Enron is poised to enter into confidentiality agreements with the two contenders - Tata Power and BSES - prior to entering into serious negotiations. Tata Power and BSES are the only two companies to have publicly evinced interest in buying Enron's stake in Dabhol Power Company (DPC).
Confirming the move a senior Tata Power executive said, "The terms and conditions of the confidentiality agreement are under discussion. This will pave the way for future negotiations."
BSES chairman and managing director R V Shahi, however, said that he was "not aware of any such move." The DPC spokesman could not be reached for comment.
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The stage seems to be set for hardcore negotiations to buy its equity in the beleaguered DPC.
Enron, which holds 65 per cent in DPC, has announced its intention to exit the project following payments dispute with the Maharashtra State Electricity Board (MSEB). Its two other US based partners General Electric and Bechtel hold 10 per cent each and they too have decided to exit the project. The balance stake is held by MSEB through a special purpose vehicle.
Enron, GE and Bechtel have valued their combined 85 per cent stake at about $1.2 billion. It is learnt that BSES is insisting on a steep discount but Enron has so fare refused to budge. The Mumbai-based power company is also negotiating for a reduction in the capital cost of the project by spinning off the 5 million tonne LNG facility into a separate company. It's contention is that it can source gas by entering into supply agreements with other players who are setting up LNG terminals on the west coast of India. This is in line with the recommendations made by the Madhav Godbole committee which suggested measures to lower the project cost.