Bechtel's strikes $160 mn deal

The government has reached a $160-million settlement with US engineering and construction firm Bechtel Corp on its claims on the mothballed Dabhol power plant, a government source involved in the deal said on Tuesday.

Maharashtra Power Development Corporation, owned by the Maharashtra state utility, which owns 14 percent of the power project, will pay the sum to Bechtel, the source said.

The settlement brings the parties one step closer to ending a four-year dispute which has embarrassed the government, given that the $2.9 billion plant was once a record foreign investment in the country and the fast-growing country is perpetually short of power.

Earlier this month, General Electric Co, which together with Bechtel held 86 percent of Dabhol, also settled its claims.

A Bechtel source confirmed from London that legal documents regarding the settlement were signed over the past four to five days. "We will consider the settlement complete only after the money has been transferred to us," the source said.

As a result of this settlement, Bechtel is expected to discontinue its $6 billion arbitration proceedings against the government to recover damages to its investment in Dabhol. The case has been scheduled to begin on July 18 at the International Court of Arbitration in London.

The government's settlement with GE was worth $145 million, the source said, though GE had not disclosed the value of its settlement. The government has yet to settle claims from foreign lenders worth a few hundred million dollars.

Dabhol was designed to produce 2,184 megawatts of power but shut down in May 2001 after a dispute between previous owner Enron Corp. and Maharashtra State Electricity Board (MSEB), its sole consumer.

The project will be revived as the Ratnagiri Gas and Power Pvt. Ltd., equally owned by GAIL (India) Ltd and National Thermal Power Corp Ltd, which will invest Rs 500 crores each in the new company. GAIL will supply the liquefied natural gas required to run the plant.