Bechtel and General Electric reject Dabhol offer

Vol 7, PW 10 (30 Jul 03) People & Policy

GENERAL ELECTRIC and Bechtel have angrily rejected an Indian offer to buy their respective 10% equity stakes in the Enron-promoted Dabhol Power Company in Maharashtra for $30m each.

We learn thatN.M Rothschild - appointed by Industrial Development Bank of India to sell Dabhol - held separate, two-hour meetings in London with each company on 14th July.

We further understand GE and Bechtel were unimpressed by what they perceive as IDBI's attempt to buy them off cheaply. A source intricately connected with negotiations reveals Rothschild informally offered GE and Bechtel $30m each as full and final payment for the 10% equity they each hold in the Dabhol power station.

This is less than half their individual equity contribution of $80m and was rejected out of hand by both companies. We understand IDBI reached the $30m figure by valuing the power station alone, without including the 5m t/y LNG import terminal, the regassification facility or the port.

"GE and Bechtel built only the 2,184-MW power station valued at $300m," says a source. "IDBI offered GE and Bechtel 10% each of the total value of the power station." Angry, neither GE nor Bechtel are ready to consider the offer, learns PETROWATCH.

An indignant source in one of the companies tells us: "This offer is utter nonsense. How could they make such a ridiculous offer How can IDBI run Dabhol power station minus the other facilities" More, GE and Bechtel claim IDBI has undervalued the power station at $300m by calculating the cost of generating power at Rs2.5cr per megawatt when the norm in India is Rs4cr per megawatt for new power stations.

Rebuffed by both companies, IDBI is reluctant to make a formal offer. During the London meeting, GE and Bechtel made identical counter offers to IDBI through Rothschild.

"We told them if they pay back our full equity ($80m each) plus $120m past dues (for construction work at Dabhol) we will complete the project, restart the power station and quit." We further learn that GE and Bechtel are willing to, "write fresh commercial contracts with IDBI to restart DPC." But as in the past, Indian lenders are showing no interest. Intriguingly, we learn the Indian power ministry wants both GE and Bechtel to stay on and help National Thermal Power Corporation restart the 740-MW Dabhol 'Phase-I' even as IDBI tries its best to get rid of them.