General Electric and Bechtel are pushing for $400 million as the price for their 85 per cent stake in Dabhol Power Company.

The two entities last week acquired beleaguered Enron Corp's 65 per cent stake in the 2,184 Mw, $3 billion utility company.

• The DPC-Enron Saga

Most analysts expected a valuation of around $200 million, when lenders invited bids for the combined stake of the three companies about two years ago.

At that time, the three US sponsors decided to exit the project following a payment dispute with the Maharashtra State Electricity Board.
 

The GE-Bechtel arithmetic
Original investment (20% in DPC)	$240 mn
For acquiring Enron's 65%  stake	$20 mn
Unpaid dues from DPC	$140 mn
Total price tag for 85%  in DPC	$400 mn
DPC's valuation on GE, Bechtel terms	$460 mn
DPC original valuation	$1,200 mn

The Tata and the Reliance groups have expressed interest in acquiring DPC. Reliance even offered to buy Enron's equity at around $25 million in the US bankruptcy court last week.

The $400 million price tag had been arrived at on the basis of a formula, which took into account GE and Bechtel's initial investment in DPC equity, the price paid to acquire Enron's stake and the dues the utility company had not paid them, sources close to the development told Business Standard.

GE and Bechtel paid $20 million for acquiring Enron's stake and invested $240 million ($120 million each) in picking up a 10 per cent stake each in the company.

Their dues for services they rendered as contractors to the project are to the tune of $140 million. GE supplied the turbines to DPC while Bechtel was the engineering, procurement and construction contractor.

"The two companies will aggressively push for this settlement now that they have emerged as the single largest block of shareholders. Earlier, they had been mooting such a formula but now they are in a better position to pursue this solution," sources said.

The $400 million is, however, still at a substantial discount to the equity of around $1.2 billion invested in DPC for setting up the 740 Mw first phase of the project and the near complete 1,444 Mw second phase, when the plant stopped generating power in mid 2001.

Last week, a US bankruptcy court allowed GE and Bechtel to acquire Enron's 65 per cent equity in DPC for around $20 million in two stages.

In the first step, the two companies will buy 32 per cent and in the second stage they will buy the remaining 33 per cent stake of Enron. GE and Bechtel picked up the stake through a complex three-tiered structure.

The US bankruptcy court permitted GE and Bechtel to buy a 49 per cent stake in the Enron-controlled Atlantic Commercial Finance. Atlantic controls another company called Offshore Power Production, which has an equity of around 98.9 per cent in Enron Mauritius which, in turn, holds shares in DPC.