Case Study : Dabhol Power Company Limited

इस पृष का िहनदी अनुवाद

By morgan ⋅ October 12, 2009 ⋅ Post a comment
Project Background

The power project at Dabhol is divided into two phases. Phase I comprise of 740 MW of
combined cycle gas fired plant and was commissioned in early 1999. Phase II consists of
generating capacities of 1444 MW. A consortium comprising of Enron Development
Corporation of USA, Bechtel, General Electric (GE), and Maharashtra State Electricity Board
(MSEB) was involved in the project as equity share holders. The plant is located at the port
town of Dabhol in Ratnagiri district in Maharashtra, about 100 miles south of Mumbai. The
particular site was chosen for the following reasons:

1. Investor friendly atmosphere in the State;

2. Financial strength of MSEB which was to purchase the power generated;
3. Requirement of power in the State;
4. Proximity to the sea – to facilitate import of fuel from the gulf;
5. Deep water port and ease of setting up port facilities at Dabhol;
6. Availability of land;
7. Requirements of development of the region.

The Dabhol Power Project

Dabhol Power Company (DPC) was incorporated as an unlimited liability Special Purpose
Company (SPC) to domicile the project. The power project at Dabhol was one of the eight fast
track power projects identified by the Government of India in the early stages of economic
reforms. Phase – I of the Dabhol Power Project was set up and commissioned in May 1999 at a
total cost of USD 1.1 billion. This combined cycle power plant was meant to use naphtha as
fuel in the first phase. Construction work on the project was completed over a period of 33
months. A consortium comprising of Bechtel and GE carried out the EPC work on this phase.
Alstom is the O&M contractor.

The company has entered into a Power Purchase Agreement (PPA) with MSEB, which defines
the respective roles and obligation of DPC and MSEB and the tariff structure in place. The PPA
envisaged a pre-tax return of 25.22%, in dollar terms to the equity investors in the project.

Phase – II comprised of a 1444 MW plant at an estimated cost of USD 2 billion including about
USD 500 million for a re-gasification terminal. Phase – II is nearly complete with the work
having stopped as a result of the ongoing dispute between the various parties to the project.
The financial close had been achieved for Phase – II.

The IPP is meant to be a base load power station supplying power to MSEB.
The Contractual Framework

Power Purchase Agreement

The salient features of the PPA signed between the DPC and the MSEB are summarized below:

1. DPC was responsible for design, construction, operations, maintenance and financing
of the power station and fuel-handling facilities to the stipulated standards;
2. DPC was required to manage the fuel supply for the power plant including entering into
fuel supply contracts in consultation with MSEB.
3. The plant was to be available for commercial power production within 33 months from
the date of financial close. DPC would have had to pay MSEB USD 14,000 per day in
penalties in case of failure to achieve commercial service within the stipulated 33 months.
4. DPC was to establish and declare the base-load and peak-load generating capacity of
the power station at pre-determined intervals. Once base-load and peak-load capacities
were established, DPC was responsible for meeting MSEB’s power demands up to 95% of
those levels. DPC was obliged to pay rebates and penalties to MSEB if it failed to meet this
condition.
5. MSEB and Government of Maharashtra (GOM) were to provide land for construction of
the power station, power, communications, water, and approach roads during construction.
6. MSEB was required to build transmission lines from the power station to its power grid.
7. MSEB is required to purchase power from DPC.
8. The tenure of the agreement is for an initial period of 20 years from the start of
commercial production. Thereafter, MSEB has the option to extend the agreement for upto
ten years.
9. MSEB was required to make capacity payments once the plant was ready for
commercial production even if power could not be supplied because of MSEB’s failure to
construct transmission lines from the power station to the electric grid. If construction was
delayed because of MSEB’s failure to provide the agreed services during the construction
phase, the power tariff would be adjusted to fully recover increased costs due to
construction delays
EPC Contract
DPC entered into an EPC contract with a consortium comprising of Bechtel and GE. The EPC
Contract lays down the respective obligations of the Consortium and DPC with respect to
complete delivery of the Project within the stipulated cost and time.

O&M Contract
The O&M Contract with Alstom records the respective obligations of the Consortium and DPC
with respect to ensuring levels of service for the Project based on pre-determined levels of
availability and safety.

Gas Supply Agreement

Oman Gas Company has entered into a contract with the DPC to supply gas.

Government Guarantees
GOM has guaranteed the obligations of MSEB under the PPA for both phases. GOI has counter-
guaranteed the GOM guarantee for Phase – I only.

Loan Agreements
Loan agreements have been entered into with numerous overseas and domestic lenders
including with export credit agencies.

Tariff Structure

The power tariff consists of the following components:

Capacity Component
1. These will be determined per kilowatt-hour on base-load capacity established through
tests by DPC each year. MSEB will have to make capacity payments on the established
base-load capacity irrespective of the actual power it purchased
2. The capacity payment reflect two fixed costs: fixed O&M costs, and capital recovery
charges to cover interest and principal payments related to the project, tax payments, and
adequate returns to equity investors
3. Both O&M costs and capital costs consist of a mix of rupee and dollar payments. MSEB
is required to bear the exchange rate risk.
4. The dollar component of O&M charges is indexed to the US inflation rate while the
rupee component is indexed to the Indian inflation rate.
Energy Payments
1. These payments are based on the actual power output of the plant.
2. These reflect the variable costs like variable O&M costs, fuel charges, etc.
3. The dollar component of O&M charges is indexed to the US inflation rate while the
rupee component is indexed to the Indian inflation rate

Share Holding Pattern

Original Current
Share Holder (%) (%)
Enron (indirectly through a series of shell companies) 65% 33%
GE (indirectly through a series of shell companies) 10% 26%
Bechtel (indirectly through a series of shell companies) 10% 26%
MSRDC (thru Maharashtra Power Development
Corporation) 15% 15%
Total 100% 100%
The share holdings above reflect the effective equity control of the various parties in DPC. The
equity control of Enron in DPC is held by its liquidators. GE and Bechtel have the option of
buying the residual 33% of the equity control of Enron (through its liquidators) in DPC.

Lenders to DPC

The following lenders to DPC are in the fray:

S.N Approximate
. Lenders Stake
Foreign lenders (ABN AMRO, Standard Chartered, BNP Paribas, Calyon,
1. CSFB, etc.) USD 325 million
2. Domestic lenders (the largest being IDBI, ICICI, SBI, Canara Bank and IFCI) Rs. 62 billion
3. Export Credit Agencies (JBIC, US EXIM, Belgium OND) USD 480 million
4. Overseas Private Investment Company (OPIC), USA USD 250 million

Present Status

1. The total investment in the project so far has been about Rs. 120 billion.
2. The main promoter viz. Enron has been declared bankrupt in the USA.
3. A series of disputes have arisen between DPC and MSEB regarding payment of power
dues and penalties for non-payment of these dues. Operations of Phase – I have been
suspended since June 2001. Implementation on the partially completed Phase – II also
ceased following the bankruptcy of Enron. The EPC contractors have claimed USD 137
million of their dues as lying unpaid.
4. MSEB has rescinded the PPA.
5. A complex set of litigations and arbitrations have been filed in London including
against the Government of India (for about USD 5 billion) as the counter guarantor.
6. A number of parties have filed arbitration cases against MSEB (under the PPA), GOM
(under the GOM Guarantee) and GOI (under the Counter Guarantee).
7. A number of parties have filed arbitration proceedings against GOI under a Bilateral
Investment Promotion Agreement (BA or Bilateral Agreement). The BA aims to protect and
promote the investment, in either Country, of investors based in the other Country.
Protection is granted against expropriation (among others). Legal experts believe that a
strong case of expropriation can be made against the GOI for actions taken (directly and
indirectly) that will hurt the interests of the investors.
8. The proceedings have been filed in London. These proceedings have been stayed by
orders from various courts (Delhi, Mumbai) in India.
9. Arbitrations / cases have been filed by / against foreign lenders, domestic lenders,
equity holders etc. The various parties to the arbitrations / cases include DPC, Enron, GE,
Bechtel, GOI, GOM, Lenders, Customs, and others including sundry creditors.