Reliance leads race for Dabhol project

British Gas, Tata Power also in fray

The Reliance group has emerged the front-runner to bag the troubled Dabhol power project, even as the British Gas group has also approached the finance ministry with a proposal to take over the company.

The third party to have shown an interest in the project, Tata Power, is understood to have made no fresh proposal to the finance ministry in this regard.

However, its memorandum of understanding (MoU) with British Petroleum (BP) for making bids for Dabhol Power Company (DPC) is still in place.

Senior government functionaries told Business Standard that Reliance was in advanced negotiations with key stakeholders in DPC including GE, Bechtel and US agency Overseas Private Investment Corporation (OPIC).

In response to a questionnaire sent by fax, a Reliance Industries spokesperson said: "We have, on several occasions over the past two years, expressed our interest in participating in any process that may be undertaken for the restructuring/sale of DPC. For that purpose, we periodically have discussions on an ongoing basis with the various stakeholders of DPC."

Reliance, however, did not comment on the acquisition cost or the price of DPC power that would make the project viable.

According to the sources, Reliance executives were now discussing the nitty-gritties of the deal with GE and Bechtel, which hold 10 per cent each in DPC with an investment of $120 million each, and OPIC.

Both GE and Bechtel had agreed not to make a prior resolution of equity claims, a requirement for their support to restart phase I (740 Mw) and complete phase II (1,444 Mw) of the project, they said.

Reliance executives had recently met representatives of GE and Bechtel in November along with representatives of the finance ministry.

A British Gas official also confirmed that the "matter (takeover of the project) is still under active consideration and no final decision has been taken".

Government sources said de-dollarisation of the offshore lenders' debt of $1,044 million and its takeover by Indian financial institutions by floating a special purpose vehicle was part of the overall strategy being discussed by the stakeholders. The Indian financial institutions can then privately place bonds at low interest rates.

While Reliance was keen that GE and Bechtel complete their commercial contracts upon payment of Rs 650 crore fees and continue as suppliers to the project, it was not averse to buying them out and settling their equity claims, the sources said.

The company was also independently pursuing with OPIC to take over the 65 per cent stake held by Enron through Enron Mauritius in the $3 billion project, the sources said.

The Dabhol saga

June 1992: MoU signed between Enron and the Maharashtra govt for Dabhol project

May 1996: Centre extends counter-guarantee for the project

May 1999: 740 Mw phase-I starts generation

Oct 2000: MSEB defaults on payments

Jan 2001: Enron invokes Maharashtra government's guarantee

April 2001: Enron issues arbitration notices to Centre

June 2001: MSEB terminates PPA with DPC, cites high power tariff

Feb 2002: IDBI invites EoIs for DPC sale. BSES, Tata Power, BG, Shell submit EoIs

March 2002: Enron, GE and Bechtel seek $500 mn as minimum bid. Private players drop out

April 2003: DPC's foreign lenders initiate arbitration process in London

October 2003: GE, Bechtel put forward three-pronged strategy to restart plant