are not considering invoking the guarantees, it definitely appears that they are considering such a move given the stringent accounting norms followed in the international market," an analyst pointed out. - 
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THE FINANCIAL EXPRESS, Thursday, June 07, 2001 
DPc foreign lenders to hold their horses , Sanjay Jog & Sitanshu Swain

 IN a significant turn of events, the foreign lenders to the Dabhol Power Company (DPC) have decided to adopt a wait-and-watch approach, rather than precipitate matters on the basis of the termination notices served by both parties - the power company and the Maharashtra State Electricity Board (MSEB) - on each other. This development comes even as the lenders' meeting rolled on to an unscheduled third day to iron out further issues among themselves.
This decision was taken after two days of hectic deliberations among the lenders where the Industrial Development Bank of India (IDBI)-led domestic lenders briefed their foreign counterparts about the positive signs relating to the continuance of the power project, top sources associated with the meeting told The Financial Express on Wednesday evening. The sources said this effectively means that the foreign lenders would not immediately insist on encashing the guarantees on their funds provided by the domestic lenders to the project. The Dabhol lenders' meeting will now continue for an "unscheduled" third day on Thursday. 
The lawyers of offshore lenders White & Case have confirmed that the meeting will continue on Thursday.
However, the representative of Industrial Development Bank of India (IDBI) Mr RS Agarwal left Wednesday's meeting mid-way to catch the flight back to India. Sources said Enron India managing director K Wade Cline made a detailed presentation for over two-and-half hours before the lenders. Mr Cline is believed to have outlined the series of events that have brought Enron to the brink of quitting India.Mr Cline said after the presentation: "We have made a presentation. The presentation went well." Dabhol Power Company, on its part, has already made it known that it is willing to revise some of its earlier projections to suit the requirements of the state government.
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THE INDIAN EXPRESS, Thursday, June 07, 2001
FIs buy more time in DPC lenders meet

The two-day meeting between Indian and foreign lenders of the Enron-promoted, Dabhol Power Corp (DPC) remained inconclusive on Wednesday with foreign lenders deciding to give some more time to the Indian government to decide the fate of the project.While officials of Indian FIs (IFIs) decided to fly back on Wednesday, foreign lenders are expected to discuss among themselves on what action should be taken on the project on Thursday. IFIs have already sunk over Rs 5,000 crore on the project and if international lenders pull the plug on the project, it would be IFIs which will have to take another Rs 2,463 crore hit on their balance sheet as they have guaranteed all the international loans taken by DPC.

IFIs, led by IDBI have already told the foreign lenders that they should not take any hasty decision as even the PM has intervened in the dispute. The foreign lenders include a consortium led by ABN-Amro, Citibank NA, Japan Exim bank and OPIC. With this, foreign lenders have now decided to adopt a wait-and-watch posture instead of fighting with Indian lenders.The IFIs had pressed for completion of the $3 billion project, as DPC has stopped commercial production and doubts are being expressed for commissioning of its 1,444 MW phase-II due on Thursday. The Indian team, led by IDBI executive director R S Agarwal, flew back to India alongwith representatives of SBI and ICICI. On Wednesday, DPC also made presentations to the lenders about the fate of the project. Analysts say that foreign lenders cannot give much time to the project as they have to follow stringent accounting norms followed in the international market.
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THE ECONOMIC TIMES, Thursday, June 07, 2001 
A step forward
DABHOL Power Company is reportedly ready to extend the period for conciliation till August. This is a good idea. Nobody, least of all Enron, which owns the majority stake in DPC, gains from terminating a costly project suddenly. India is desperately short of electricity, whether or not Maharashtra claims that it can do without Dabhol power. The least that will be achieved by extending the conciliation period will be a more organised withdrawal of Enron from the $2 billion project. 
However, if MSEB, the governments of Maharashtra and India act sensibly, then the project can be salvaged by some renegotiation. Enron, which reportedly plans to specialise in energy trading and pull out of power generation worldwide, might still pull out, but a renegotiated Dabhol will be a cheaper source of large volumes of electricity which India desperately needs. The Godbole committee reckons that by renegotiating DPC's PPA and its gas contracts, and by some financial re-engineering, the cost of DPC electricity can be nearly halved. That will mean very attractive prices for electricity from a new gas driven plant. It also means that domestic financial institutions and banks, who have a huge exposure to Dabhol, will not have to contend with the worrisome prospect of having to provide for loans that become non-performing. 
Meanwhile the government in New Delhi has to stop waffling about the need for reforms and get some work done. The first thing to do is to issue an ordinance permitting all independent power producers to sell power to whoever is willing to pay for it. Private investment is already allowed in transmission and distribution. With generators free to sell to entities other than SEBs, India will move towards a more competitive market for power. Privatising power distribution has proved to be a mixed success - it has succeeded to some degree in states like Orissa and flopped in UP, mainly because nobody has faith in the government's ability to administer. Reforms of state owned distribution networks and SEBs are uncertain and will take a long time to succeed. In the meantime, it is a good idea to set up parallel, privately owned and operated systems for generation, transmission and distribution that will provide reliable, quality power to consumers who are willing to pay.
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BUSINESS STANDARD, Thursday, June 07, 2001
Dabhol to challenge MERC order in high court, Arijit De & S Ravindran 
The legal battle between the Dabhol Power Company (DPC) and the Maharashtra State Electricity Board (MSEB) has taken a fresh turn with the former deciding to challenge, in the Mumbai High Court, the order of the Maharashtra Electricity Regulatory Commission (MERC) restraining it from seeking recourse to international arbitration till June 14. The case is slated to come up for hearing on June 11, three days before the next MERC hearing. DPC's contention, it is learnt, is that it is beyond MERC's jurisdiction to debar the company from proceeding with international arbitration. DPC has informed MERC about its decision in a communication dispatched this evening, MERC officials said.When contacted, the DPC spokesperson declined to comment on the issue. MSEB has slapped a claim of Rs 401 crore on DPC for non-supply of power at adequate levels on January 28.
In a submission before the commission, it also said that DPC has to pass on Rs 1,200 crore which had been paid as capacity charges. On May 29, MERC had passed an interim injunction restraining DPC from going in for arbitration on its payments dispute with MSEB till June 14. The commission had also taken the line that DPC could not activate the escrow account for the second phase of the project. The terms of the power purchase agreement inked between MSEB and DPC provide for international arbitration between the two sides if payments disputes arise. DPC lawyers had questioned MERC's authority to settle disputes with MSEB. They had argued that MERC, created in May 1999, did not have the jurisdiction to adjudicate on disputes between DPC and MSEB. The DPC argument was that since the amended PPA with MSEB had been inked in 1998, there was no question of MERC having any role to play. MERC sources concede that they cannot reopen the PPA. But they point to another amendment to the Electricity Regulatory Commissions Act on October 27, 2000, which empowered MERC to settle all disputes between power utilities. The commission's stand is that since both DPC and MSEB are power utilities, it has the right to adjudicate on all disputes between the two.
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BUSINESS STANDARD, Thursday, June 07, 2001
DPC to continue billing MSEB for Phase II power, S Ravindran 
Dabhol Power Company (DPC) will continue billing the Maharashtra State Electricity Board (MSEB) for the power generated from its phase II, which was due to commence operations on Thursday. Sources close to DPC said: "If MSEB had fully cooperated with DPC, commercial production could have begun from tomorrow. Under the power purchase agreement (PPA) they would have been forced to buy this power.""While MSEB's contention is that they have rescinded the PPA, DPC's contention is that the PPA continues to be in force. Under these circumstances, DPC will definitely charge MSEB for the second phase power at some future date," the sources added. 
MSEB has already stopped buying power from DPC. MSEB chairman Vinay Bansal could not be reached for comment. Meanwhile, lenders to the Enron-promoted Dabhol Power Company (DPC) are yet to arrive at a decision on the crucial issue of a transfer notice being served to the MSEB.DPC executives made a presentation to a consortium of domestic and foreign lenders in Singapore on Wednesday. "The lenders are yet to get back to DPC with their views on the subject," sources said. This was one among various suggestions put forth by DPC executives to the lenders.
The other issue that was discussed was the mothballing of the 1,444 mw second phase of the project.Further, DPC executives also spelt out the differences between the company and the Godbole committee to a consortium of Indian and foreign lenders."DPC representatives pointed out that there was a huge gulf between the members of the Godbole panel and the company. The bone of contention is the plant load factor (PLF) at which DPC will sell power to Maharashtra State Electricity Board (MSEB). Dabhol Power is keen on a PLF of 90 per cent which will bring down the tariff. The Godbole panel on the other hand wants a much lower offtake of power by MSEB," sources close to DPC told Business Standard from Singapore. 
The meeting was attended by Enron India, managing director, Wade Cline; DPC president and CEO Neil McGregor and representatives of Indian financial institutions and banks like Industrial Development Bank of India, ICICI, State Bank of India. The foreign lenders were represented by the arrangers to the loan for DPC including to Credit Suisse First Boston. DPC also sketched out a number of possible scenarios to the lenders in the wake of the preliminary termination notice issued to MSEB. Sources however refused to elaborate further. DPC executives are scheduled to hold another round of discussions with the lenders to the project on Thursday. 
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THE FINANCIAL EXPRESS, Thursday, June 07, 2001 
'Captive, decentralised power projects are the answer to power shortage problem', Rajeev Jayaswal

THE failure of big power projects such as Dabhol proves that captive and decentralised power generation projects are the solution to the massive power shortage in India, according to global power major Wartsila Corporation's president and CEO Ole Johansson. "The future of small power projects or distributed generation in India is quite promising, compared to large power plants," he said citing the company's growth in India."Wartsila, India, is adding about 200 MW power generation plants every year in India for the last five year and the growth is likely to continue even in the future," he said. Wartsila, India, has commissioned a number of distributed generating stations in India in the last 15 years, which altogether crossed the installed capacity by 2,000 MW. The power generation plants have been installed for industries, utilities and independent power producers (IPPs).  "Out of the total 2,000 MW power projects installed, 50 per cent of the capacity was added in the last five years, showing the trend for small distributed generating stations located close to the load centres," he said.

Stating, there is a large demand and supply gap in India, Mr Johansson said: "India is currently short in peak demand by about 11 per cent. According to an estimate, about 1,00,000 MW will have to be added over the next 12 years to the existing generating capacity of about 1,00,000 MW, to support a GDP growth rate of 6 per cent per annum."Speaking about the Enron controversy, he said, "The company, the foreign lenders involved in the projects, and both the state and the Central governments can find an amicable solution."

He, however, added that the big plants are always difficult to finance, whereas there are little financial and completion risks involved in small power projects. The company claims to install a captive power plant of 150 MW in about 14 months which can run on both furnace oil, as well as natural gas.Stating that gas is the fuel of the future, Mr Johansson said that power generated by using gas fuel is cheaper than oil by about Rs 1, depending on the availability of gas and its market price. "The cost of power generation is under Rs 3 per unit in case of gas, whereas in case of oil it is about Rs 4 per unit," he said. The Finnish company, Wartsila