The Maharashtra state electricity board (MSEB) is contemplating settling an unpaid letter of credit (L/C) that has been at the centre of the long-running saga at the stalled Dabhol power project (DPC) in the Indian state.

The move comes as the foreign shareholders in one of the collapsed Enron Corporation's most troublesome assets are reported to be offering to sell their stake in the US$2.9 billion project for the apparently knock down price of US$380 million.

Sale price

"We have met prospective buyers and offered them to sell our stake for US$380 million," according to an official who Reuters say was speaking on behalf of DPC shareholders Enron, General Electric and Bechtel.

"We have invested nearly US$1 billion but are willing to sell it for this amount," according to the official who the news agency says added that the proposal was made to four prospective buyers which included an Anglo-Indian Tata-BP joint venture, India's Reliance, the UK's British Gas and Royal Dutch/Shell.

Concessions

Public sector bodies also seem to be willing to compromise on previous positions in order to facilitate a sale according to local media.

The BJP-led central government has said it would accord the project priority status and relax limitations on how the project obtains gas supplies while the Maharashtra state government would make several concessions on taxes and duties according to India's Financial Express.

It says the cash-strapped MSEB would also pay the L/C for power charges incurred since October 2000, and may even make additional payments for power bought and not paid for that was not covered under any L/C arrangement.

L/C future?

The board first refused to pay out on the L/C on the grounds that the project operators were charging too much for electricity produced by Dabhol. Litigation has since frozen payment of the L/C as the several parties attempted to resolve their differences.

Last year N M Rothschild, the financial consultant to the Indian financial institutions that still have considerable exposures in the DPC recommended that MSEB should offer the project's new operators an irrevocable L/C in an amount equal to the sum of one month's total capacity and one month's charges for energy based on the plant running at 100 per cent capacity. (DC World News, 29 September 2003)

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