Dabhol lenders meet to sign foreign debt exit package

Vol 8, PW 5 (02 Jun 04) Midstream & Downstream

Indian and foreign lenders to the stricken Dabhol Power Company are all set to sign a final agreement in Mumbai for the exit of the projects multi-million dollar foreign debt.

During a two-day meeting beginning 2nd June, Indian lenders, led by IDBI, are set to agree to buy-out the $600m debt of 30 foreign banks and financial institutions at a 50% discount. We have increased the offer amount by $50m, an Indian lender tells PETROWATCH.

During a previous meeting on 12th and 13th May in London, the two sides discussed a new financial package and exit option for foreign banks. The London meeting started with the Indian and foreign lenders eyeing each other suspiciously, a source close to the foreign lenders tells us.

But as the meeting progressed everybody cooled down and the gap narrowed. Result: ABN Amro, Bank of America, Citibank and other smaller banks agreed to the proposal informally.

The foreign lenders said they would consult their respective headquarters and give a final answer in Mumbai. If they agree, this week should see foreign lenders exit the project definitively.

We understand Indian authorities are ready to offer several guarantees to Indian lenders, who have already sunk in Rs2,184cr ($485.3m) in Dabhol, if they fail to raise enough money to finance the foreign debt buy-out package. On offer will be soft loans worth $200m at a low interest rate of 5% to 6% and finance ministry approval to raise tax-free bonds worth Rs3, 500cr ($777.7m).

By removing the dollar element we expect DPCs tariff levels to range from Rs2.55 to Rs3.46 per kilowatt hour. Indian lenders believe the combined cost of completing the Dabhol Power Project and its LNG facility works out at $478m.

Any buyer will need to invest at least $500m to generate 2,184-MW of power using LNG. IDBI is also lobbying the finance ministry to waive customs duty on future LNG imports at Dabhol.