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Commercial viability key to DPC takeover

BS Corporate Bureau in Mumbai | December 15, 2004 10:02 IST

NTPC, one of the companies to be roped in by the government to revive Dabhol Power Company, has indicated that it will consider investing in the company "only if it is commercially viable."

Sources close to NTPC told Business Standard that the company will have to take a look at the tariff structure of DPC compared with NTPC's which on an average stood at Rs 1.47 per unit while the cost of power from the new projects is around Rs 3 per unit.

"We think that the per unit cost of the project should be lower and be around Rs 2 per unit. Only if it is around that figure (the selling cost of power being Rs 2 per unit) then NTPC can consider taking over DPC," added the source.

The source claimed that the cost of power from DPC could come to Rs 2 per unit "only if the lenders and stakeholders take a hit". DPC's cost of power per unit ranges from anywhere between Rs 5.60 per unit to Rs 8 per unit.

Meanwhile, a group of seven offshore banks had initiated foreign arbitration proceedings against the Government of India under the treaties that govern investments between the countries of their respective origin and India.

The lenders have proceeded against the government for its "failure to protect their lenders' loans to the Dabhol Power Project. The 2,184-mw facility promoted by Enron Power, General Electric and Bechtel was shut down in May 2001. The total value of the claims made by the seven banks is about $291 million.

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