New Delhi, India - September 22, 2003
Bechtel Enterprises Holdings, Inc. and GE Structured Finance (GESF) have filed an arbitration action against the Government of India to recover their investments in the Dabhol Power Company (DPC). The total value of the claim may reach US$600 million for each company and represents their direct investments of approximately US$120 million each and their shares of the market value of DPC specified in the power purchase agreement (PPA) signed by the Maharashtra State Electricity Board (MSEB) and guaranteed by the Government of India.
Bechtel and GE File Arbitration Over Dabhol Power Company
"We have attempted to resolve our legal and contractual claims but have been blocked at every turn," said Rick Smith, Executive Vice President and Managing Director of Bechtel Enterprises. "Regrettably, this international arbitration demand must be made."
"We will continue to pursue a full recovery of these investments through all available means," said Scott Bayman, President of GE India. "At the same time, we remain committed to helping to restart this much needed power generation facility. It is incumbent upon all responsible parties to make sure this happens in a fair and reasonable way."
This arbitration action was taken by the Bechtel and GESF affiliates that hold 10% ownership interests in the $3 billion Dabhol power plant – Energy Enterprises (Mauritius) Company (EEMC) and Capital India Power Mauritius I (CIPMI). The claim was made under the Arbitration Rules of the United Nations Commission on International Trade Law and the investment agreement between the Republic of Mauritius and the Government of India.
The companies have been pursuing the recovery of their investments for more than two years while the plant has been shut down. Recently, an independent arbitral in the U.S. ruled unanimously in the companies' favor, finding that the Government of India and its agents illegally took the companies' interests in Dabhol Power Company. The Tribunal also ordered the political risk insurance claims held by the Overseas Private Investment Corporation, a U.S. Government agency, to be paid in the amount of $28.5 million for each company.
The ruling is expected to trigger a U.S. Government claim for compensation against the Government of India.
In this second arbitration, the companies detail systematic attempts by both state and national officials to deny DPC's rights relating to the power project including:
- Denying the ability to operate Phase I of the project, complete construction for Phase II, reimburse contractors, service debt and pay dividends to the project sponsors.
- MSEB's refusal to make payments under the PPA, improperly rescinding the PPA, and ceasing to buy power from DPC. These actions effectively destroyed the PPA – the primary asset of DPC – and represent an improper taking of the plant itself.
- Actions by financial institutions controlled by the Government of India to seize control of DPC assets, depriving the companies of their investments.
- Finally, the Maharashtra Energy Regulatory Commission (MERC), an agency created after the PPA was signed, blocked the companies' ability to pursue the international arbitration provisions in the PPA. As a result, DPC was prevented from pursuing arbitrations against the MSEB and the Governments of Maharashtra and India.
Under the India – Mauritius Bilateral Investment Treaty, each party appoints one arbitrator within two months of this filing; a third arbitrator is appointed by the two selected arbitrators. Bechtel and GE submitted their arbitrator's name to the Government of India on September 5, 2003, thus beginning the 60-day panel selection process. The arbitration will commence promptly after all arbitrators are chosen. The decision of the panel is binding.
The Bechtel organization (www.bechtel.com) is one of the world's premier development, engineering, construction, and project management companies. It has completed more than 20,000 projects in 140 countries on all seven continents, including more than 300,000 megawatts of generating capacity in over 500 power stations. Bechtel Enterprises Holdings, Inc., is Bechtel's financing, development and ownership company. Since 1990, Bechtel Enterprises has participated in arranging more than $28 billion in project financings; it is a leader in the privatized infrastructure market with interests in power generation, water and wastewater, transportation, telecommunications and other ventures. Bechtel Enterprises owns a 10% interest in the Dabhol Power Company; Bechtel Power Corporation helped construct both Phase I and Phase II of the Dabhol power facilities.
GE Structured Finance (GESF) is a leading investor and provider of innovative structured financial products spanning all levels of the capital structure. With more than 30 years of experience, GESF meets the needs of its clients by combining industry and technical expertise with significant financial capabilities. GESF's more than 420 professionals serve clients in the commercial & industrial, communications, energy, project & trade finance, and transportation markets, worldwide. GESF (www.gestructuredfinance.com) is a unit of GE Commercial Finance, a business of General Electric Company. GE is a diversified services, technology and manufacturing company with operations worldwide.