Enron chief: 'We want out' of India

By CNN's Alex Frew McMillan in Hong Kong

MUMBAI, India -- U.S. energy behemoth Enron Corp. is ready to throw in its cards in India.

The company wants the Indian government to buy it out of its disastrous investment.

"We want out," Enron chairman Kenneth Lay told the Financial Times. Lay said the Houston-based company's partners in its Dabhol subsidiary are ready to fold their hand, too.

"We have made it pretty clear to the government leadership we are now at a point where we would like to be taken out, and we think most of our partners do," Lay said.

An about-face

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That's a sudden about-face from Lay. The Enron chairman visited India at the start of this month, and left insisting he wanted to see a solution worked out.

"I hope that we will be able to find a resolution to this problem," he said at the time. He reaffirmed his "interest in, and support for, India."

Enron owns 65 percent of the $3 billion Dabhol power plant, just outside Mumbai. Its stake is the largest investment by an overseas company in India.

But the power plant has run aground. It was slated to be India's biggest.

Instead, Enron is waging a legal war of attrition with its customer, the Indian state of Maharashtra.

A $48 billion unpaid bill

The state's electricity board owes the Enron subsidiary $48 million in unpaid bills, after defaulting on payments. It owns 15 percent of the plant and reneged on a promise to buy more.

Now GE Capital and Bechtel, which each own 10 percent of the project, look ready to pull out. GE Capital confirmed on Thursday it was looking to sell and would consider "credible offers."

GE and Bechtel bought in to sell parts to the project.

The collapse of the Dabhol project would be a major embarrassment for the Indian government. Observers predict it will cause overseas companies to think again before investing in India.

Many are already put off by the huge amount of red tape involved.

Fast-growing India -- the second-biggest country in Asia -- also faces a huge power crisis in a decade. Its local power authorities are broke and can't afford to build more plants without overseas participation.

Dabhol hoping Supreme Court will take case

Maharashtra, which includes the Indian business capital of Mumbai, contracted to buy all of the Dabhol plant's power. But it has backed out, saying the electricity that Dabhol makes is too expensive.

The state also says it can't absorb the full capacity. Like Enron, it wants the Indian government to step in and help sell the power to other Indian states.

India's power ministry has told its Power Trading Corp., an agency that sells and trades power around India, to look into purchasing the power plant's excess.

The Dabhol plant still stands idle. It stopped generating electricity after Enron and Maharashtra slapped each other with tit-for-tat lawsuits to terminate their power-purchase agreement.

A $1.8 billion second phase of the plant was almost finished and due to start in June. But the contractors mothballed it.

The legal battle is now before the Supreme Court of India, waiting for a hearing date.

The project's bankers are thinking about intervening, with legal briefs asking the Supreme Court to hear the case rather than the Maharashtra Electricity Regulatory Commission.

The state wants the local commission to hear the case.