Search the Internet          Tips  Sites: Finance, Investment

Talks between Dabhol, BSES, Tata Power hit a roadblock

S Ravindran

Negotiations between the promoters of the Dabhol Power Company and the prospective buyers, BSES and Tata Power, have hit a roadblock on the issue of the jurisdiction of the proposed confidentiality agreement.

Enron, General Electric and Bechtel which together hold a 85 per cent stake in DPC are insisting that the confidentiality agreement with Tata Power and BSES be governed under international law.

The two domestic companies, on the other hand, are unanimous in their view that the agreement should be subject to Indian law, sources said.

"The two Indian companies have taken this position as they contend that all the three parties to the confidentiality agreement, BSES, Tata Power and DPC are Indian companies, and hence should be governed by Indian laws. Why should the confidentiality agreement then be controlled by international law?" sources in the lenders' consortium said.

The foreign promoters of DPC, on the other hand, feel they would be more "comfortable with proceedings under international law," sources added. The DPC spokesman was not available for comment.

BSES chairman and managing director R V Shahi said, "We have already given our comments regarding the confidentiality agreement to the lenders. We are awaiting the final draft of this agreement from them." He refused to elaborate.

A senior official of the Industrial Development Bank of India said, "We have received a letter from Enron and the confidentiality agreement will be signed in about 10 days." He declined to give further details.

The signing of a confidentiality agreement with DPC will pave the way for due diligence and a possible financial bid by the two companies.

At a meeting in Singapore earlier this month convened by the financial institutions an elaborate roadmap for finding a solution to the vexed Dabhol problem had been chalked out.

It had been decided in Singapore to ink that separate but similar confidentiality agreements would be inked by DPC with BSES and Tata Power within a fortnight who would then begin due diligence. A price bid would have to be submitted within 60 days after this.

This was, however, subject to approval by the foreign promoters of DPC who have so far withheld their approval. Enron, GE and Bechtel have decided to exit the project following a payments dispute with the Maharashtra State Electricity Board.

The near complete 2,184 mw project whose cost has been estimated at $ 3 billion represents the largest foreign direct investment in India. IDBI is trying to facilitate the sale.

Powered by

YOU MAY ALSO WANT TO READ:
The Enron Saga

The Rediff-Business Standard Special
The Budget 2001-2002 Special
Money
Business News

Tell us what you think of this report