THE ECONOMIC TIMES
Friday, May 18, 2001 http://www.economictimes.com/today/18econ09.htm
 DPC lenders put off preliminary termination notice

The above article has also appeared in: 

THE TIMES OF INDIA
Friday, May 18, 2001 http://www.timesofindia.com/today/18busi20.htm
DPC lenders meet adjourned for today 
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THE ECONOMIC TIMES
Friday, May 18, 2001  http://www.economictimes.com/today/18econ32.htm
India asks Enron to renegotiate Dabhol contract 
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THE FINANCIAL EXPRESS
Friday, May 18, 2001    http://www.financialexpress.com/fe20010518/eco5.html
Deshmukh convenes meet to discuss Dabhol crisis Sanjay Jog 
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BUSINESS STANDARD
Friday, May 18, 2001 http://www.business-standard.com/today/test5.asp?menu=4
'Affordable DPC tariff must to woo third-party buyers' 
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BUSINESS STANDARD
BYSTANDER
Friday, May 18, 2001  http://www.business-standard.com/today/opinion2.asp?menu=8
Dangerous drift on Dabhol
The Central and state governments have failed to manage the Dabhol crisis effectively, writes John Elliott
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BUSINESS STANDARD
Friday, May 18, 2001  http://www.business-standard.com/today/state6.asp?Menu=32
Godbole panel not to seek replacements Our Regional Bureau in Mumbai
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THE ECONOMIC TIMES Friday, May 18, 2001  
DPC lenders put off preliminary termination notice Anto Joseph 

MUMBAI : THE INDUSTRIAL Development Bank of India has once again prevented Enron-promoted 2,144-mega-watt Dabhol Power Company from issuing a preliminary termination notice. Bowing to pressure from IDBI, off-shore lenders have agreed to extend the deadline to May 25 for the Maharashtra government and Enron to settle the ongoing payment crisis. However, lenders are going to monitor developments on a daily basis. 

Lenders who held a conference call late evening at IDBI Tower in South Mumbai have decided to postpone issuing the termination notice by a week. Many off-shore lenders of the $2.9-billion DPC are still in favour of issuance of a preliminary termination notice to the Maharashtra government. A preliminary termination notice gives six months to the government agencies to deal with the problems facing the project. It is the starting point of the process of terminating the project. 

When lenders met last time in London on April 23-24, lead lender IDBI had successfully persuaded off-shore lenders not to allow Enron to go ahead with the termination notice. Lenders had informally agreed to lend time -- around two weeks -- to the government of India to sort out payment related issues. The Maharashtra government has, in the meantime, set up the Godbole Committee to renegotiate the project. 

In the meeting in London, most lenders had proposed a dialogue between the government and Enron rather than going in for any precipitative action. Without the lenders' approval, Enron could not go ahead with its proposal at its board meeting held on April 25. In the board meeting, the company had authorised two persons -- Wade Cline, managing director of Enron India and Neil McGregor, president and CEO of Dabhol Power Company -- to issue the termination notice, whenever lenders agree. 

The Indian lenders, led by IDBI, have continued to oppose the termination move. Termination of the project is expected to hurt Indian lenders since, unlike foreign lenders, their exposure risks are not covered under the government guarantee. While the phase II of the 2184 mega-watt power project is under construction at Dabhol in Maharashtra, and part of which is getting ready for commercial operation in June, the phase I that produces 740 mw of electricity has run into a major payment tussle with the sole buyer MSEB. 

Indian financial institutions and banks have contributed around 60 per cent of the debt for DPC with a $1.2 billion exposure. The $2.9-billion project was lead-arranged by IDBI, and a substantial chunk of Indian debt came from IDBI, SBI, ICICI and IFCI. Of the $2 billion debt, $1.6 billion have already been invested in the project. More than 80 per cent of the phase II is already over, and Enron was expecting the phase to go operational by the year-end. The project, the largest FDI in India so far, was financed by a consortium of around 40 commercial banks -- including ANZ Grindlays, Bank of America, Bank of Tokyo and Citibank. Half a dozen governments including the US, Japan, Belgium, Oman and India have participated in the project financing through various state-owned financial institutions and Exim agencies. 

The recent stand-off between the state government-owned power utility and the US power major stemmed from a payment crisis. MSEB had delayed the monthly payments of electricity bills from October last year and subsequently defaulted payments, claiming that the cost of power produced by DPC is exorbitant. It also slapped a penalty bill of around Rs 401 crore and is going to slap another Rs 740 crore on DPC for failing to produce electricity within the stipulated time period of three hours after the cold start. Enron India had subsequently invoked state guarantees, counter-guarantees, and political force majeure and then went on to invoke the arbitration clause.

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THE TIMES OF INDIA Friday, May 18, 2001
DPC lenders meet adjourned for today 

MUMBAI: The on-going global lenders meet of Enron-promoted Dabhol Power Company (DPC) over allowing the multinational to issue a pre-termination notice to the Maharashtra State Electricity Board (MSEB) has been adjourned for Friday. 
"Talks with the foreign lenders would continue Friday as Thursday's session has been adjourned," top financial institution sources said here. The Indian lenders, led by Industrial Development Bank of India (IDBI), on Thursday participated in the discussions with their international counterparts and tried to persuade the latter to restrain DPC from issuing the pre-termination notice to the loss making board, sources said. 
Technically, the permission to serve the termination notice could be given if 4 per cent of the total lenders were in its favour. The lenders have been discussing the issue since Wednesday by way of tele-conferencing across the globe. DPC's foreign lenders include J-Exim, Citibank NA, and ABN Amro among others. (PTI) 

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THE ECONOMIC TIMES Friday, May 18, 2001  
India asks Enron to renegotiate Dabhol contract 

HONG KONG : INDIA has told US energy company Enron it should renegotiate its contentious power purchase agreement with the Maharashtra government, finance minister Yashwant Sinha said on Thursday. 

"We have suggested to Enron that they should seriously renegotiate the power purchase agreement with the government of Maharashtra, because there are certain elements in that power purchase agreement which can undergo a change," Sinha said. 

Enron and India have been sparring for six months over payment defaults by the Maharashtra State Electricity Board for power purchased from Dabhol Power Company. A Dabhol spokesman on Thursday declined to comment on Sinha's statement. He reiterated the company's previously stated position that it is ready for a dialogue to resolve all issues, but a renegotiation of the contract is not on offer. 

DPC has already held a meeting with a Maharashtra government committee and is slated to meet them again on May 23. "Since the purpose of the meeting is only to hear out the committee and understand their thoughts, we will not present any proposal," Dabhol said on May 3. 

DPC is building the world's largest natural gas fired power plant on India's western coast. The 740 megawatt first phase of the facility began operating in 1999. The plant's generating capacity will triple to 2,184 mw when phase two is completed next month. MSEB agreed in 1995 to buy all the power produced by the plant, but now says the power is too expensive, and is refusing to take the additional second-phase capacity. Its change of mind has sparked concern over the fate of the project. DPC has already issued a notice of arbitration, and last month its board authorised management to terminate the contract. A vote on Thursday by lenders to the project is expected to endorse the board's decision, a source close to the matter told Reuters. 

Sinha said he had no comment on the vote. He also declined to reveal the Center's opinion of MSEB's refusal to buy the second-phase power. (Reuters)
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THE FINANCIAL EXPRESS Friday, May 18, 2001    
Deshmukh convenes meet to discuss Dabhol crisis Sanjay Jog  
Mumbai, May 17: Maharashtra Chief Minister Vilasrao Deshmukh has convened a crucial meeting on Saturday with state officials, the Maharashtra State Electricity Board (MSEB), the advocate general and legal experts to take stock of the situation of the ongoing Dabhol crisis.
Mantralaya sources told The Financial Express that the issues relate to renegotiations with Dabhol Power Company (DPC) like the proposed arbitration proceedings, the Centre's reluctance to purchase Dabhol phase-II power, and issuance of preliminary termination notice to the DPC are likely to to come up prominently at the Saturday's meeting. Furthermore, the meeting would also discuss at length the DPC's refusal to pay rebate of Rs 401-crore charged by MSEB for the mis-declaration and default on the availability of power on January 28. MSEB will complete the review of rebate payment by end of this month and serve another rebate of Rs 400 crore to DPC.
MSEB and state energy department are likely to seek chief minister's intervention to take up the issue of despatch of Dabhol power from phase-II by the Centre in view of their inability to bear additional burden. In fact, the state energy department and MSEB were surprised over the recent statement by the union minister of power Suresh Prabhu that neither National Thermal Power Corporation nor Power Trading Corportion are in a position to purchase or trade Dabhol power to other states. 
Moreover, the energy department and MSEB were of the view that the Centre, which has provided a Counter Guarantee for Dabhol phase-I, cannot remain as a silent observer, but should bail out the state government and MSEB. The chief minister's meeting is also likely to discuss the "cold" response from the union ministries of power, finance and oil and petroleum in reaching at an acceptable solution. Ironically, the Centre, which has decided to adopt a conciliatory route, has yet to prepare a reply to the DPC's notice served on April 4 for the non-payment of December bill of Rs 102 crore.
Sources said that the state government would make a fresh appeal to the Centre to implement a common strategy in defending the stand of MSEB, Centre and state governments at the proposed arbitration proceedings. 
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BUSINESS STANDARD  Friday, May 18, 2001
'Affordable DPC tariff must to woo third-party buyers' 
The Centre should benchmark "an affordable" tariff of Dabhol Power Company's (DPC) liquified natural gas (LNG) based power, so as to enable the Central utilities like the National Thermal Power Corporation (NTPC) or the Power Trading Corporation (PTC) to buy and distribute power from the US energy major, according to a senior official of Maharashtra government.
"Now that DPC is ready for renegotiations, why does the Centre not set the terms of tariff for the multinational's LNG-based power?," the official said here today reacting to a statement made yesterday by Union power minister Suresh Prabhu that the Centre would allow sale of power to a "willing buyer" if DPC and the Maharashtra State Electricity Board (MSEB) jointly approach with a concrete proposal. 
The Union government is also a part of the Godbole panel and the former should not undermine its responsibility merely by stating that "we would try and offer all the help", the official said. When asked if DPC and MSEB would be able to find a "willing party" for the US energy major's costly power, the official said, DPC was ready to reduce the tariff and bring it down to an affordable level following which either NTPC or PTC could source it and pass on to the power-starved north Indian states. 
Last evening, Prabhu had said the Centre would give any status, including a mega project one, if MSEB and DPC approach the Centre for the same together. Prabhu had said that his ministry would extend its cooperation to the state government "in every way" to resolve the imbroglio between MSEB and DPC. The minister also categorically stated that NTPC could not buy DPC's power, as it was a mere "power selling entity". "There was no question of NTPC buying power from the project since long-term power purchase agreements have been signed by NTPC with the buying states," he said.
Earlier in his meeting with state chief minister Vilasrao Deshmukh, the latter had suggested that NTPC sell the excess power over and above the 300-400 mw needed for the state from the 740 mw Phase-I and soon to be commissioned Phase-II of 1,444 mw, to other needy states.
Source: PTI\
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BUSINESS STANDARD Friday, May 18, 2001
BYSTANDER - Dangerous drift on Dabhol
The Central and state governments have failed to manage the Dabhol crisis effectively, writes John Elliott

No-one seems to be terribly concerned that Enron's $3 billion power project at Dabhol, which is India's most high profile foreign investment, looks as if it is heading rapidly into a meltdown. 
Even stories that Enron is shifting executives' families out of the country - surely the actions of an organisation that is clearing the decks for a showdown - attract relatively little attention. International lenders have suspended loans, and contractors on the Dabhol site are said to be withdrawing. This is no longer - as Suresh Prabhu, the power minister, has put it - merely the sort of "dispute between a generator and a distributor" that has happened in many other countries. 
Sure it started out as that; but it now looks as though Enron plans to take its recent force majeure notice to its logical conclusion and withdraw from India as soon as it can. One does not need a lawyer to realise that Maharashtra has unwittingly been helping Enron assemble evidence of force majeure ever since demands for renegotiation or cancellation of the project came from the state assembly's during its noisy sojourn in Nagpur last November. 
After that, the Maharashtra government stoked the flames by calling for cancellation and by demanding on three separate occasions that the plant should move from being idle to full production in three hours. That is a time limit that had never been demanded before and which the Dabhol equipment is not designed to meet. Then the Central government used this time-limit issue as an excuse for not paying Enron money that was due under the project's finance ministry counter guarantee. 
This must have confirmed Enron's belief that there is really no chance of it ever being allowed to settle down at Dabhol to a normal business relationship with the Maharashtra government, the state's political parties, and the state electricity board. There is too much history and baggage - starting with the original project's go-ahead against advice from the World Bank and others, and continuing with the way that Bal Thackeray was suddenly converted to the virtues of Dabhol's second 1,440MW phase stage after he met Rebecca Mark, a senior Enron executive. 
Then there were blockages on Enron's plans for broadband telecom and gas sales, followed by the Nagpur attacks, and damming statements issued since then by the Maharashtra government. Now the story is lost in a complex array of arbitration and conciliation, lenders' meetings, government meetings, and often contradictory newspaper reports. Seemingly forgotten is the basic fact that Enron's senior executive in India obtained authority last month from Dabhol's board to terminate the project if matters do not improve. 
For him not to act on that, India presumably needs to show good faith that it wants to resolve all the disputes quickly. But insisting, as the state government has done, that the interim report of the Godbole committee of inquiry on the dispute should be the starting point for re-negotiating the power purchase agreement is scarcely a conciliatory start. 
The best solution of course would be for Enron's 65 per cent stake in Dabhol to be bought out by a another power company which would then, with bankers and lenders, renegotiate the power purchase agreement, lower the rate of return, restructure $2 billion debt, and arrange to sell power across to states outside Maharashtra. 
Many foreign power companies have looked at the project, which looks attractive because the 2,144 MW power plant is almost completed, whereas most other big power projects have not even started construction, and because there is a large liquefied natural gas terminal which will be one of the first in the country. But no foreign company wants to pick up the risks and uncertainties involved. That leaves the possibility of an India buyer - with Reliance being frequently mentioned as the most likely candidate because of its proven financial and management capabilities and reach. 
But time is running out and it does not look as if Enron will wait much longer. If it does terminate the contract - and maybe puts the Dabhol company into bankruptcy - India's image will suffer because of the government's failure to pay the counter guarantees, which could well be presented as the central issue. The only beneficiary of this disaster would be the company that eventually picks up the pieces at Dabhol because it will obtain the project at a knockdown price. 
This may sound as if I am arguing that Enron is in the right. I am not. What I am arguing however is that the Central and state governments have failed to manage this crisis effectively. Instead they are treating it with a characteristic sense of drift - assuming no doubt that, like so many crises in this country, it will solve itself - which it will not. 
If anyone doubts Enron's motive for ridding itself of its India business, just look at its recent first quarter results: profits up 20 per cent to $406 million on sales that had almost quadrupled to $50 billion. Does anyone seriously think that Dabhol matters to such an international commodities trader? 
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BUSINESS STANDARD  Friday, May 18, 2001  
Godbole panel not to seek replacements Our Regional Bureau in Mumbai
Chairman of the renegotiation committee appointed to hold discussions with the Dabhol Power Company (DPC) Madhav Godbole, on Wednesday said the remaining six members on the committee were adequate to fruitfully continue negotiations with the power major. 
Responding to a query whether the withdrawal by three appointees on the committee -- EAS Sarma, RK Pachouri and Kirit Parikh -- would hamper negotiations with DPC considering their respective expertise in fields of finance and power, Godbole told Business Standard, "I would not like to get into such an argument. As far as the committee is concerned we would not be seeking fresh inductions." He was reacting to Maharashtra chief minister Vilasrao Deshmukh's statement made earlier on Wednesday, wherein he said the government would wait for the chairman of the renegotiation committee to make a requisition for new members on the committee.
Deshmukh also told mediapersons after the cabinet meeting, "We have repeatedly informed the centre of our inability to absorb the DPC power that would become available following the completion of phase II of the project." He also observed that while Maharashtra was keen to ensure the active participation of individual members from the Union finance, energy and legal ministries for a fruitful dialogue process with DPC, the appointment of retired bureaucrat AV Gokak was not clear on some issues.
"Whether Gokak is authorised by the centre with some powers to negotiate on its behalf is not clear as of now. However, with renegotiations currently on, we would like to await the committee's deliberations," he said. The next meeting of the renegotiating committee with DPC is scheduled for May 23.