GE, Bechtel may pay $22 mn for 65% in Dabhol

A huge discount to investment of around $600mn by now bankrupt Enron.

The Dabhol Power Company (DPC) may soon see a change of ownership with General Electric and Bechtel in advanced discussions to buy Enron's 65 per cent stake in DPC for $22 million (around Rs 97 crore).

If the deal goes through, GE and Bechtel will end up owning a combined stake of 85 per cent in DPC as the two US companies already own 10 per cent each. The remaining 15 per cent is owned by the Maharashtra State Electricity Board through a special purpose vehicle.

"GE and Bechtel are in advanced stages of discussion with the global lenders of the bankrupt Enron Corp as the sale cannot go through without their consent," sources familiar with the development said.

The deal is likely to entail a complex process. Enron Corp owns its stake in DPC through a multi-layered structure, with the last leg being Enron Mauritius, which holds a 65 per cent stake in the Indian arm. GE and Bechtel cannot acquire Enron Mauritius's stake in DPC as the Indian subsidiary is not a part of Enron Corp's bankruptcy proceedings.

Consequently, it may end up acquiring Enron Mauritius or its parents. Further, since the US government agency Overseas Private Investment Corporation (OPIC) also has the right to acquire a 65 per cent stake in DPC in lieu of honouring a political risk insurance cover, there might be a back-to-back deal with OPIC first acquiring the Enron affiliates and then selling them to GE and Bechtel. OPIC has a dual role in DPC, that of lender, and political risk insurer to Enron Corp, which invoked this cover.

GE and Bechtel's renewed move to acquire the stake comes at a time when major Indian corporate houses like the Reliance and Tata groups have shown interest in acquiring Dabhol Power Company.

If the two US companies manage to acquire an 85 per cent stake in DPC it will substantially strengthen their bargaining position in the event of a sale.

Enron, GE and Bechtel decided to walk out of DPC following a payments dispute with the Maharashtra State Electricity Board (MSEB), the sole buyer of the power generated from the plant at Ratnagiri district in Maharashtra. The plant has been lying idle for close to three years after MSEB rescinded the power purchase agreement in May, 2001.