Friday, June 08, 2001, http://www.economictimes.com/today/08infr01.htm
Stone & Webster to evaluate DPC suspension

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Friday, June 08, 2001, http://www.economictimes.com/today/08infr02.htm
Private firms expect early end to Enron crisis

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Friday, June 08, 2001, http://www.business-standard.com/today/finance8.asp?Menu=5
Dabhol lenders to study pullout cost , Freny Patel 
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States cannot afford DPC power , Santosh Tiwary & P Vaidyanathan Iyer 
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Friday, June 08, 2001, http://www.financialexpress.com/fe20010608/top3.html
Dabhol lenders for 1-yr plant closure, Sanjay Jog
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Friday, June 08, 2001, http://www.financialexpress.com/fe20010608/top4.html
DPC willing to cut rate of return to 11 per cent, Sitanshu Swain
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Friday, June 08, 2001, http://www.financialexpress.com/fe20010608/news1.html

Dabhol's RoE should not cross 16%: Godbole panel , Sanjay Jog
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Friday, June 08, 2001, http://www.financialexpress.com/fe20010608/news2.html

DPC appeals to high court to stay MERC order, Sanjay Jog
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DPC appeals against Merc's order on escrow
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Friday, June 08, 2001, http://www.timesofindia.com/today/08busi1.htm
Lenders form panel to negotiate with MSEB, By Pradipta Bagchi 
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Friday, June 08, 2001, http://www.timesofindia.com/today/08busi2.htm
DPC against public hearings , Swati Deshpande 
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Friday, June 08, 2001, http://www.indian-express.com/ie20010608/bus1.shtml
DPC lenders hire advisor to evaluate suspension
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Friday, June 08, 2001, http://www.indian-express.com/ie20010608/bus2.shtml
Dabhol Power ready to scale down RoR to 11 pc, Sitanshu Swain
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Friday, June 08, 2001, http://www.hindubusinessline.com/stories/14085602.htm
Enron seeks promise on phase I drawal 
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Friday, June 08, 2001, http://www.hindubusinessline.com/stories/040821ed.htm
Dabhol lessons 
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Godbole charges DPC with doublespeak 
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Friday, June 08, 2001, http://www.the-hindu.com/stories/0208000b.htm
Provision for arbitration 

Medha for judicial inquiry 
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Friday, June 08, 2001, http://www.telegraphindia.com/

LENDERS BLOW THE DABHOL II FUSE  
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Friday, June 08, 2001, http://www.asianageonline.com
DPC CHALLENGES MERC'S ORDER IN COURT
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Friday, June 08, 2001, http://www.economictimes.com/today/08infr01.htm
Stone & Webster to evaluate DPC suspension

INDIAN and foreign lenders of us energy major Enron-promoted Dabhol Power Company are to appoint global energy consultants Stone and Webster to evaluate the cost of suspension of the multinational's 2,184-mw project. On the second day (yesterday) of the lenders' Singapore meet, Enron India managing director K Wade Cline in his presentation suggested a temporary suspension of the $3-billion project, FI sources said. 
Cline also provided detailed alternatives vis-a-vis a post-suspension scenario with reference to power blocks and almost ready liquefied natural gas terminal, they added. 

Sources said Stone and Webster were zeroed upon to calculate their estimate of revenues of the entire project, including the LNG terminal as foreign lenders felt that a cost evaluation should be undertaken in the present circumstances. ``The Indian lenders failed to convince their foreign counterparts who in turn were in favour of the suspension,'' they explained. ``The fate of DPC's 1,444-mw phase-II now hangs in balance as it has been postponed for the time being till the matter regarding the `rescinding' of the power purchase agreement (PPA) is settled,'' they said. 

As per the original schedule of PPA, DPC's phase II was to have been fired on Thursday. 
Both Indian and foreign lenders were of the view that the legal wrangles between DPC and Maharashtra State Electricity Board should be kept in abeyance and a solution reached for offtake of phase-I power, they said. (PTI) 

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Friday, June 08, 2001, http://www.economictimes.com/today/08infr02.htm
Private firms expect early end to Enron crisis

PRIVATE power producers expect an early end to the dispute between Enron Corp and a local utility after Prime Minister Atal Bihari Vajpayee said he was optimistic about the US firm's $2.9-billion project. "Now the Central government is taking interest. That too at the highest level. That is very nice," Harry Dhaul, director-general of the Independent Power Producers' Association of India, said. 

On Wednesday, Vajpayee said he was confident that Dabhol Power Co, 65 per cent owned by Enron, and the Maharashtra State Electricity Board, the plant's only buyer, would sort out their problems. MSEB, which complains that Dabhol produces costly power, defaulted on payments of $48 million to DPC last year. The squabble provoked Enron to serve a preliminary termination notice to MSEB and the utility declared late in May that it had stopped buying power from the controversial plant. 

Dabhol's first phase of 740 mw is already operational and the next phase was scheduled to add 1,444 mw later this year. MSEB has already said it would not buy power from the project's next phase. Private power producers, who have been demanding central government intervention in the dispute said Vajpayee's comments augured well for the plant and will help refurbish India's image that took a beating after the dispute involving its largest direct foreign investor. "I think the prime minister has done absolutely the right thing. It is going to send the right signal that we are back on track and the international investors concern will be duly met." (Reuters)

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http://www.business-standard.com/today/finance8.asp?Menu=5
Dabhol lenders to study pullout cost , Freny Patel 
Lenders to the Dabhol Power project have mandated their engineer, Stone and Webster, to do a costing study on the implications of mothballing the second phase of the project. The issue is whether to close it now or wait till the civil work on the project is over. Enron has made it clear that it wants to pull out of the second phase unless issues relating to the power purchase agreement are resolved and the government of India makes a firm commitment on the offtake of power.
IDBI executive director RS Agarwal, who was present at the two-day lenders' meeting in Singapore, told Business Standard that the institutional lenders will discuss the report of the engineers before deciding on a further course of action. The second phase is 92 per cent complete. Total completion would entail the finalisation of the power blocks and the LNG facility.
Incidentally, the trial run of the first block of the second phase-740 mw -was to have taken place today, but failed to happen on account of the legal battle between DPC and MSEB.To date, more than $1,570 million has been invested in the second phase. Stone & Webster's report will identify how much additional funds the lenders would have to plough in depending upon whether the project is shelved immediately or after completion of construction activity. It will also figure out the funds required to restart the project.
"The legal position of the two parties -- DPC and MSEB -- has complicated the issue," said Agarwal. Foreign lenders are reportedly unconvinced about the Indian government's seriousness in resolving the issue. Lenders have expressed anxiety over the suspension of power offtake by the MSEB, as this has affected the $50 million cash flow. The priority is for the two sides to resolve the issue through negotiations at the earliest. DPC ought to take the initiative as it is at the receiving end, said industry sources. 
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Friday, June 08, 2001, http://www.business-standard.com/today/economy1.asp?Menu=3
States cannot afford DPC power , Santosh Tiwary & P Vaidyanathan Iyer 
The Centre's initiative towards facilitating sale of power from the Enron-promoted Dabhol project in Maharashtra to other states is likely to come a cropper. Sources told Business Standard that the states would in no way be able to purchase power from Dabhol Power Company (DPC) as it would be difficult to lower the tariff to Rs 3 per unit. "No state will be able to buy power from DPC at a rate above Rs 3 per unit considering the rate at which they are supplying power to the consumers at present," said a source in the Central Electricity Authority (CEA). 
Power minister Suresh Prabhu had only last week asked CEA to consult the power-deficient neighbouring states of Maharashtra seeking their views on the requirement and tariff at which they would be able to buy electricity from DPC. Sources said that states such as Gujarat, Madhya Pradesh and Goa, to which DPC could supply power, were not in a position to buy it at a cost which was more than what they spend at present. 
They pointed out that even after a considerable reduction in tariff, it was highly unlikely that DPC would sell power to these states at the rates affordable by them. And for the other states, transmission cost would only add up to the already high cost of Dabhol power. Hence, the proposition is almost ruled out, said sources. They said that the unit cost of power for all SEBs was around Rs 3 at present. Interestingly, the average tariff of all the SEBs was estimated to be 208 paise per unit in 1999-2000, with a ratio of tariff to cost at 74 per cent. In 1999-2000, the unit cost of power supply in Gujarat was 287.30 paise, and in Madhya Pradesh, it was 252.72 paise. 
Maharashtra had 254.36 paise per unit cost of power supply in 1999-2000. Sources said that the the existing tariff structure and supply cost is a clear indication why third party sale had not been allowed by the states even though Section 43 of the Indian Electricity (Supply) Act, 1948 allowed such sale. They added that the chances of states allowing third-party sale by the independent power producers in the light of the DPC-MSEB controversy was remote. The Centre has asked the states to allow third-party sale from the IPPs.
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Friday, June 08, 2001, http://www.financialexpress.com/fe20010608/top3.html
Dabhol lenders for 1-yr plant closure, Sanjay Jog
 THE lenders to the Dabhol power project, who concluded a three-day meeting in Singapore on Thursday, have unanimously suggested that the Dabhol project be closed down for a year in a bid to "resolve various issues pertaining to tariff reduction". These lenders, comprising the offshore lenders and the Indian financial institutions (IFI) and banks, have asked Enron's consultants based in Houston, Stone and Webster, to prepare a feasibility report for closure of Dabhol plant for a year.

IFI sources told The Financial Express that the offshore lenders have agreed not to take any stern step at this point of time but explore various opportunities for a long-term solution. "However, all the lenders were also unanimous that the government of India should make various commitments especially to see that the project gets going in future," the sources added.

Sources said Enron's consultants will find out the possible gains and losses for the lenders as well as for the Dabhol Power Company and MSEB if the Dabhol plant was closed down for a year. The consultants will also look into the viability of the closure formula especially when over $2 billion loans have been blocked in the project.

Moreover, the lenders and DPC are believed to have expressed disappointment over the Prime Minister AB Vajpayee's statement that the Maharashtra government and Enron will find a solution to Dabhol imbroglio. In fact, the lenders and the DPC were expecting the Centre would play a proactive role for the early resolution of issue. These lenders were disappointed over the timing of the prime minister's statement. "The prime minister's statement is obviously not a good sign," remarked the lenders. According to sources, the prime minister's statement has been seen as a major setback for the ongoing efforts to resolve the Dabhol crisis. 
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Friday, June 08, 2001, http://www.financialexpress.com/fe20010608/top4.html
DPC willing to cut rate of return to 11 per cent, Sitanshu Swain
 EVEN as the foreign lenders secured more time to take a final view of their investment in Dabhol power project, hopes of reviving the high-cost project has gained momentum as the US energy major has shown willingness to scale down the rate of return (RoR) from 16 per cent to 11 per cent from the Dabhol project.
Such a move on the part of Enron Corporation will facilitate a similar downward revision in the per unit of power cost from its present range of Rs 3.01 to Rs 4.70, depending upon the PLF and foreign exchange variation.
The power cost in India remains cheaper as the return is calculated in rupee terms whereas in Enron's case, it is high since it is linked to the exchange rate. According to a top official of Industrial Developmment Bank of India (IDBI), Enron has informed the financial institution that it is keen to cut down the projected return from 16 per cent to 11 per cent. ''It is matter of time that Enron will decide about the revision of the projected return,'' said the official, adding that IDBI is insisting on the immediate implementation of the revised return instead of waiting for the second phase.
Enron's initiative to cut down the projected return is possible as the assured return of 16 per cent, which is linked to the exchange rate is making the per unit cost expensive. Further, the IDBI official point out that Enron's maximum rate of return in the US is between six per cent to eight per cent. The rupee has almost depreciated by 35 per cent to 40 per cent since the 16 per cent return was agreed upon by the MSEB and the Maharastra government. The rupee's slide effectively pushes up the per unit power cost. Also IDBI has already brought down the interest rate on loans lent to DPC from 21 per cent to 16 per cent, which will automatically cut down the capital expenses for the project. 
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Friday, June 08, 2001, http://www.financialexpress.com/fe20010608/news1.html

Dabhol's RoE should not cross 16%: Godbole panel , Sanjay Jog

Mumbai, June 7: THE Madhav Godbole renegotiation committee on Thursday unanimously took the view that the Dabhol Power Company's (DPC) return on equity (RoE) should not exceed 16 per cent, even if the drawal of power is at 90 per cent plant load factor (PLF). The committee comprising Dr Godbole, Vinay Bansal, VM Lal and SK Shrivastava, which met along with officials of the Maharashtra State Electricity Board (MSEB), has asked the Infrastructure Development Finance Corporation (IDFC) and Crisil to jointly prepare a detailed presentation in this regard within eight days.

The committee has asked IDFC and Crisil to fix certain parameters so that the return on equity will be maintained at 16 per cent, despite cut in the tariff. MSEB sources told The Financial Express that according to the present government norms, the return on equity has been fixed at 16.5 per cent at 68 per cent PLF. As the PLF increases by 1 per cent, the return on equity will hike by 0.7 per cent. "According to these existing norms, the DPC's return on equity will go up to 31 per cent at 90 per cent PLF. However, the committee is of the view that DPC's return on equity should not exceed 16 per cent, despite low PLF and drawal," sources said. These sources added that the IDFC and Crisil has been asked to explore various possibilities to make this happen. 

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Friday, June 08, 2001, http://www.financialexpress.com/fe20010608/news2.html

DPC appeals to high court to stay MERC order, Sanjay Jog

 THE Dabhol Power Company (DPC), which has challenged the jurisdiction of the Maharashtra Electricity Regulatory Commission (MERC), has appealed to the Bombay High Court to stay the MERC order restraining it from reactivating the escrow account and carrying out arbitration proceedings. 

The DPC, in a 245-page writ petition which will come up for hearing before the high court bench comprising AP Shah and SA Bobde on June 11, has also requested that the MERC be restrained from the June 14 and future proceedings on petitions filed by the MSEB.

The DPC has argued that the MERC has no jurisdiction to act, entertain, or adjudicate upon any of the disputes and differences which have arisen between the DPC and MSEB under the provisions of the power purchase agreement. Thus, for a writ of prohibition or a writ in the nature of prohibition, or any other writ, direction or order provided for under article 226 of the Constitution of India, MERC be prohibited from entertaining, or, from adjudicating upon any matter raised in the petition filed by MSEB.

The DPC said for a writ of certiorari or a writ in the nature of certiorari, directions or orders provided for under article 226 of the Constitution of India, MERC be prohibited from calling for the records of the case and after pursuing the same, quash and set aside the order granted by MERC on May 29.

The DPC said that for a writ of mandamus, or writ in the nature of mandamus, or any other writ direction or order provided for under article 226 of the Constitution of India, MSEB should be directed forthwith to withdraw its writ petition filed before MERC. 

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DPC appeals against Merc's order on escrow
 THE Dabhol Power Company (DPC), which has challenged the jurisdiction of Maharashtra Electricity Regulatory Commission (Merc), has appealed to the Bombay high court to stay Merc's order restraining it from reactivating the escrow account and carrying out arbitration proceedings. 
The DPC in a 245-page writ petition which will come up for hearing before the high court bench comprising AP Shah and SA Bobde on June 11 has also requested that the Merc be restrained from the June 14 and future proceedings on petition filed by MSEB. The DPC has argued that the Merc has no jurisdiction to act, entertain or adjudicate upon any of the disputes and differences which have arisen between the DPC and MSEB under the provisions of power purchase agreement. Thus, for a writ of prohibition or a writ in the nature of prohibition or any other writ, direction or order provided for under article 226 of Constitution of India, Merc be prohibited from entertaining or from adjudicating upon any matter raised in the petition filed by MSEB.
The DPC said for a writ of certiorari or a writ in the nature of certiorari, directions or orders provided for under article 226 of Constitution of India, Merc be prohibited from calling for the records of the case and after pursuing the same, quash and set aside the order granted by Merc on May 29.
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Friday, June 08, 2001, http://www.timesofindia.com/today/08busi1.htm
Lenders form panel to negotiate with MSEB, By Pradipta Bagchi 
Domestic and international lenders to the $ 2.9 billion Dabhol Power project have put aside their differences and adopted a united front to try and resolve the crisis. The lenders under the leadership of the IDBI have set up a committee comprising of the major Indian lenders--IDBI, ICICI and SBI--and the foreign lead arrangers--ANZ Grindlays, ABN Amro, Citibank and Credit Suisse First Boston. This committee of lenders will meet with the Maharashtra State Electricity Board next week to try and seek a resolution to the current crisis. 
Institutional sources said that the lenders have not given consent for DPC to issue a transfer notice to MSEB yet. Permission for such a notice was sought by DPC officials after their presentation to the lenders on Wednesday. However, both domestic and foreign lenders have decided to take an active role to try and arrive at a concrete solution to the crisis by negotiating with MSEB. 
Depending on how negotiations with MSEB progress, the lenders will take a view on the payments to be made to Bechtel, the EPC contractor for phase II of the project. According to the current schedule, a payment of $ 25 million has to be made by June 18 to Bechtel. Institutional sources indicated that the lenders have come to the conclusion that a concrete plan is needed within a specified time-frame to have any hope of salvaging the project. However, institutions remain confident that a solution will emerge, especially as PM Vajpayee has promised to intervene to find a solution. 
Foreign lenders have also explained their position to their Indian counterparts in terms of further disbursal of loan funds. This is because in the absence of a plan, it is difficult for foreign lenders to seek more disbursals on the project from their respective credit committees. The total project cost of the DPC project is slated to be $ 3 billion, of which $ 2.1 billion has been financed through debt while the rest has come from equity contributions from Enron Corp, MSEB, GE and Bechtel. Indian institutions have a Rs 5,000 crore exposure to the project.
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Friday, June 08, 2001, http://www.timesofindia.com/today/08busi2.htm
DPC against public hearings , Swati Deshpande 
The Dhabol Power Company does not like public hearings. In a petition filed by the company before the Mumbai High Court to challenge the proceedings before the Maharashtra Electricity Regulatory Commission (MERC), DPC submits it ``cannot get a proper or fair hearing'' if the proceedings are open to public and involve hearing strangers to the contract. 
While contending that MERC has no jurisdiction to debar the company from proceeding with international arbitration, DPC at the same time, protests the presence of the press and filming of the MERC proceedings by TV channels. DPC's petition will be heard on June 11 by a division bench headed by Justice Ajit Shah.
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Friday, June 08, 2001, http://www.indian-express.com/ie20010608/bus1.shtml
DPC lenders hire advisor to evaluate suspension
ENRON Corp and Maharashtra State Electricity Board (MSEB) will get some more time to solve their problems during which the Dabhol Power Company will stop production of power, lenders to the project said after three-day deliberations in Singapore.The lenders have also decided to hire US-based energy consultants, Stone and Webster to prepare a report on the cost of suspension of the plant for a year. The consultants will study the possible losses for the lenders as well as for the DPC and MSEB - if the project is closed down for a year. 
The consultants will also look into the viability of the closure formula especially when over $3 billion loan has been already blocked in the project. On the second day (Wednesday), Enron India managing director K Wade Cline suggested a 'temporary suspension' of the project. Cline also provided detailed alternatives vis-a-vis a post-suspension scenario with reference to power blocks and almost ready Liquified Natural Gas (LNG) terminal, they added.
Stone and Webster were zeroed upon to calculate their estimate of revenues of the entire project, including the LNG terminal as foreign lenders felt that a cost evaluation should be undertaken in the present circumstances. The fate of the DPC's 1,444 mw phase-II, which was to be fired today, now hangs in balance as it has been postponed for the time being till the matter regarding the rescinding of the Power Purchase Agreement (PPA) is settled.
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Friday, June 08, 2001, http://www.indian-express.com/ie20010608/bus2.shtml
Dabhol Power ready to scale down RoR to 11 pc, Sitanshu Swain
EVEN as the foreign lenders secured more time to take a final view of their investment in Dabhol power project, hopes of reviving the high-cost project has gained momentum as the US energy major has shown willingness to scale down the rate of return from 16 per cent to 11 per cent from the Dabhol project. Such a move on the part of Enron Corporation will facilitate a similar downward revision in the per unit of power cost from its present range of Rs 3.01 to Rs 4.70, depending upon the PLF and foreign exchange variation.
The power cost in India remains cheaper as the return is calculated in rupee terms whereas in Enron's case, it is high since it is linked to the exchange rate. According to a top official of Industrial Development Bank of India (IDBI), Enron has informed the financial institution that it is keen to cut down the projected return from 16 per cent to 11 per cent. ''It is matter of time that Enron will decide about the revision of the projected return,'' said the official, adding that IDBI is insisting on the immediate implementation of the revised return instead of waiting for the second phase.
Enron's initiative to cut down the projected return is possible as the assured return of 16 per cent, which is linked to the exchange rate is making the per unit cost expensive. Further, the IDBI official point out that Enron's maximum rate of return in the US is between six per cent to eight per cent.
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Friday, June 08, 2001, http://www.hindubusinessline.com/stories/14085602.htm
Enron seeks promise on phase I drawal 
ENRON has suggested that it could suspend construction of phase II of the Dabhol power project for about a year or so if it proves difficult to find buyers for electricity from its plant. That would, however, be possible only on an assurance that the entire phase I power would be lifted. Mr Wade Cline, Enron India Managing Director, told financiers at a meeting in Singapore that Dabhol Power Company (DPC) was also willing to pare its returns by 10 per cent if MSEB assures power purchase and reinstates the contract. 
Another suggestion that came up at the meeting was that ``mechanical'' construction such as the power blocks and LNG facilities could be completed and the rest left for a later date. The lenders have mandated engineering firm, Stone and Webster, to make an ``assessment'' of the project and submit a status report within a week. The mandate includes ascertaining the current requirement of funds and the cost implications of suspending the second phase. 
According to sources, foreign lenders have mellowed their stand but are not willing to back down too far. They have not yet made any commitments because of legal issues involved. The issue of reduction of tariffs could be discussed only after finding a buyer for the power, the meeting was reportedly told. The sources also said offshore lenders were unhappy about MSEB rescinding the PPA, which they want to be reinstated. They feel that a confrontationist stand would not be good for any one. Sources said the meeting had spilled over to one more day on Thursday but some representatives of Indian lenders had returned yesterday. However, a couple of others stayed back for the final round of talks, the sources added. 
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Friday, June 08, 2001, http://www.hindubusinessline.com/stories/040821ed.htm
Dabhol lessons 
DABHOL POWER COMPANY'S reported willingness to extend the period for conciliation must be welcomed as it gives rise to some hope for a negotiated settlement. At the same time, it must not be perceived by the anti-Dabhol lobby as a climbdown by the company. Even if an amicable settlement comes through, the chances for which appear extremely dim now given the extreme postures adopted by all concerned, there are not going to be any winners or losers. 
The politicians need to realise that they cannot mess around as they like with such projects, especially one that has an apparently water-tight contract. More important, they need to realise that the decision-making process in the country is still woefully inadequate to deal with multinationals which have wide experience in dealing with varied markets. There seems little point in the Prime Minister, Mr Atal Bihari Vajpayee, now saying that Dabhol power is ``too expensive'' for anyone. For companies like Enron, the principal promoter of Dabhol Power Company, the crisis is a lesson in that they cannot hope to get away with unreasonable profits and blatantly one-sided contracts. Ultimately, wisdom must dawn that a negotiated settlement will be far more beneficial and far less messy than the one that goes through a long-drawn legal process. It is still not too late for the Maharashtra State Electricity Board, the Maharashtra Government, DPC and the Centre to sit around the table and arrive at a settlement. 
At the same time, it must be mentioned that wisdom has belatedly dawned on the Power Minister, Mr Suresh Prabhu, that contracts have to be honoured. For, it was the party he belongs to -- the Shiv Sena -- that re-opened the original agreement inked by its predecessor Sharad Pawar Government, thus increasing the burden on the MSEB many times over. Mr Prabhu's admission may also be because of the unenviable position he might find himself in should the burden of the project shift to his lap. As it is, his Ministry is burdened with the problem of getting the power sector back on the rails, with recalcitrant State governments unwilling to go ahead with even minimum reforms. Mr Prabhu has to deal with a situation of investors -- forget international agencies, even the domestic institutions -- having absolutely no faith in the repaying capacity of the State electricity boards and where Central power sector utilities are making no headway in collecting their bills even as they continue to bail out the States. 
It is probably because of this that Mr Prabhu feels that independent power producers should be allowed to sell power directly to third party consumers, bypassing the moribund SEBs. By doing so, the argument goes, there will not be any need for the elaborate payment security mechanisms that the IPPs insist on when selling to the SEBs. Such a proposal had even been mooted in the draft Electricity Bill. However, it is unlikely that States will accept this proposal as it will mean that industrial consumers, which contribute to the bulk of the SEBs' revenues, switching to direct purchases from the IPPs. Private investment has also been permitted in transmission and distribution and by allowing third party sale, the country is expected to move towards a more competitive power market. But the question remains whether India is as yet ready for such a switch. 
The poor financial position of the SEBs cannot be just wished away, so also the fact that subsidies to certain consumers are going to continue for some time to come in one form or the other. Dabhol exposed the myth that Maharashtra was a financially well-administered State. That itself should serve as a lesson to other States to not play around with the power sector and instead run it on purely commercial lines. Dabhol is also a lesson for the domestic financial institutions that they need to be more transparent and professional in the way they assess projects. 
Godbole charges DPC with doublespeak 
MUMBAI, JUNE 7. The ongoing efforts to renegotiate the Power Purchase Agreement (PPA) with the Enron-promoted Dabhol Power Company (DPC) suffered a setback today with the State Government- appointed renegotiation panel chief, Dr. Madhav Godbole, charging the company with adopting a dual stand on the issue. 
``They have a different stand on the negotiating table before the committee and a different stand elsewhere'', Dr. Godbole said after the panel held an internal meeting at the Maharashtra State Electricity Board (MSEB) premises in south Mumbai to discuss PPA- related issues. 
The meeting also discussed at length the availability of power in the State, Dr. Godbole said adding that the next meeting with DPC officials would be held after the Maharashtra Electricity Regulatory Commission ( MERC) hearing scheduled for June 14. However, no date has been fixed. 
The meeting chaired by Dr. Madhav Godbole, was attended among others by the State energy secretary, Mr. V.M. Lal, the MSEB chairman, Mr. Vinay Bansal and the Central nominee, Mr. A.V. Gokak. 
Meanwhile, the Bombay High Court today fixed the hearing on the suit filed by the DPC challenging the MERC ad- interim order for June 11. 
The MSEB had filed a suit before the MERC alleging that the DPC had defaulted by not supplying power on demand on January 28, February 13 and March 29 this year as per the PPA and slapped a penalty of Rs. 401.24 crores on it. After hearing both the parties on May 29, the MERC had posted the next hearing to June 14 to give time to the DPC to submit its reply. It had also passed an ad-interim order restraining the company from taking the matter to the International Court of Arbitration in London and also from activating the escrow account till its next hearing on June 14. 
In a petition filed on Wednesday, the DPC sought a direction from the High court to call for records from MERC and after perusing it, quash the impugned May 29 order in favour of the MSEB. 
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Friday, June 08, 2001, http://www.the-hindu.com/stories/0208000b.htm
Provision for arbitration 
The company also sought a direction to MSEB to withdraw the proceedings pending before the Regulator. It said the Electricity Regulatory Commission Act 1998, came into affect much after it had signed the PPA with the MSEB on December 8, 1993. The PPA clearly provided for international arbitration in case of any dispute between the parties. Therefore, the MERC had no jurisdiction to act, entertain or adjudicate upon any disputes and differences which had arisen between it and the MSEB in connection with the PPA. 
Seeking to nullify MSEB's argument that the Indian Contract Act, 1872, would prevail over any other law, it said the MSEB had entered into the PPA after seeking the State Government's approval. Both parties were fully aware that the PPA contained a dispute resolution mechanism, which provided for an arbitration of disputes and differences, in accordance with arbitration agreement set out in Clause 20.3. Therefore, the DPC said, it possessed a contractual right under PPA to refer any dispute or difference which may arise to arbitrators. The MSEB had a similar right to invoke the arbitration clause, it added. - PTI 
Medha for judicial inquiry 
KOLHAPUR, JUNE 7. The Narmada Bachao Andolan leader, Ms. Medha Patkar, has called Enron supporters ``anti-nationals'' and demanded a judicial inquiry into the deal as recommended by the Godbole Committee. Speaking to reporters here on Wednesday, Ms. Patkar, said, ``The time has come to oust Enron from India'' and appealed to the people to maintain pressure on the decision-makers in the interest of the nation. 
An indefinite agitation would also be launched against the globalisation process from October-November this year under the banner of the National Alliance for People's Movement, she said. Criticising the Maharashtra Government's apathy towards the project-affected people, she said a report of the Justice Dawood Committee on their rehabilitation was expected this month adding that the people were all set to go on a satyagraha in Madhya Pradesh from July 5. 
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Friday, June 08, 2001, http://www.telegraphindia.com/

LENDERS BLOW THE DABHOL II FUSE  

The controversial second phase of Dabhol Power Company (DPC) plunged into another round of uncertainty today, with the foreign lenders weighing a move to suspend construction of the project. The latter appointed global energy consultants Stone & Webster to evaluate "the cost of suspension" of the second phase of the 2,184 MW project promoted by US energy major Enron Corp. While the Indian institutions had, on Wednesday, assured their foreign counterparts that the Centre was likely to step in and a solution to the Enron mess was in sight, the overseas lenders apparently did not buy this argument. "This (the central government's intervention) has been repeated often," the foreign lenders are believed to have said. "The Indian lenders failed to convince their foreign counterparts, who, in turn, were in favour of the suspension," sources said."The fate of DPC's 1,444 MW Phase-II now hangs in the balance, as the project has been postponed till the issue of the rescinding of the power purchase agreement (PPA) is settled," they said. As per the original schedule of the PPA, DPC's Phase-II was to have been fired today. 
Sources said Stone and Webster will review the second phase of the project. One of their aims will be to ascertain whether it is worthwhile to complete the mechanical part of the second phase. According to a section of the participants at the meeting, the rationale behind completing the mechanics of the project was that in case Enron wanted to exit, the project will get a better valuation. Already, 92 cent of the project has been completed, with $ 1500 million committed to it. 
On Wednesday, the Enron India managing director K. Wade Cline in his presentation before the lenders in Singapore, suggested a "temporary suspension" of the $ 2.9 billion project, R S Agarwal, executive director of IDBI, told The Telegraph here today.Cline also provided detailed alternatives vis-a-vis a post-suspension scenario, with reference to power blocks and almost ready liquefied natural gas (LNG) terminal, sources said. However, Agarwal, who headed the delegation representing the Indian financial institutions, said all the lenders unanimously agreed that Phase-I should restart immediately. They were of the view that the legal wrangles between DPC and the Maharashtra State Electricity Board (MSEB) should be kept in abeyance and a solution reached for offtake of Phase-I power.
The local lenders said the legal wrangling had complicated matters further, with no end in sight to the eight-month old imbroglio.The foreign lenders felt the Centre should play a greater role in resolving the payments tangle, the sources said. They also felt the MSEB move, rescinding the PPA, had harmed their interests in the project. When asked whether the foreign banks had given any indications of invoking the guarantees of the Indian institutions, sources replied in the negative.
Meanwhile, both the lenders continued to meet with representatives of individual foreign banks today. In a related development, the state government has decided to call the third round of the Godbole renegotiations committee on June 30. The Godbole committee, which met today, also discussed the state energy review report.
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Friday, June 08, 2001, http://www.asianageonline.com
DPC CHALLENGES MERC'S ORDER IN COURT

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