Tuesday, November 20, 2001

DPC deadline expires for issuing final termination notice

DH News Service
MUMBAI, Nov 19

The six-month deadline set by Enron-promoted Dabhol Power Company (DPC) for Maharashtra State Electricity Board (MSEB) to issue the final termination notice (FTN) expired today. The power major, however, has been restrained by the Bombay High Court from initiating the process till December 3. Had the DPC issued FTN today, it would have irrevocably bound all parties to ending the contract without going in for any alternative, an option which is still open.
DPC, on April 19, slapped a preliminary termination notice (PTN) on MSEB, due to what it called continuing default in payment of dues by the board on several occasions and political interference to the detriment of its business operations. As per the power purchase agreement (PPA) signed between DPC and MSEB, the PTN gave six months to both parties to resolve the dispute, or else, allows the aggrieved party to terminate the contract and claim damages.
While the possibility of DPC issuing the final termination notice was real, a dramatic intervention by the Indian financial institutions (FIs) led by IDBI, which moved the high court on November 5, have given a temporary reprieve to the MSEB. The FIs and banks pleaded for an injunction against DPC and sought reopening of the Dabhol plant.
The intervention by FIs so incensed DPC that it called off the two-day meeting with the representatives of the FIs in Singapore in protest. However, it was persuaded to participate in the meeting, which was aimed at finding a buyer of Enron's stake in the company. Two private power majors, Tata Power and BSES, have shown interest in picking up Enron's stake, but at a discounted price.
The high court, which heard the preliminary arguments of the FIs and DPC on November 9, restrained DPC from issuing the FTN andadjourned the hearing till December 3.
DPC sources told Deccan Herald the high court order means the PTN notice period will continue till December 3 and the company would initiate termination process on that day, if the high court allowed it to do so.
DPC has claimed that the damages it would claim on final termination of the contract would run around Rs 24,000 crore. This figure too has been disputed by the MSEB and the state government.
MSEB, on its part, stopped drawing power from Dabhol plant from May 29 onwards, which brought the plant to standstill.