DPC revival package may see IFIs picking $900-m equity

Sanjay Jog

Mumbai, Aug 26: INDIAN Financial Institutions (IFIs), led by the Industrial Development Bank of India (IDBI), are weighing the option of taking over the equity of Enron-led Dabhol Power Company (DPC) of around $900 million during the preparation of a package. Simultaneously, the IFIs are also looking at the option of converting majority of the loan amount of $1.2 billion into the equity.

The IFIs, which have lent the rupee loan of Rs 1,732 crore and the guarantee of Rs 3,900 crore to the Dabhol project, have already met the Union finance secretary Ajith Kumar and informed him about carving out a comprehensive package to enable them to take over the Dabhol project in the wake of Enron’s decision to pull out of it. The IFIs have also swung into action with a view to arriving at an out-of-the-court settlement, as the preliminary termination notice served by DPC to the Maharashtra State Electricity Board (MSEB) expires on November 19.

IFI sources told The Financial Express that the IDBI-led consortium of rupee lenders will shortly hold talks with the off-shore lenders and also take up the issue related to take over of equity, or converting a big chunk of loan into equity with the trustee bank ABN Amro Bank.

Sources said that as per the lending agreement, there seems to have been a provision of take over of equity by the lenders.

Sources said that the government, which has provided a counter guarantee for the Dabhol phase-I, would also have to play a pro-active role and support the IFIs in the equity take over bid and other such options for the resolution of the issue. Though, the offshore lenders have rejected the proposal for debt restructuring and cut in the interest rate, IFI sources said that these options can also be taken up again at the level of the trustee bank for reconsideration, especially when Enron had decided to opt out of DPC “at cost.”