Even if Enron's fall had not been as spectacular as it actually was-the $101 billion
(Rs 4,80,000 crore) American company's stockmarket value was less than $650 million
(Rs 3,000 crore) in the first week of December 2001-it would still have been big news in India. Enron is 65 per cent owner of the country's biggest, most maligned and most politicised foreign project, the 2,184 MW Dabhol Power Company (DPC). At first, Enron's collapse appeared to be the final nail in DPC's coffin. The company's 740 MW Phase I shut down in May and work at its 1,444 MW Phase II is at a standstill. There are no takers for its power because of its high cost.

The unravelling of Enron has added to the long list of DPC's woes. At the Mumbai-based corporate office of DPC all employees, barring a "core team" have been sacked. The staff strength at the plant is cut down from the peak of 12,000 to just a few security personnel. Ex-employees of Enron have gone to the extent of hosting a pink-slip party.

Business HOW ENRON UNRAVELLED Aug 2001: Jeff Skilling quits as CEO. Oct 16: Poor third quarter results. Fall in credit rating. Investors file suits. Oct 22: Probe begins into Enron. Nov 9: Merger with Dynegy announced. Nov 28: Dynegy pulls out of merger. Enron's share price falls to 26 cents from high of $80 in January. Dec 2: Enron files for bankruptcy.

Much less brave are the Indian financial institutions whose loans and guarantees for loans to DPC stand at a staggering Rs 6,100 crore. Of this, IDBI accounts for Rs 2,300 crore, SBI for Rs 1,800 crore and ICICI Rs 1,500 crore. The balance is shared by other banks and institutions. Saddled with huge non-performing assets, a haircut-a term used to define writing down of investment value-of their investments in DPC is the last thing institutions can afford. This fear is driving India's financial institutions into bringing light back to DPC.

Suddenly, the controversial project has turned from a white elephant to a national asset. For the time being though the fears of a US court appointed liquidator taking charge of DPC's assets have receded. Enron has said that DPC is a separate legal entity registered in India and is not covered under the bankruptcy proceedings. Over the years Enron Corp has become more of an energy (mainly gas and power) trading company and has been getting out of power generation. That's why it classifies DPC as its non-core business.

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ENRON'S INDIA CONNECTION # Enron holds 61 per cent stake in DPC # Indian financial institutions have lent or guaranteed loans worth Rs 6,100 cr to DPC # DPC employee strength down to 200 from a peak of 12,000. More job losses on the cards. THE LIKELY SOLUTION # Enron could agree to sell its DPC stake at much less than its earlier demand of $ 1 billion # Financial institutions likely to restructure loans to reduce interest cost # Tata and BSES willing to take over DPC.

Conciliation is already evident among the parties involved in the DPC imbroglio. "DPC is a national asset. The country can't afford not to have power", says ICICI CEO K.V. Kamath. "Making this power more affordable will call for appropriate sacrifices by various players. On our part, we are open to lengthening the repayment schedule and reworking the interest rate structure, but there is no way we are going to take a haircut on the principal loan amount." The option being pushed through now is to sell Enron, Bechtel and General Electric's combined 85 per cent stake in DPC to either Tata Power or BSES. The remaining 15 per cent of DPC is owned by the Maharashtra State Electricity Board (MSEB).

There are three key hurdles in DPC's revival. The price that Enron expects for its share, the plethora of legal cases that the project is mired in and the cost that will have to be incurred to restart DPC's Phase I and complete Phase II. The near collapse of Enron Corp could ease some of these hurdles. Knowing Enron is now in desperate need of funds to pay off its creditors, the Indian suitors are hoping it would be ready to sell its stake at much less than the $1 billion it is believed to have been expecting.

LAST MEN OUT: The Enron plant at Dabhol after shut down

The plan being put together by financial institutions now is to negotiate the lowest possible price for Enron's $800 million equity contribution to DPC, restructure the debt to bring down interest rate on loans and make the power payable in rupees rather than dollars. The Government can accord a mega power project status to DPC, which will mean some tax sops. It could then sell the project. Experts feel that if the plan works, then Dabhol could be selling power at Rs 2.70-2.90 per unit, against its peak price of Rs 7 in June 2000. "There are enough ways in which the cost of power produced by DPC can be brought down to attractive levels," says Kirit Parikh, economist and member of the committee that had renegotiated DPC's power purchase agreement in 1996. Another expert on DPC and Enron Abhay Mehta says that the equity cost of the project should be brought down to zero as the project cost is already inflated. After restructuring, power should be sold only during peak load and at Rs 2.70-3 per unit.

Institutions had tried to convince the government that NTPC should buy DPC. Given its capacity of 20,000 MW, it would be able to offset the high power tariff from DPC with the lower tariffs it commands from its older, fully depreciated plants. But the Union Power Ministry didn't favour this solution. That has shifted focus on Tata Power and BSES. At a meeting in Singapore in November, Tata Power and BSES were willing to pay about $400 million for Enron's equity contribution. But that was before Enron Corp had fallen into crisis. Now Indian suitors are keen to drive a hard bargain and pay only $100-200 million for the equity stake on offer. Would Enron agree on selling so cheap? The answer to this would depend largely on the extent to which Enron Corp can pull itself out of the mire it finds itself in globally.

Perhaps the bigger hitch here is that Tata Power and BSES are keen on distribution rights to circles like Pune as a form of guarantee. MSEB is opposed to this, and negotiations are on with the Maharashtra Government. To get the DPC project started again could cost as much as $500 million (about Rs 2,400 crore). This includes investments for completing Phase II, which is 97 per cent ready. As for legal disputes, all parties agree that the best recourse is an out of court settlement.

Financial institutions see a possibility of finding a working solution within three months. But DPC sources believe that it will take another year to get the project back on its feet. All contracts need to be renegotiated. There are more than 40 parties involved in various contracts for the project. But at least nobody today believes that DPC will not find its place under the sun. Ironic as it is, the collapse of Enron is being seen as a big hope for DPC's revival.

-with Anil Padmanabhan in New York