Making a fresh start

New Delhi, July 20: The Supreme Court today put its stamp of approval on an out-of-court settlement to end the legal battle that engulfed Dabhol Power Company.

Under the terms of settlement, Dabhol will have a new owner ? Newage Power Company Private Ltd ? with an 85.5 per cent stake. Newage is a special purpose vehicle (SPV) floated by GE and Bechtel.

Newage will then transfer assets worth Rs 10,036 crore to financial institutions ? the creditors of Dabhol.

The financial institutions, led by Industrial Development Bank of India (IDBI), had a $1.5 billion debt exposure in the project. Other lenders included the State Bank of India, ICICI Bank, the Industrial Finance Corporation of India (IFCI) and Canara Bank.

The financial institutions will, in turn, transfer the assets to a joint venture company formed by the National Thermal Power Corporation (NTPC) and Gail (India) Ltd. The two state-owned firms will re-start the operations of the gas-based power plant that is lying idle since May 2001.

Under the deal, GE will get about $145 million and Bechtel $160 million from the financial institutions.

The deal marks the end of a spate of litigation among overseas partners GE and Bechtel, the Maharashtra State Electricity Board (MSEB) and the financial institutions. The MSEB has a 15 per cent stake in Dabhol.

The joint memorandum submitted as an ‘out-of-court settlement’ said the Dabhol board would be re-constituted. It will now comprise “two directors nominated by the petitioner, the Maharashtra Power Development Corporation Ltd (MPDCL), two nominated by the Newage Power Company and two by the Indian financial institutions”.

This arrangement will continue “until all the shares are transferred to and in favour of Newage”, according to the settlement memo filed before a division bench comprising Justices S.N. Variava and A.R. Lakshmanan.

The settlement said the directors from GE and Bechtel have already resigned and hence would not play any role.

Enron Corporation, the US power utility that collapsed in 2000 under a welter of charges arising from accounting shenanigans, was the progenitor of the project and had held a 65 per cent stake in Dabhol.

After the collapse of Enron, its stake had been bought out by GE and Bechtel during the bankruptcy proceedings in the US.