Dabhol invokes Centre's counter guarantee again

Dabhol invokes Centre's counter guarantee again
ENS ECONOMIC BUREAU

MUMBAI, MARCH 8: The Dabhol Power Company (DPC) invoked the Government of India's counter guarantee for a second time on Thursday following the failure of MSEB to clear its outstanding bill of Rs 102 crore (approximately US $ 22 million) for December 2000. Under the terms of the power purchase agreement the said bill was due for payment on January 25, 2001. The counter guarantee was invoked as the state government had failed to pay the same amount after the Government of Maharashtra guarantee in favour of DPC had been invoked on February 8, 2001.

In a statement to the press, the managing director of DPC Wade Cline said "Although we could have invoked the Government of India guarantee earlier, we delayed taking this decision as long as possible in order to give MSEB more time to pay their December bill. This bill is now overdue by 41 days and as neither MESB nor the Government of Maharashtra has paid the outstanding balance, we have drawn on the Government of India guarantee to cover the outstanding amount.

DPC has contractual obligations to lendersthat it must honour as well as operating expenses to fulfil which is why we have made use of this security measure at this time. We continue to belive that all parties involved must meet the their contractual obligations. We remain willing to discuss the project jointly with MSEB, Government of Maharashtra and Government of India to look at options available to resolve outstanding issues."

Cline further stated that DPC had exercised restraint and chose not to immediately invoke the security mechanisms at its disposal in the contrctual agreement despite delays in payment by MSEB since early 2000. On February 6 this year DPC invoked the Government of India's counter guarantee for the first time for recovery fo Rs 79 crore outstanding from MSEB towards the bill for November 2000. The November bill was subsequently paid but a total amount of Rs 229 crore is now outstanding for December 2000 and November 2001.

"The project is on schedule to achieve its full generating capacity and receive the first shipment of Liquefied natural gas, a less expensive and more environment friendly fuel, by end of 2001," said the statement.