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India power finance woes hinder Enron investment

BOMBAY: Enron Corp is keen to buy companies in India's power sector, but the financial woes of the country's state electricity boards (SEBs) makes investment difficult, a top company official told Reuters in an interview.

"I think we would like very much to look at these (acquisition) opportunities. Primarily, none of them are really going to go ahead unless we can fix the (financial) security structure," Joseph. W. Sutton, Enron's Vice Chairman said late on Friday.

"Right now, SEBs are not able to offer any security structure that allows you to invest," Sutton said.

The SEBs, which generate and distribute most of the power produced in the country, are sitting on huge losses mainly on account of poor efficiency and government energy price controls.

They have for long been the main obstacle to private and foreign investment in India's power sector despite a big gap in demand and supply of power.

Sutton was in Bombay as part of the business delegation accompanying U.S. President Bill Clinton, who ended a five-day visit to India on Saturday.

Enron was one of the first foreign investors in India's power sector. It is currently building the world largest private power plant at Dabhol, a coastal village, 200 kms (250 miles) south of Bombay, in India's western Maharshtra state.

The company, along with General Electric GE.N and Bechtel, is building a 2,364 megawatt (MW) plant at a cost of about $3 billion.

The project's first phase of 740 MW, costing $1.078 billion, has been completed and the second phase is expected to be complete by the end of next year.

While the poor finances of the SEBs have derailed the plans of many private power projects, Enron's cash flows are protected by a guarantee from the state government in the event of non-payment by the SEB.

Enron is one of the few companies which have been provided with central government guarantees.

Sutton said Enron had "unlimited" plans for investment in India and added the company had identified power, natural gas and the telecom sector as the key areas.

Enron Corp on Friday entered into a pact to buy a 49 percent stake in a private energy firm, Ispat Energy, promoted by the Ispat Group, which is building a 354 MW project in Maharashtra.

It will also supply liquefied natural gas (LNG) to Ispat Energy.

"Our plans are really unlimited. We really don't have any caps. If there are good investments then there really are no limits," he said.

Apart from its traditional presence in the power sector and LNG sales, Sutton said Enron was planning a major foray in the India telecom sector by building a nationwide network which will enable high-bandwidth data transmission.

"We would like to put the backbone in India for hi-tech infrastructure. We would like to build a backbone structure throughout India connecting Bombay, Delhi, Bangalore, Calcutta...throughout India," he said.

"This doesn't exist. Right now, you want to send data, you have to send it to London or the United States and back to India."

He said the telecom backbone would enable the transmission of large amounts of data including voice data and streaming videos. When asked about the cost of Enron's telecom foray, Sutton said it was not "hugely expensive".

"When you are talking about high technology, you don't talk about what kind of investments. These investments aren't hugely expensive investments, these are moderately priced investments."-Reuters