India says it will not buy Enron out

Critics have painted Enron as a profiteering multinational charging Indians too much for power

By CNN's Alex Frew McMillan in Hong Kong

MUMBAI, India -- The Indian government will not buy Enron out of its Dabhol power plant.

The Houston-based company reportedly wants at least $1 billion for its stake.

India's junior power minister, Jayawanti Mehta, told parliament on Thursday that the government is not considering bailing Enron out.

It was a written comment, and the minister didn't elaborate.

Looking for solutions

A negotiating committee is looking at cutting the cost of power instead. Mehta said it has not yet finished its review and made its recommendations.

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Enron owns 65 percent of the $3 billion Dabhol Power Co., the biggest investment by an overseas company in India.

It is locked in a bitter fight with Dabhol's only customer, the Indian state of Maharashtra.

Enron submitted a proposal this week to the Indian government suggesting several solutions. The best are a buyout by the government or Dabhol's bankers, it said.

"In the interest of quickly resolving this dispute, Enron has expressed a willingness to forgo expected profits," the company said, in a statement.

But any buyout would have to cover the cost and investment of its involvement in Dabhol, Enron said.

Waiting for a reply

A company spokesman said Friday that Enron is waiting for a reply from India's power and finance ministries. But they have given no timeframe when that might come.

Wade Cline, Enron India's managing director, has declined to specify what price the company wants. But it is at least $1 billion, according to India's Economic Times.

Cline said the company would be willing to complete the power plant, which would cost another $230 million.

A second phase of the power plant was near completion when contractors stopped work because of Enron's fight with Maharashtra.

A $48 million bill

The state, which includes India's business hub, Mumbai, says it can't absorb all the power. It also says the electricity is too expensive.

Maharashtra owes Dabhol $48 million in unpaid power bills.

The Maharashtra State Electricity Board owns 15 percent of the project. GE Capital and Bechtel are the other investors, each with a 10 percent stake.

The Dabhol plant stands idle after both sides slapped each other with lawsuits to terminate their deal.

Enron Chairman Kenneth Lay visited India at the start of July. He left confident a solution could be reached.

But the legal fight has since worsened, and Lay has changed his tune. "We want out," he said at the end of July.

A second dispute

Enron's problems, as well as the large amount of red tape involved, have had a chilling effect on overseas investment in India.

India also faces a power crisis over the next 10 years, as its economy grows. Its local power boards cannot afford to build the plants the country needs.

A second power dispute has grown nasty in India's Orissa state. The local subsidiary of U.S. power company AES Corp. says it cannot afford to pay for electricity or even its workers' salaries.

The subsidiary, Orissa Power Generation Corp., has asked the state transmission company to stop providing power.

AES is looking to sell its 49 percent stake, unless it can raise power prices.