Enron wants $1 bn for DPC stake

Mumbai: Enron is unwilling to sell its stake in the Dabhol Power Company (DPC) till it receives at least $1 billion, sources say. Enron has declined an offer, ranging between $450 million and $600 million, from two major power players in the country - Tata Power and BSES.

The two power majors reportedly based their offer on the expectations that Enron will rework its costing of the Dabhol project by bringing down the total project cost to around $2.1 billion from the originally envisaged figure of $3.30 billion. This, the sources said, could be done by making a reduction of $1 billion in capital costs and $200 million on the LNG block.

If this is done, then the per-unit cost of electricity consumed could be brought down to at least Rs 2.60 per unit. If one were to assume a debt:equity ratio of 70:30, then 30 per cent of the $2.10-billion project cost would result in an equity component of Rs 630 crore.

The other viable method of reducing the project cost is to hive off the LNG project into a separate company, which would result in the capital cost getting scaled down by $600 million. This would bring down the project cost to $1.50 billion, and 30 per cent of that would result in an equity flow of around $450 million.

Tata Power and BSES have asked the IDBI-led financial institutions as well as Enron to come to a mutually-agreed method, to facilitate cost reduction so as to be able to hand over the project to a new party. The two feel that neither Enron nor the FIs can save themselves from taking some sort of a hit, if they wish to sell the project to a new party.

Other demands for picking up Enrons stake are: 1) The Dabhol project should be given a mega-power status. 2) Exemption on import duty on imported equipment. 3) Exemption of excise duty on fuel. 4) FIs reduce their interest rates on loans advanced.

The sources said that while Tata Power could pick up a stake in the LNG project in association with the Gas Authority of India (GAIL), BSES might not use the gas from the LNG project at all on grounds that the fuel would turn out to be expensive. BSES feels that a better deal for supply of gas could be struck with other gas suppliers like Reliance, GAIL, British Gas or Petronet.

Whatever may be the case, one thing is certain. Enron may not be able to sell DPC till it brings down the capital cost.