| The government and the Indian lenders to the Dabhol Power Company are working on a two-pronged strategy aimed at assessing the situation at the 2,184 mega watt facility to restart electricity generation while negotiating a proposal to buy the debt extended by foreign lenders.
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| "We will assess the situation at the plant. We need to check up whether the facility is ready to be operationalised, some work is pending like the LNG facility. We will do all that while the lenders talk (to their international counterparts," Naresh Chandra who heads the committee on restarting the facility told reporters after a meeting that lasted over two hours.
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| While Chandra refused to comment on the future course of action, he said that the committee was considering various options for restarting the plant, which has been lying idle for nearly four years.
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| An option being considered by the committee was to let the Indian lenders float a special purpose vehicle to all the debt on DPC books. The SPV would issue bonds, the proceeds of which would be used to buy out the project's foreign debt. "This is one of the options but we are yet to finalise the details of the mechanism to restart the plant," he said.
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| The Indian lenders who attended the meeting also briefed the committee about their course of action for the May 12 meeting with foreign lenders in London. At a similar meeting last month the Indian and the foreign lenders could not reach an agreement.
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| The government had earlier asked the Indian lenders to buyout the foreign debt component in the project as a means of countering GE and Bechtel's acquisition of Enron's residual equity in DPC.
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| Apart from Chandra yesterday's meeting was attended by financial sector secretary NS Sisodia, IDBI chairman M Damodaran, ICICI Bank joint managing director Kalpana Morparia, representatives from the State Bank of India, law firm Amarchand Mangaldas and senior finance ministry officials.
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| Overseas lenders to an idle $2.9 billion Indian power project that Enron Corp built are likely to respond next week to a proposal from domestic creditors on the losses the two groups should bear, officials said on Friday.
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| Domestic lenders to Dabhol Power Co had offered to buy the $390 million in debt owed to overseas lenders for 40 percent of that amount at a meeting late last month, the officials said.
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| The Indian lenders plan to sell or securitise that debt. "The Indian lenders' offer has not been accepted yet. But I believe the lenders will come to a solution over the next month or so," said a senior official at India's Finance Ministry, which is closely tracking the talks although it is not directly involved.
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| "If they don't, the opportunity won't come again." Officials said the lenders were due to meet in London on Tuesday and Wednesday. They last sat across the table from one another last month in Singapore after a gap of several months.
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| Indian creditors, led by state-run Industrial Development Bank of India, lent about $1.3 billion to the project. Overseas banks and institutions such as Bank of America, Citibank and ABN Amro lent $600 million.
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| The two sets of lenders have been wrangling for three years -- ever since Enron shut the 2,184 megawatt plant after its sole customer, the Maharashtra State Electricity Board (MSEB), a loss-making state utility, fell $240 million behind in payments.
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'HOT PROPERTY'
But Dabhol's assets could become "hot property" if the two sides reached an agreement, because the domestic lenders could then initiate an asset sale by calling for international bids, the government official said.
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| There are already four prospective buyers for the plant, which was India's single largest foreign direct investment.
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| The potential buyers are a consortium comprising British Petroleum, Tata Power Company Ltd and GAIL India Ltd; BG Group Plc; the Reliance group; and, Royal Dutch/Shell.
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| The assets became more attractive after India passed a landmark electricity law in June last year that permits generators to sell power directly to consumers instead of to state-run utilities, such as the MSEB, which dominate the sector.
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| Consumers and distributors, in turn, can pick their supplier.
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| But the final bidder will have to negotiate with General Electric Co and Bechtel Group Inc, which signed an agreement last month to buy bankrupt U.S. energy major Enron's 66 stake in Dabhol Power Company.
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| The two U.S. giants had already owned 10 percent each in Dabhol, while MSEB still owns the remaining 15 percent. GE and Bechtel have been insisting on an equity sale for Dabhol instead of an asset sale, which would give creditors first claim on the proceeds.
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| According to a senior executive, GE and Bechtel are likely to ask for $400 million for their 86 percent stake: $200 million for their original investment, $140 million in unpaid contractor fees, $40 million in cost overruns and the $20 million that they paid for Enron's stake.
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| "The negotiating position of the buyer (vis-a-vis GE and Bechtel) may be much better than that of the Indian lenders," said the Indian government official.
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| He added that this might put pressure on the U.S. companies to reach a settlement with the Indian lenders, paving the way for selling Dabhol's assets and restarting the plant. |
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