Search the Internet          Tips  Sites: Finance, Investment

Enron not to hike stake in Dabhol Power Company

US energy giant Enron Corporation said it has no plans to hike its ownership stake in Dabhol Power Company, its controversy-ridden electric power project, as reported by local newspapers on Thursday.

Houston-based Enron, which is building India's largest private power plant, said in a statement that it in fact plans to sell 15 percent of its stake. That would lower its holding to 50 percent as planned four years ago when project details were finalised, the statement said.

Indian newspapers reported on Thursday that a Union Cabinet committee had cleared Enron's proposal to increase its stake in the second phase of the Dabhol Power project by 30 percentage points to 80 per cent.

Enron later said the 80 per cent figure refers only to the second phase and therefore does not convey the correct picture.

"You can't look at the second phase as a separate unit. You have to look at Dabhol Power Company as a whole and there our stake today stands at 65 percent," a company spokesman said.

The 2,184 MW power project has four equity partners - Enron with 65 per cent, US giants General Electric and Bechtel with 10 percent each, and Indian utility Maharashtra State Electricity Board with 15 per cent.

Under the original project plan, the MSEB's stake was to increase to 30 per cent, and Enron's to fall to 50 per cent, through additional investment by the state electricity board to finance construction of the second phase of the project.

But faced with financial problems, MSEB informed Enron last year that it would be unable to buy that additional 15 per cent, leaving Enron to scout around for another buyer.

Enron said in its application to the Indian government that it had sought permission to transfer that 15 per cent stake to another Enron affiliate, which will sell it to a strategic or financial partner. "Technically, Enron is simply splitting its existing equity structure into two separate Enron-owned companies, one holding 50 per cent of DPC equity and one holding 15 per cent to facilitate the sell down," Enron said in a statement.

India's Foreign Investment Promotion Board had cleared the proposal in November last year, followed by the Cabinet Committee on Economic Affairs on Wednesday.

Tell us what you think of this report