A Duff & Phelps release on Wednesday said that it had assigned an Ind AA- rating in May 1998 to the Rs 90-crore NCD issue of Essar Power.

Subsequently, the company has decided not to proceed with the proposed debenture issue, and requested Duff & Phelps to withdraw the rating. The rating agency added that "there is no outstanding debt issue planned through the above instrument."

An Essar spokesperson, when contacted, said that "proceeds from the proposed NCD issue were to replace part of the high cost funds of Essar Power. It was to be a refinance facility."

The spokesperson clarified that "there is no question of any shortfall in borrowing as the NCD issue was only to be for refinance purposes."

Essar Power isan independent power producer, and operates a 500 mw power plant in Gujarat. The power plant was upgraded to its current configuration following the hiving of a captive one of Essar Steel.

A Ruia private company based in Mauritius, Prime Hazira, holds 49 per cent in Essar Power while Essar Steel and Essar Oil hold stakes of roughly 41 per cent and 10 per cent respectively. Talks have been on for some time now of an impending equity dilution by Prime Hazira in Essar Power to square off a $75-million loan availed of from the Union Bank of Switzerland. The loan facility backs Prime Hazira equity stake in Essar Power.