Other reasons cited for Enron having second thoughts on Essar Power is that GEB has reportedly for several months now been paying for only around 40 per cent of the committed offtake agreement; agreements between Essar Power and GEB,are "based more on good faith"; differences over the price per Essar Power share, and the extent of stake in the utility; the extent of Essar Power's liabilities; and issues involved in its refinancing by a suitor.An issue that has turned out to be bothersome to Enron is the negotiated agreements between Essar Power, Essar Steel and GEB. Under the present terms, Essar Steel gets to have 200mw with GEB at 300mw. In thecase of Essar Steel, it is the company's weak financials casting doubts over the ability to pay for power. With GEB, it is the lack of a secured payment mechanism as there is no back-up state-government guarantee.

Both can potentially lead to situation wherein the power supplied by Essar Power could technically become "unsecured" in nature. Enron, "has not foreclosed any option on Essar Power", say power industry sources, "but that would most likely revisit some of the issues involved", and that "it is still hopeful that a way around will be found".

Essar Power's annual report for 1997-98 shows a net profit of Rs 17.8 crore on income of Rs 409.7 crore. Annualised, the return on shareholders funds-on an equity capital at Rs 523 crore-works out to 6.8 per cent.

Enron's decision to go back to the `drawing board', sources say, were triggered off by the less than impressive financials of the company, and more importantly leaves Marathon as the only serious contender for the utility. The sale of Essar Poweris critical to both the promoters, Ruias, and domestic financial institutions as proceeds are to be used to square off term-loans and straighten affairs at flagship, Essar Steel. More importantly, the sale has a direct bearing on Essar Steel's ability to redeem its $250 million floating rate note due for redemption on July 13. Corporate bankers close to talks between Enron and Essar Power mentioned that "at one one point in time, differences arose as to the extent of stake that the US company was to be offered in Essar Power".