GE and Bechtel Give India's Stalled Dabhol Plant Work Restart Pledge

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Researched by Industrialinfo.com (Industrial Information Resources, Incorporated; Houston, Texas). The $2.9 billion Dabhol power generation project in India's western state of Maharashstra has been idle since June 2001 after its only customer, the Maharashtra State Electricity Board (MSEB), stopped payments following a dispute with Dabhol Power over tariffs. The intervening time has seen the dispute resolved and the project's original main investor, Enron, evaporate into bankruptcy.

At the end of the first week in February 2003 India's power minister reported that General Electric (NYSE:GE) (Atlanta, Georgia) and Bechtel Corp (San Francisco, California) had agreed to provide unconditional support in restarting work on the project. The government and the companies both have expressed their concerns. India is worried about foreign investment flows and the backers of the project expressed concern over recovering lost capital. The day before the minister said the companies had pledged their support, GE had sent a letter saying that the two companies would not begin work on the project unless they recovered the amount they had already spent on Dabhol. The current stated disposition of shares is Dabhol Power, GE, and Bechtel with 10% each, MSEB with 15% and Enron Corp is quoted in some current Indian statements as 'controlling' 65%.

The dispute between the parties over payment led to the closure of the 740 MW plant that represents the first phase of the project with the second phase remaining incomplete.

When the $1.078 billion phase 1 gas combined cycle plant was commissioned in 1999 the second phase, a 1,624 MW plant, was scheduled for commissioning in 2001. Enron had built a five million ton per year LNG terminal in 1997, mainly to supply the power plants and had plans for LNG sales to Abu Dhabi and Oman and to send gas supplies to the north by pipeline.

The progress of the project was embroiled in criticism from environmentalists and local politicians. Fiscal concerns focused on the state buying electricity at too high a price. The whole 'Dabhol' saga became a byword for the clash of the interest groups, globalization pros, and cons and concern on the suitability major projects imposed on localities by remote bureaucrats.

The solution of the problems and Dabhol's new hopes of completion have been forced along by India's need for more electrical power and to prove that it can handle foreign financed projects. GE and Bechtel will see some benefit in the progress other projects they are involved in on the sub-continent and in tying the package up in the most businesslike way possible given the past history. The banks and other investors will also be anticipating progress and the accompanying relief.