MSEB is also planning to partly privatise its distribution network with an investment of Rs 2,000 crore over five years, as part of its future plans.

"MSEB will come out with a debenture issue in June to raise Rs 500 crore, which will be on the same lines as last year's debenture issue," Maharashtra Deputy Chief Minister Gopinath Munde told PTI on Sunday.

The SEB had issued debentures last year also to raise Rs 500 crore, to finance its 30 per cent stake in the 740 mw phase I of the Dabhol project, which is to be commissioned on May 26.

The fresh debenture issue is primarily to fund the SEB's picking up 30 per cent equity in Dabhol project's phase II also. However, the funds raised by the issue will be used for other operations of MSEB as well, according to the minister.

Munde, who is incharge of the power portfolio, said the debentures would have a tenure of seven years, which is the same as last year's issue.

However, the interest rates offered were likely to be lower than the previous issue's coupon of around 14 per cent, he added.

The debenture issue would be managed by merchant banker JM Financial, the minister said.

MSEB's investment in Dabhol phase I amounted to about Rs 650 crore. Total capital cost of the first phase is $1.078 billion, of which 30 per cent is equity.

Enron International holds 50 per cent of the equity, while the engineering, procurement and construction (EPC) contractor Bechtel International and equipment supplier General Electric have 10 per cent each.

The $1.87-billion second phase is also to have the same equity profile with the total equity base weighing about $452 million. Thus, MSEB will be required to shell out about $136 million to pick up 30 per cent in phase II.

Earlier this month, Enron had achieved financial closure for the second phase withfive loans totalling $1.414 billion. Chief contributors included IDBI, ICICI, IFCI and SBI for the rupee debt and ABN Amro, CSFB, Citibank, SBI and Canara Bank for the dollar loans.

The next major project MSEB is working on is the privatisation of part of its distribution network covering Nayi Mumbai, Thane and Belapur, Munde said.MSEB is planning to run this network as a separate company with 70 per cent private equity participation, the minister said.

The SEB would hold 10-15 per cent share in the venture, he said, adding that for the remaining part, tenders would be floated to private bidders.

The government wants BSES and Tata Electric Company, which are the present power suppliers to Mumbai, to be part of the venture, Munde said.

He said the feasibility report for the project has been completed. The project would distribute about 800 mw of power and this would go up to 2000 mw in the next 10 years.

The new company would procure bulk power from MSEB for distribution, the minister said.

Whenasked if the successful commissioning of Dabhol phase I would become an electoral placard for BJP during the coming Lok Sabha elections, the minister answered in the negative.

He said the government was never against the project adding that it only opposed the agreement Enron had with the previous government, which, according to him, had given some undue favours to the American promoters.