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Opic to keep off DPC assets sale attempts

BS Bureaux

The US-government promoted funding agency Overseas Private Investment Corporation has decided to disassociate itself from any attempts at selling Dabhol Power Company, if the Indian financial institutions opt for an asset sale.

Opic has dug in its heels as it feels that financial institutions have not taken all possible options into consideration.

"Financial advisors need to be appointed to undertake the complete financial analysis of the project so as to take care of the interest of all the concerned parties. The plant is extremely complex and cannot be run without the proper technical expertise. The services of the two sponsors General Electric and Bechtel will not be available to them," a senior official with a foreign lender told Business Standard on conditions of anonymity.

General Electric supplied the turbines to the project while Bechtel was the EPC contractor.

Opic is peeved with the fact that Indian lenders are keen on mandating Rothschild for finding buyers through the asset sale route. The feeling in Opic is that Rothschild should in fact suggest the route.

"In case the Indian lenders restart the plant, they will have to bear the entire risk and liability in the event of the something going wrong with the plant. Opic will not be a party to this," the official added.

The electrical drawings of the plant and the software is not available. "Some of the electric cables have already been damaged. Also the replacements are only available with GE. The Indian lenders will run the risk of dereliction of duty if the plant is damaged. The Indian FIs are running the risk of crossing the bridge.

They should be looking at getting the co-operation of GE and Bechtel. The interest of all the shareholders and the creditors have to be taken care of," the official explained.

The three offshore sponsors of the Dabhol Power Company-Enron, General Electric, Bechtel and a foreign lender have claimed $225 million from Opic as political risk insurance.

"The claim is under the expropriation head and falls under political risk insurance. Opic is still evaluating the possibilities and is yet to take a final decision," said a foreign lender to the $3 billion, 2184-mw project at Ratnagiri district in Maharashtra.

The official refused to disclose the name of the overseas lender citing confidentiality reasons. Opic has also lent another $140 million to the project.

A claim under expropriation head is for taking over the assets of without due compensation.

Enron, GE and Bechtel hold a combined stake of 85 per cent in DPC whose assets have been taken over by a court appointed receiver for care and preservation. The move assumes significance as the Indian lenders led by the Industrial Development Bank of India are seriously considering a sale of assets.

In the event of the political risk cover being honored by Opic it automatically takes over the equity in the project raising the prospect of a possible conflict with the domestic lenders.

"Opic is not keen on getting into such a situation. Such battles could indefinitely delay a solution leading to the deterioration of the DPC plant," the senior official added.

The three US companies Enron, GE and Bechtel decided to exit the DPC last year following a payments dispute with the Maharashtra State Electricity Board, the sole buyer of the power from the 2,184 mw Dabhol power project. The lenders led by IDBI are scouting for buyers.

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