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Strategies & Market Trends : India Coffee House -- Ignore unavailable to you. Want to Upgrade?

To: Mohan Marette who wrote (6405)	9/7/1999 12:14:00 PM
From: JPR	Respond to of 12475

By Anantharaman Muralikumar BOMBAY, Sept 7 (Reuters) - India's main opposition party threatened on Tuesday to pull the plug on Enron Corp's (NYSE:ENE) controversial mega power project if it wins elections in the western state of Maharashtra this month. The Maharashtra Pradesh Congress Committee (MPCC) said in a statement the Dabhol Power Company (DPC), in which Enron holds a 50 percent stake, is charging too much for its electricity, and said it would stop work on the second phase of the project and re-negotiate prices paid for electricity generated by phase one. "Today, we must all join together to stop phase two totally and thereafter re-negotiate phase one, since it is affecting Maharashtra's industrial growth," the MPCC statement said. "We in Congress in Maharashtra undertake a promise that Enron will re-negotiate the power purchase agreement (PPA) after the same is made a public document and public opinion sought and independent commission to be set up," it said. Maharashtra is holding assembly elections alongside national elections this month. Analysts flayed the announcement saying it would make foreign investors nervous, but they doubted whether the pledge would be fulfilled. Besides Enron, the Maharashtra State Electricity Board (MSEB) owns 30 percent in DPC while General Electric Co (NYSE:GE) and the Bechtel Group own 10 percent each. The project to set up the world's largest private power plant at Dabhol, some 400 kms (250 miles) south of Bombay, has been dogged by controversy since its inception in 1992. Commercial production of the 740 megawatt phase one of the project, which cost $1.078 billion, commenced in late May. The second phase is a 1,624 megawatt plant, costing $1.87 billion and is scheduled for commissioning in 2001. "Enron's power project of Maharashtra is considered to be one of the most expensive power projects with a cost of over 40 million rupees per megawatt for the phase one," MPCC said. Under the terms of the agreement the price will come down as volumes purchased rise. The Congress unit said within two days of the Enron project starting production, MSEB had stopped buying power from a cheaper electricity provider. "Phase two will see higher power costs and one may witness industrial units' movement out of our state," it said. An Enron spokeswoman, when contacted by Reuters, said she had no comment to make on the Congress unit's statement. "It's very bad," said Sangeeta Purushottam, head of research at SG Securities Asia. "It means that policies and agreements have no sanctity." The Congress, which originally, cleared the project in early 1990's, is the second political party in recent months to seek changes in the terms. The Nationalist Congress Party, which split from the Congress in May, has also said it would re-negotiate the terms if it came to power in the state elections. Congress had looked set to recapture control in Maharashtra until the split, but recent opinion polls showed the alliance government of the Shiv Sena and the Bharatiya Janata Party (BJP) stood a good chance of hanging onto power in the state. The Dabhol project was reviewed and its terms renegotiated by the Shiv Sena-BJP state government in 1996. "If the country does not honour the contract and chooses to tinker with it each time there is a change in the government, it will give wrong signals to the foreign investors," commented an industry official, who did not wish to be identified. "These issues have been raised before and Enron has won them in the court of law," he said. anantraman.muralikumar@reuters.com)) Copyright 1999, Reuters News Service