How Delhi will help the new owner of Dabhol plant

Vol 8, PW 13 (22 Sep 04) Midstream & Downstream

In our last issue we gave details about the imminent sale of the Dabhol Power Company.

In this issue we can reveal more about government plans to help the new buyer of this 2184-MW power project. First, the Overseas Private Investment Corporation of the US will select a new buyer through open bidding.

Then, the highest bidder, after buying out the debt of DPCs lenders, will be asked to bid for the residual value of the project from which OPIC hopes to recover its political risk insurance worth $200m. GE, Bechtel and Maharashtra Power Development Corporation will recover their contract dues and equity value to the extent possible (from this bid),a finance ministry source tells PETROWATCH.

Finally, DPC will be liquidated and the new sponsor will have to pay amounts decided by the official liquidator. Simultaneously, the government will allow all DPC guarantees and counter guarantees to lapse.

Litigation pertaining to this plant will be allowed to abate before the sale process is complete. All past claims on General Electric and Bechtel would be extinguished, except to the extent agreed during negotiation or bidding for the project.

Delhi also wants the Maharashtra State Electricity Board to waive its Rs400cr ($87m) claim against DPC. OPIC will then commission GE and Bechtel to carry out a detailed physical assessment of the power plant.

Another company would examine the LNG terminal. Both will give an assessment of the cost needed to complete the plant, we learn.

The new sponsor will need to make investments to complete the plant, LNG terminal and unloading facilities. For this the government has left it to the new buyers discretion to negotiate a contract with GE and Bechtel or anyone else.

Help from Indias Central Electricity Authority through a generating license is promised. The sponsor will enter into a fresh PPA with MSEB to sell the electricity and is free to sell the balance power to any willing buyer.