Enron is reported to be moving staff out of management roles in its controversial US$2.9 billion Dabhol power project located in the western Indian state of Maharashtra. This follows months of wrangling in which the US energy giant and its financial backers have sought to recover what they say are overdue payments.

The amounts outstanding are disputed by Dabhol's only customer, the Maharashtra state electricity board, which had guaranteed payments by a letter of credit (L/C) which is in turn backed by a sovereign government counter guarantee.

Pulling staff out of Dabhol follows Enron's declaration of force majeure in respect of the project. The Texas-based company is also reported by local media to have withdrawn from negotiations for other Indian power projects. These latest actions seem to be a response to the Indian government's backing of the Maharashtra state government's decision not to meet certain financial conditions requested by the project's financiers.

The lenders are requesting payment of a disputed 2.13 billion rupees outstanding from last December and January. The state and federal governments as well as consumers and critics dispute the amounts due because they say Dabhol's charges are more than four times higher than those levied by other suppliers.

In a 1 May letter the lenders asked for extended financial guarantees but according to the Press Trust of India, the federal government has upheld the state government's refusals of the lenders' requests to provide escrow cover or increase the L/C limit.

Enron has invoked two federal government guarantees, one of which New Delhi had said it will only honour if other disputes over payments are resolved. The lending consortium comprises ABN Amro, Credit Suisse First Boston, Citibank NA, ANZ Export Finance Ltd, Bank of America and the Industrial Development Bank of India.

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