Imminent elections bring Dabhol drama to standstill

Vol 7, PW 26 (24 Mar 04) Midstream & Downstream
     

Companies interested in acquiring a majority stake in the beleaguered Dabhol Power Company would be well advised to forget the project for at least a few months.

It seems the Indian government has pressed a pause button on the Dabhol drama and no developments are likely before a new government is sworn in after general elections in April and May. It has been decided not to respond to OPICs (Overseas Private Investment Corporation of US) proposal till a new government settles in, a source closely associated with the US agencys negotiations with the government tells PETROWATCH.

Informally, OPIC has been told that it should not expect anything to happen during election time. OPIC was scheduled to visit India on 8th and 9th March but postponed its visit indefinitely.

Confirms an Indian lender: OPIC understands that unless the finance ministry gives a green signal nothing will move. As if to stress the point, we learn the finance ministry hasnt yet responded to OPICs proposal made during its last trip in January.

OPIC thinks it is futile to make trips to India unless the Indian government is ready to talk. Says a potential bidder: After the initial excitement of those two days, things have come to a standstill.

We also learn that after witnessing the favourable response from international majors Shell, British Gas and BP, OPIC is now seriously contemplating an asset sale instead of an equity sale. It is absolutely clear that the foreign companies want the LNG terminal so why not sell it as a separate asset reveals a source.

An equity sale will involve unending legal and financial hassles, says a Tata Power source. If DPCs assets are sold separately the lenders will get more value out of it.

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