Financial Daily from THE HINDU group of publications
Tuesday, Jul 05, 2005
Corporate - Courts/Legal Issues
Bechtel to go ahead with arbitration on Dabhol
New Delhi , July 4
BECHTEL Corporation could emerge as the stumbling block in the ongoing efforts to restart the $2.9-billion Dabhol power project. Even as GE has announced a "comprehensive settlement" of its Dabhol-related disputes, Bechtel the other major equity shareholder in the project has said that it has failed to arrive upon a settlement with the Government.
The San Francisco-based engineering company is preparing to go ahead with the arbitration proceedings against the Government in the London Court of Arbitration (LCA) on July 18 for recovery of its claims.
"The Indian Government has so far rejected our most conciliatory proposals for a settlement. Consequently, while our door is never closed, we are taking all necessary steps to argue our case before the LCA on July 18," the Bechtel spokesperson, Mr Jonathan Marshall, told Business Line.
Bechtel Corporation, along with GE, holds close to 85 per cent stake in the beleaguered Dabhol Power Company (DPC), which ran the 2,184-MW power project in Maharashtra. GE had, on July 2, announced that it had reached a settlement with the Indian lenders, the Union Government and the Maharashtra State Government on the dispute.
According to sources, beyond the financial settlement, Bechtel had asked for certain issues to be settled before arriving on a final agreement with the Indian lenders and the Union Government.
Among the issues, Bechtel Corporation had sought the right to argue in a court of law that the liability to compensate DPC's creditors should fall on the Government of India for the period that the plant has been shut since 2001, sources said.
The Government had been hopeful that the Indian lenders to the project would reach an out-of-court settlement on the pending cases with both GE and Bechtel. While GE has played along with the Government on the issue, Bechtel's stand could delay the restart process.
In fact, GE had gone ahead and decided not to enforce the Paris-based International Court of Arbitration's (ICA) order of April 27 for the recovery of claims of $123 million from the Maharashtra State Electricity Board, its subsidiary Maharashtra Power Development Corporation Ltd (MPDCL) and the State Government. GE is also actively partnering NTPC, BHEL and GAIL in restarting the idle plant.
Bechtel, on the other hand, had initiated the process of attaching MPDCL shares in Dabhol Power Company based on an order issued by a US court in May this year, enforcing the Paris-based international court of arbitration's order of April 27.
"While the settlement with GE is a big step forward towards the ultimate objective of restarting the project, Bechtel also needs to come on board before any step towards transferring ownership of the plant can be taken. We are hopeful of a settlement with Bechtel before the LCA case comes up for hearing," a Government official involved in the exercise said.
The Government, on its part, has worked out the broad contours of a special purpose vehicle, involving NTPC, GAIL, the Indian-lenders led by IDBI and SBI and MSEB, to restart the power plant and the adjoining LNG terminal.
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