Mystery deepens over sale of Essar Power to Marathon

Vol 4, PW 1 (16 Feb 00) Midstream & Downstream

Gujarat officials reject accusations that they are responsible for sabotaging the sale of Essar Powers 515-MW power plant to Marathon Power.

In a past issue of Petrowatch (18-Gujarat blocks Marathon deal with Essar for power plant, Vol 3/Issue 24) we reported that the Gujarat government had invoked an obscure regulatory clause, which blocked the sale of Essars Hazira power plant to Marathon for approximately $170m. Subsequent inquiries reveal that Gujarat officials have had little to do with the negotiations between Essar and Marathon Power.

Further, there is a growing feeling in Gujarat that the reason why negotiations between Marathon and Essar have stalled is because Essar no longer wishes to sell its power plant. One source goes further and suggests that the whole exercise was carefully stage-managed to impress Indias financial institutions, which are putting pressure on Essar to clear its mountain of debt.

It (the sale) wont happen, a source tells Petrowatch, The power plant is one of the few assets they (Essar) have which is making money. Essar executives, meanwhile, offer little more than a broad smile by way of explanation.

Marathon Power offers No Comment, saying its is bound by the terms of a confidentiality agreement. Only in June this year will we know if the deal is dead or alive.

Last year, Marathon and Essar failed to reach agreement by a deadline of 8th December and agreed to extend negotiations by another 200 days. Marathon is asking Indian banks to restructure Essars debt by lengthening the maturity of the loans from nine years to 12 years.