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TITLE: Enron Benefiting From State Bail-Out Of Dabhol Power Arrears |
AUTHOR: |
PUB: Indian Express |
DATE: January 14, 2001 |
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One of the problems experienced with independent power producers (IPPs) under privatization schemes is that they are often falsely presented as a new source of finance for investment in electricity generation . The fact is, investors in an IPP will not construct (or buy) a power plant unless they are sure they will be repaid (with a profit margin), and so usually require a power purchase agreement (PPA) to be in place. Under the terms of a PPA, the electricity utility undertakes to buy (usually) all the power produced by a power plant. The price of the power (in foreign exchange) and the amount to be sold are specified. For example, in India part of the settlement Enron has reached for its huge power plant at Dabhol is a guarantee of regular payment for output from the Maharashtra State Electricity Board (MSEB). The MSEB has set up an 'escrow account' of moneys collected from electricity consumers on which Enron would have first claim in the event of default, or even delay, in paying the power station. Indeed, as Sucheta Dalal, a columnist for the Indian Express, wrote on 14 January, this is precisely what is happening: "The Maharashtra government's decision to pay Dabhol Power Company's (DPC) arrears has temporarily defused the situation, but the problem of unaffordable power continues to grow. Since the Maharashtra State Electricity Board (MSEB) and the State government are bankrupt, dipping into State contingency funds has paid Dabhol. But this cannot go on. Already the State has frozen the dearness allowance and bonus for government servants and is unable to meet overtime payments to its over-worked police force. The next blow will be a stiff dose of additional taxes. In the absence of political will to clean up the power sector, it will not be long before Maharashtra heads towards irrevocable financial ruin. Yet, Enron's lobbyists and politicians who gained from it, try to convince us that the DPC deal simply cannot be broken without dire consequences. Enron is a powerful company and has formidable political connections; its track record speaks for itself. It has large chunks of the media and the politicians completely under its sway, but its main trump card is its political connections in the US. Remember how US Ambassador Frank Wisner joined the company soon after leaving India? It allegedly has equally close links with the Republican government to be headed by George W Bush. The question is, can a bankrupt Maharashtra afford to bend to Enron's pressure? The answer is no." END |