Enron's ownership

IN early April, General Electric Corp (GE) and Bechtel Corporation won approval from a United States bankruptcy court to buy 66 per cent of Enron's stake in the beleaguered $3 billion Dabhol Power Company (DPC) project. By taking over the energy firm's equity, the two U.S-based corporate giants, which initially had a 10 per cent stake each in the power company, have together become the single largest owners of the controversy-mired project. This move has effectively given them the upper hand in the negotiations over the DPC's existence.

GE and Bechtel plan to buy Enron's share for $20 million in two phases. Initially, 49 per cent will be handed over to them. Enron will continue to hold 26 per cent in the DPC.

If Enron's stake falls below 26 per cent, according to the shareholders agreement and power purchase agreement, the Government of India (GoI) stands released from its commitment to compensate DPC for any revenue loss. "They will not allow this. The GoI is their best bet at recovering money," says anti-Enron activist Pradyumna Kaul. GE and Bechtel have no intentions to restart the project. They have indicated that they will sell their equity to anyone who pays at least $400 million, says Kaul.

Soon after GE and Bechtel announced the gain of Enron's shares, the Maharashtra State Electricity Board (MSEB) and the IDBI (the Industrial Development Bank of India), the principal financiers of the project, came under fire. Kaul alleges that they deliberately did not bid. According to him, a senior advocate had advised the MSEB not to put forward an offer. MSEB chairman Jayant Kawale told mediapersons that he was unwilling to comment on the bidding issue. According to him, who owned DPC was not important, but getting the project's problems resolved was.

Whether the DPC will be revived is a billion dollar question. But stakeholders and lenders have been working over time to resolve its financial crisis. And GE and Bechtel have been relentless in their efforts to recover their investment. Some headway was made in September 2003 when an "independent" arbitration tribunal in the U.S. ruled unanimously that the interests of GE and Bechtel in the DPC were improperly expropriated by the Indian government. The tribunal ordered a binding award of $28.57 million each to GE and Bechtel for claims that they brought against their political risk insurer, the Overseas Private Investment Corporation (OPIC), an agency of the U.S. government. Naturally, OPIC was not about to let the government off the hook easily. As sovereign guarantors of the project, the government was responsible for paying up, said OPIC. Besides, it was due to the Indian government's political shenanigans that the project collapsed. Anti-Enron activists in India, however, pointed out that the dispute was purely commercial and had nothing to do with politics. Hence, OPIC's claim does not hold good.

Meanwhile, GE and Bechtel filed an arbitration action against the government seeking recovery of their dues. The total claim that they slapped on the government amounted to $600 million. The matter is still in limbo. In January 2004, in another attempt at recovering losses, GE and Bechtel offered to sell their combined 20 per cent stake in Dabhol for $380 million. This would include the initial investment of $200 million, $40 million in additional costs and $140 million in unpaid dues. No offers were made.

Indian lenders have been against an equity sale as it gives shareholders first right over the proceeds.

Anupama Katakam