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Third bidder joins race for Dabhol power project

Tamal Bandyopadhyay & S Ravindran

The drama over Enron Corporation's stake sale in the Dabhol Power Company has taken a new turn with a third bidder emerging out of the blue.

"There is a third party willing to step in. It's a serious, credible bidder. We are checking out how it (third bidder) is going to raise the money to buy out the stake," IDBI chairman PP Vora said. He, however, refused to reveal the identity of the third bidder.

Both BSES and Tata Power Company have already submitted non-committal bids indicating the price range they are willing to cough up for Enron's 85 per cent stake in DPC. If their final bids do not match the expectations of the company as well as the financial institutions which have been playing the facilitator's role, there is the third bidder to fall back on.

Both Tata Power and BSES have already submitted unsigned bids. "We have seen their indicative quotes and are in discussion with Enron about the bids. Both of them will sign the confidentiality agreement before the end of this month and immediately start the due diligence," Vora said.

According to Vora, the due diligence will take six weeks and once that is over the bidders will be required to put in the final bids. "As far as the financial institutions are concerned, we have made it very clear that at this stage we are willing to cut down the interest rates to a reasonable level and also reschedule the maturity profile of the loans. This is the sacrifice we will make," Vora said.

Tata Power is understood to be privately pressing for the allocation of a distribution zone in Maharashtra where it can sell a part of the generated power. The Maharashtra State Electricity Board and the state government are strongly opposed to this move.

They feel that it will hinder their ability to cross subsidise agricultural and residential consumers as the Tatas are keen on an industrial zone like Thane or Pune. Further, losing an industrial zone will make it more difficult for MSEB to gainfully absorb the 740 mw power that it is committed to lift from the first phase of the DPC project.

BSES wants the capital cost of the project to be drastically reduced.

The financial institutions and banks are engaged in a desperate attempt to find a way out of the crisis as they have a huge collective exposure including guarantees to the controversial $2.9 billion project.

The Industrial Development Bank of India has the maximum exposure of Rs 23 billion, followed by State Bank of India with Rs 18 billion and ICICI with Rs 17 billion.

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