Dabhol lenders fight over $0.05 cents in exit package

Vol 8, PW 9 (28 Jul 04) Midstream & Downstream

IDBIs Mumbai HQ is witnessing a flurry of hushed activity.

No one is allowed to answer media inquiries, particularly about ongoing negotiations about the future of the jinxed Dabhol Power Company. But information does trickle out, drop by drop, and anyone interested in the fate of DPC might like to know that Indian and foreign lenders are now engaged in a microscopic struggle over payment of a difference amounting to just five US cents demanded by foreign banks.

The ball is in the foreign lenders court, an Indian lender tells PETROWATCH. We have offered them 60 cents a dollar but they are demanding 65 cents per dollar for their $600m exposure in DPC.

This report learns that last month IDBI was ready to increase its offer of $250m to $310m and close negotiations but decided not to at the last minute. It sounds silly, adds our source.

But its a fact that we are now fighting over five cents. Indian lenders are now waiting for the foreign sides response, delayed because they are still trying to understand the dynamics of the new Congress-led United Progressive Alliance government in India.

We know they will come around, he adds. After all who would let go of an investment worth millions of dollars For once Indian lenders feel there have been positive initiatives from the finance ministry.

Its a two pronged approach, he said. We are sorting out the financial mess and the government is trying to clear up the legal mess.

Last week, the UPA government set up an inter-ministerial group with representatives from the power, finance and law ministries to study the extent of damage from litigations and arbitrations between DPC and the government of India. Dabhol is worth $2.9bn of which $1.9bn is debt and $1bn is equity.

Of the $1.9bn debt, Indian lenders have invested $1.3bn.