Enron fall worries financial firms


By Alok Mukherjee (The Hindu)

NEW DELHI, NOV. 29. With the international energy giant, Enron Corporation, facing bankruptcy, Indian financial institutions have become concerned about the Rs. 6,204 crores exposure they have in the Enron-promoted Dabhol Power Company (DPC) in Maharashtra.

While the DPC is already in a dispute with its minority shareholder and sole purchaser of the power it generates, the Maharashtra State Electricity Board (MSEB), financial institutions and other agencies were so far unsuccessfully engaged in resolving the dispute. The collapse of the Enron Corporation has complicated the situation.

Admitting this here today, the Union Finance Minister, Mr. Yashwant Sinha, agreed that developments in the United States had certainly created uncertainties but expressed the hope that the financial institutions would be able to find a solution, though there was no time-frame.

A solution is being worked out on two fronts. One is at the level of the financial institutions which are trying to salvage their Rs. 6,204 crore loans extended to the DPC, while a group of Secretaries is trying to sort out the matter - including a possible sale to a third party.

Enron holds 65 per cent share in the $ 2.9-billion DPC project while the MSEB has a 15 per cent share. Two other companies, General Electric and Bechtel hold the balance at 10 per cent each.

With the DPC shut down for some time now and with reports coming in from the U.S. that Enron had announced that it would not be making any payments on any account, the question of recovering the Rs. 6,204 crores lent by the Indian financial institutions has become extremely complicated. Various questions would now arise about the assets owned by Enron worldwide and whether they would be auctioned off to repay the huge debts of the parent company.

The Enron collapse has put a question mark over another oil and gas venture that the company was involved in as a joint venture partner with Oil and Natural Gas Corporation (ONGC) and Reliance.

This joint venture partner called the Enron Oil and Gas India Limited (EOGIL) was the operating company for oil and gas fields of Tapti and Panna and Mukta oilfields on the Indian west coast and had recently entered into a tentative deal with British Gas for the sale of its equity in the venture for $388 million.


However, British Gas had made it clear that the deal would go through only if the ONGC and Reliance agreed to allow British Gas to be the operating company. The ONGC, which holds 40 per cent equity in this joint venture, has declined and has instead staked its claim to be the operating company. Consequently, the deal between EOGIL and British Gas is likely to fall through, leaving Enron with another troublesome asset, while the ONGC and Reliance would have a bankrupt partner in the joint venture.