Troubled Waters Need to salvage Dabhol power project hhe Dabhol gas-based power project contin- ues to face problems. The 1,967 MW’ project, owned by Ratnagiri Gas and Power Private Limited {RGPPL) has not generat- eda single unit of elecric- lity since January 2014, | mainly on account of domestic gas short- age. Power generation from the project hhas declined consistently over the years | from 11,877 MUs in 2010-11 10 around | 1,506 MUs in 2013-14. The project has been allocated 7.6 milion standard cubic metres per day (mscmd) of gas from Reliance Industries Limited's Krishna- Godavari-D6 block (KG-D6) and 09 | msemd of gas from the marginal gas fields of the Oil and Natural Gas Corpo- ration (through GAIL (India) Limited) However, gas supply from the KG-D5 block has plunged to zero since March 2013 due to lower-than-anticipated pro- duction. While the promoters are finding ways (0 revive the project, lenders are looking at options to recover their dues. Background ‘The plant was initially owned by the Dabhol Power Company (DPC) and was promoted by US-based energy, com modities and services company, Enron Corporation, in 1992. It marked the largest foreign investment in the coun- try and the power sector, ‘The plant ran into trouble soon after the 640 MW Block 1 was commis- sioned in 1999 due to Power purchase agree- ‘ment (PPA)-related issues with the erstwhile Maha- rashtra State Electricity Board (MSEB). In 2001, Enron filed for bankruptey, following which DPC was shut down, In July 2005, the project was revived with the incorporation of RGPPL, promoted by NTPC Limited and GAIL which took over the assets of DPC, RGPPL settled the claims of General Electric Company and Bechtel Corporation, which were minori {y partners with Enron in DPC, with sup- port from the financial institutions. NTPC and GAIL each have a 32.86 per cent stake in the company, 17.81 per cent is held by MSEB Holding Company Limited and financial institutions such as IDBI Bank Limited, State Bank of India (SBN), ICICI Bank Limited, and Canara Bank own the remaining 16.87 per cent. {In 2006, the plant resumed power gener- ation amid a severe power crisis in Maharashtra, using naphtha to make up for the power shortage. In 2009, loans for the project were restructured due to its inability to pay its dues. Year-wise power generation from RGPPL Year Installed capacity (MW) Gross generation (MUs)_ 21810 1967 em wien 1967 wero iti 1967 wie mei ‘7 i | aio 1367 | aoiets wperrgatanra 1367 Source: Wit rply to @ Lok Sabha question n March 2013, ental Etc Authonty 2 POWER LINE » Octobe Current status Currently, RGPPL owes around Rs 85 bil- lion as debt repayment to various lenders. To add to its woes, Maharashtra State Electricity Distribution Company Limited (MSEDCL), the sole buyer of power from the project. reportedly owes it nearly Rs 15 billion, In April 2014, the Ministry of Finance stepped in to resolve theissue between two companies, stating it would deduct the dues payable by MSEDCL from the central funds to be transferred to the state in case the dispute ‘was not resolved amicably. However, the ministry considered this option only as a last resort. The matter escalated further in May 2014, when MSEDCL served a notice on RGPPL for the termination of the PPA owing to frequent closures and high generation costs due to the use of expensive liquefied natural gas (LNG) While the lenders are oscillating between, the options of hiving off the projects assets or declaring it a non-performing asset (NPA), the Power Finance Corporation has already declared the project an NPA, on account of the com- pany’s inability to pay interest install ‘ments for three months. Further, there are proposals to convert a part of the lenders’ debt into equity; however, a final decision in this regard is pending, Other lenders including SBI and ICICI are also. planning to convert their dues into equi- {y: After the conversion, their stake would, increase to 27 per cent while that of NTPC and GAIL would reduce to 28.8 per cent each, and the stake of MSEB Holding, Company would reduce to 15.2 per cent. In September 2014, the lenders consid- ered the option of hiving off the LNG ter- minal associated with the project to recover their debt. The 5 mtpa Dabhol LNG terminal in Ratnagiri was commis- sioned by GAIL in January 2013 and entailed an Investment of Rs 40 billion. The terminal is owned by RGPPL while GAIL is the commercial operator. This proposal, however, has been opposed by the promoters NTPC and GAIL, as well as the Maharashtra government as it ‘would significantly diminish the pro- ject’s valuation.