Delhi ready to help banks exit Dabhol with cash offer

Vol 7, PW 22 (28 Jan 04) People & Policy

Good news continues for the Dabhol Power Company.

Indian authorities will soon facilitate the exit of 25 foreign banks and financial institutions. Before 31st March, the finance ministry will make a proposal to buy out the exposure of Foreign Financial Institutions to DPC.

The Indian government will offer them 60 cents per dollar for their exposure in Phase I and 30 cents per dollar for Phase II, a senior finance ministry source tells PETROWATCH. Foreign banks will have to take a 40% and 30% cut in their loans to DPC for phases one and two respectively.

Dabhol is worth $2.9bn of which $1.9bn is debt and $1bn is equity. Of the $1.9bn debt, foreign banks are exposed by $600m while Indian lenders have sunk $1.3bn.

Indian lenders will also suffer the same or more discount in their loans. OPIC is coordinating with the Indian finance ministry to formulate a revival plan for a New Dabhol package.

New Dabhol will have new owners, new loans and a slew of fiscal concessions, adds our source. Eventually, the 2,184-MW power plant will be given Mega Power Project status with concessions on customs duty for LNG equipment.

After a stalemate of three years, DPC will now get all the concessions, retorts an Indian lender cynically. In 2000, Enron demanded the same sops but were shown the door! Once these concessions are in place, the government will extend extra help for completion of the LNG terminal.

Originally, Enron planned to construct five LNG storage tanks: two dedicated to the combined cycle gas-fired power plant and three for the supply of natural gas to Maharashtra, Gujarat and Rajasthan. Today, two and half tanks stand at the sprawling 1,700-acre site.

The LNG terminal is the anchor for all the companies interested in buying the project, reveals a source. It is expandable to 10m t/y.

Government figures (subject to change later) reveal that any new owner of Dabhol would have to spend $240m + $140m as equity and contractual payments to GE and Bechtel, about $600m towards new loans and $500m for completion of the power project and the LNG import terminal.

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