Search the Internet          Tips  Sites: Finance, Investment

Enron refuses to sign sponsors' co-operation pact with lenders

S Ravindran

The Dabhol power drama has taken yet another twist with Enron refusing to sign the sponsors' co-operation agreement with the lenders. Its two other US-based partners, General Electric and Bechtel, have agreed to do so.

Enron holds a 65 per cent stake in the controversial Dabhol Power Company while General Electric and Bechtel hold 10 per cent each. The balance 15 per cent is held by the Maharashtra State Electricity Board.

In a parallel development, the global and domestic lenders have decided to meet in Mumbai on April 8 and 9 to take stock of the situation.

The lenders are likely to now take a firm decision on whether they should seize the assets and the equity of the project in view of Enron's refusal. The equity as well as the assets are mortgaged to the lenders.

"Enron has not yet signed the agreement. I cannot reveal anything further," said a senior IDBI official.

Enron's stand assumes significance as it fears that the institutions which are facilitating the sale process will seize its equity.

Last week Enron Corporation vice president, international relations, John Ambler, said, " For some time, it has been clear to Enron that the Indian financial institutions would attempt to seize all of our substantial equity value in the Dabhol project, leaving Enron and its stake holders without an opportunity to recover any of our very substantial investment."

Ambler had further said that since no assurances were forthcoming from lenders on the seizure of this equity, the company was reluctant to proceed with the due diligence and the sale process.

Enron, GE and Bechtel decided to exit the Dabhol Power Company following a payments dispute with MSEB. The signing of the sponsors cooperation agreement is crucial for kicking off a due diligence exercise by prospective bidders.

Powered by

ALSO READ:
The Enron Saga
The Rediff Budget Special
The Rediff-Business Standard Special
Money

Tell us what you think of this report