| towering claims
Mumbai, Sept. 22: GE and Bechtel today hurled an arbitration claim of $1.2 billion on the Centre against the investments they made in the mothballed Dahol Power Company (DPC), re-igniting the Enron controversy that many say choked off foreign capital in power.
Bechtel Enterprises and GE Structured Finance filed the arbitration proceedings to recover $600 million each — five times their investments of $120 each. There was no word on why the claim was so high. In rupee terms, it would amount to Rs 5,550 crore.
The amount also reflects the market value of DPC as specified in the power purchase agreement signed by the Maharashtra State Electricity Board (MSEB) and guaranteed by the Government of India, a joint press statement put out by the two companies said today.
“We have attempted to resolve our legal and contractual claims, but have been blocked at every turn,” Bechtel Enterprises vice-president and MD Rick Smith said.
“We will continue to pursue recovery of these investments through all available means. At the same time, we are committed to restarting the facility. It is incumbent upon all parties to make sure this happens in a fair and reasonable way,” GE India president Scott Bayman said.
The sovereign guarantee was given by the 13-day minority government of Atal Bihari Vajpayee seven years ago. Having taken lessons from it, governments that came later stopped issuing blanket guarantees to any power project. Sovereign guarantees require the government to step in if there is a failure in fulfilling any clause by the Indian entities.
Bechtel and GESF affiliates hold 10 per cent in the $3-billion Dabhol power plant through Energy Enterprises (Mauritius) Company and Capital India Power Mauritius I. The claim has been lodged under the arbitration rules of the United Nations Commission on International Trade Law, and the investment agreement between Mauritius and India.
Today’s move is a culmination of attempts over the past two years by the two companies to recover their money. It comes after an independent arbitral in the US recently ruled that the Government of India and its agents “illegally took the companies’ interests in DPC”. The ruling could trigger a US government claim for compensation against the central government.
In the second arbitration, the companies detail “systematic attempts by officials of the Centre and Maharashtra to deny DPC’s rights in the project”. These include not allowing them to operate phase one, complete construction for phase two, reimburse contractors, service debt and pay dividends to project sponsors.
The last straw was a Maharashtra Energy Regulatory Commission order preventing them from pursuing international arbitration provisions under the PPA.
Under the India-Mauritius Bilateral Investment Treaty, each party appoints one arbitrator within two months of the filing; the two then name a third arbitrator. Bechtel and GE told Government of India who their arbitrators would be, on September 5, 2003. This, therefore, marks the start of the 60-day panel selection process. The arbitration will commence after all arbitrators are chosen, and the panel’s decision is binding.