The Enron Saga
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The Peak Load Contd...
On December 2, 1996, the High Court while expressed reservations, (see quote in the beginning) dismissed a bunch of petitions that had challenged the legality of the Enron power project, and the way was cleared for work on the project to start. In December 1996, Business India wrote, "For the DPC, the Bombay High Court's order is yet another vindication of the consistent stand that there is nothing wrong with the project or the contract it had originally signed in 1993". In January 1998, Enron announced that it would begin generation at Dabhol by December 1998, four months earlier than the date mentioned in the PPA. By May 1999, the first phase was ready to supply electricity to the national grid and construction on the second phase had begun. By mid 2000, officials in the MSEB voiced their concern about the efficacy of the payments to DPC. In 2000, MSEB purchased electricity from DPC at the rate of Rs. 7.00 per kWh. |
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MSEB would pay DPC as much as 12% of its average monthly revenue of
about Rs. 800 crore in fixed charges alone, when Dabhol contributed only
6% towards its overall energy pool. In January 2001, MSEB was to pay Rs.
2,000 crore to the DPC and in December 2001, when phase II would be
commissioned, the bill was likely to be Rs. 6,000 crore. Analysts felt
that even with a tariff increase it was unlikely that MSEB could pay
this amount.
In January 2001, Enron officials announced that the company would invoke
the LC to recover its dues from MSEB amounting to Rs. 262 crore for the
months of October and November. Since the LC was for Rs 136 crore only,
Enron threatened to invoke the state government guarantee. On January 6,
2001 the GoM agreed to give MSEB Rs. 114 crore so that it could pay the
October bill. The GoM, however, decided not to pay DPC's November bill.
With the GoM deciding against the payment of subsequent bills, it seemed
likely that DPC would invoke the counter guarantee of GoI. On February
7, 2001, DPC invoked the GoI counter guarantee.
In late February 2001, the GoM turned down the MSEB's proposal to
provide nearly Rs. 200 crore for paying the December and January bills
to DPC. DPC had set February 25, 2001, as the deadline for the payment
of both the December and January bills. Jimmy Mogal, spokesperson, DPC,
said, "The invocation of the state guarantee and sovereign guarantee
will be one of the options the company may consider if the MSEB fails to
meet the deadline by February 26, 2001." On February 27, 2001, Enron
announced that it would discuss the future course of action with its
lenders. Said a Spokesman of Enron, "Around 40 parties from different
countries are involved with us and we would be taking them into
confidence. We will not be taking any action in a haste."
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