Dpcs Foreign Lenders Set Stage For Final Termination Notice

Foreign lenders to the Enron-promoted Dabhol Power Company (DPC) are finally set to give the go-ahead to the company for serving the final termination notice (FTN) to the Maharashtra State Electricity Board (MSEB). The deadline for DPC to serve the FTN expires on November 19, 2001.

The FTN is the culmination of a series of measures that started with DPC serving the preliminary termination notice in May this year.

In a related development, domestic lenders to the 2184 mw power project are meeting in Singapore on November 8 and 9 in a last-ditch effort to save the project.

Institutional sources said the lenders will take a close look at the offers of BSES and the Tatas for the project. Given a choice, the banks and institutions are not willing to run the project themselves even if they are offered the project at a hefty discount. "Our business is to lend and not to run a power project," said a senior banker.

The latest provocation for the foreign lenders is the ruling by the Supreme Court last week restraining DPC from encashing a Rs 136 crore letter of credit issued by the MSEB till January 2002.

"It is a simple case. The letter of credit issue should be delinked from the problems surrounding the project. Instead, MSEB has gone to court and the matter has now got delayed. Under these circumstances it makes perfect sense to serve the final termination notice," said sources in the foreign lenders consortium.

"DPC has already approached us seeking permission to serve the FTN. So far, we had not taken a clear-cut decision. After the Supreme Court ruling, we are very much inclined to assent to serving the FTN," sources added.

The overseas lenders have a combined exposure of about $ 1 billion in the $ 3 billion power project in Maharashtra. The foreign lenders include Bank of America, Citibank, Credit Suisse First Boston, Japanese Bank for International Cooperation and ANZ Investment Bank.

Even after the foreign lenders give their permission to serve the FTN, the path has not been paved for international arbitration. MSEB and DPC are locked in a legal battle over the jurisdiction of various disputes between them. While MSEB is keen on the issue being resolved by the state power regulator, the Maharashtra Electricity Regulatory Commission, the power company is keen on going to the Court of Arbitration in London.