The Hindu Business Line : Lenders discuss Dabhol recast

BANKS and financial institutions that have funded Dabhol Power Company (DPC) today met in Singapore to negotiate a financial restructuring package that may include the Indian lenders taking over foreign loans at a discount.

Institutional representatives in Singapore refused to say what transpired at the meeting. The IDBI Chairman, Mr M. Damodaran, who is heading the Indian team, said: "We have decided not to talk to the media on this issue now." IDBI has advanced the largest chunk in about Rs 6,200 crore of loans that Indian banks and financial institutions have given DPC.

A Government source said as per an informal understanding between OPIC, a US Government-backed political risk insurer, the Indian Government and prospective bidders of the project some time ago, Indian lenders were to take over the foreign currency debt if Phase-I loans were written down by 40 per cent and Phase-II loans by 30 per cent.

The parties had also decided that GE and Bechtel would prepare a report on the 2,184 MW plant's present condition. According to recent reports, the Finance Ministry has also agreed to guarantee bonds of a special purpose vehicle that lenders would form to take over the foreign currency loans.

After the Indian lenders take over the foreign loans, the total debt of the company would fall from $1.9 billion to 600 million. After GE and Bechtel took over original majority owner Enron's equity a week ago, their total holding of 85 per cent is said to be valued at $385 million. According to the source, a buyer would have to spend about $500 million to complete and restart the project. After the restructuring, the cost of the project would come down from an original $3-billion to $1,485 billion.

While the package had been informally discussed at a meeting the Government had with OPIC and potential buyers - Tata Power, Reliance Energy, British Petroleum, British Gas and Shell — some weeks ago, the positions after today's discussions are not known.