Enron has decided to invoke the letter of credit (L/C) issued to ensure it receives payment for power it supplies to the Maharashtra state electricity board (MSEB). The US energy giant now says it will now use the L/C to recover part of the debt owed to it by the state-owned electricity board. (See DC World: Enron may invoke L/C to recover Indian power debts, 17 January 2001).

The Maharashtra state government has refused Enron's requests to bail out the cash strapped electricity board. It claims it is unable to pay its overdue bills - which date back to November - because Enron's prices had risen far too high and the increases could not by law be passed on to consumers. Enron says it is simply recouping its investments.

Enron told the state government of its decision on 25 January. Earlier that day the state finance minister had reiterated his refusal to bail out MSEB. He subsequently told local media that there is no money for a bail out; therefore it is not even being considered. Officials at the Enron controlled Dabhol Power Company were apparently unable to comment on the matter.