One of the enduring symbols of Enron Corp.’s failed foreign business investments was its investment in the Dabhol Power Plant on the Maharashtra coast approximately 150 miles south of Mumbai.
When it first began producing power in the late 1990s, Enron’s sponsorship of the project was widely viewed as a breakthrough in the traditional ambivalence of India’s government toward foreign investment in Indian assets. However, the plant was shut down in 2001 after a dispute between Enron and its sole customer, the Maharashtra electricity board, and the plant has remained idle as Enron slid into bankruptcy amid competing litigation claims between the foreign owners in the plant, the Maharashtra state government, and the Indian government. So much for attracting foreign investment in a fast-growing Indian economy that could use the benefits of foreign capital.

At any rate, India prime minister Manmohan Singh is back to the drawing board in terms of attracting foreign capital. Apparently, the Prime Minister has ordered government officials involved in the plant litigation to resolve all foreign claims on Dabhol before his July 18 summit with President Bush in Washington. As a result, General Electric Co. announced over the weekend that it reached a settlement to sell its equity in the mothballed power project, although the announcement did not disclose how much it would receive for its stake in the almost $3 billion venture. Bloomberg’s report on the settlement estimates the settlement payments to G.E. would total $145 million.
G.E.’s settlement leaves San Francisco-based Bechtel Group Inc. as the only foreign stakeholder in Dabhol that has not reached a settlement, although speculation is that Bechtel is about ready to announce a similar settlement in which it would receive about $160 million in payments to exit the project. Bechtel and GE hold about 85% of Dabhol after buying Enron’s stake in the plant last year, and the Maharashtra State Electricity Board owns the balance of the plant. Inasmuch as the 20 foreign lenders in regard to the Dabhol plant have restructured their indebtedness secured by the plant, the resolution of the claims of G.E. and Bechtel will clear the way for the Indian government to proceed with a plan under which two public-sector companies would takeover the generating plant and coordinate its rebirth as a going concern.