Court in India Clears Enron’s Power Project

Enron Corp. overcame the last outstanding legal obstacle to a $2.5-billion power project in India with a court’s dismissal of a trade union challenge to the country’s largest foreign investment.

A Bombay High Court judge rejected arguments by the Centre for Indian Trade Unions that the government of Maharashtra state shouldn’t have reinstated the project. It was canceled in August 1995 because of cost concerns and then revived in January.

The case has prevented the Houston-based natural gas company from completing financial agreements with lenders to the project, a 2,450-megawatt, gas-fired generator. It recently resumed preliminary construction work and repairs at a site near Dabhol, 100 miles south of Bombay.

“This is the last critical step in getting the Dabhol power project back on track for completion by December 1998,” Enron Chairman Kenneth L. Lay said.

“Preliminary site preparation activities are underway and construction should be fully activated within a week of execution of financing documents,” which should be ready shortly, Lay said.

Enron owns 80% of the Dabhol Power Co. project, with units of General Electric Co. and Bechtel Group Inc. each owning 10%.

Enron shares fell 37.5 cents to $45.50 on the New York Stock Exchange.

A lawyer for the unions said the group would appeal. Enron spokeswoman Kelly Kimberly said the appeal process wouldn’t hold up financing.

Immediately after the ruling, Sanjay Bhatnagar, vice president of Enron’s Dabhol Power, said he hoped the decision cleared the final obstacle to the project.

“We’ll be proceeding very quickly to tie up all outstanding matters,” he said.

Sunip Sen, a counsel for the unions, said he was unhappy with the judge’s treatment of the case. Sen said the judge told the court he hadn’t examined the economics of the project, which formed part of the union’s objections.

The court ruled that all allegations brought by the union against Dabhol Power, the Maharashtra government and the Union of India were without merit, Enron said. As a result, all approvals and clearances granted to the Dabhol project remain legally binding, the company said.

Enron said it will end all arbitration proceedings against the Maharashtra government following cancellation of the power project.