OPIC Puts Condition To Dabhol Recast

New Delhi, Aug 30: | Updated: Aug 31 2002, 05:30am hrs
The Overseas Private Investment Corporation (OPIC) has expressed its reservations over the proposal of Indian lenders to restructure Dabhol power project through sale of assets route without a detailed analysis by an independent financial advisor.

OPIC has stressed that a financial advisor be appointed immediately so that a stake holders analysis could be carried out in quick time, based on which the lenders could take a decision on the route to be adopted for restructuring the project.

Top government officials told FE that in a recent meeting with the heads of domestic lenders-IDBI, ICICI Bank and SBI, the chief operating officer, OPIC, Ross Connelly categorically stated that pending a detailed analysis by a financial advisor, it will not agree for initiating the recast process by sale of assets.

Indian Financial Institutions (IFIs) led by IDBI are of the view that given the current state of affairs of Enron Corp, it was impossible to restructure the Dabhol power project by the sale of equity route which besides other legal issues involves an exhaustive due diligence process.

Moreover, IFIs feel that in view of substantial liabilities that the company carried, on account of take-or-pay contracts and other contingent liabilities, the prospective bidders would also be comfortable to acquire the project only under the sale of assets route.

Explaining the shift in the IFIs stand from the sale of equity route to the sale of assets option, to be followed for restructuring the project, an official said that with the filing of the petition under Chapter 11 of the US

Bankruptcy Code by Enron Corp, the main sponsor, sale of equity would now need approval of the Creditors Committee of Enron as also the Court(s) in the US.

Besides, Enron Mauritius Company (EMC), the entity holding equity in the Dabhol Power Company (DPC), has also initiated steps for its liquidation in the Mauritius Court and the court has appointed a provisional liquidator, he added. The official said, he would also need to approve sale of equity.

Further, availability of adequate man-power with hands-on-experience of DPC would be a pre-requisite for carrying out the exhaustive due diligence process for sale of equity, he said, which would not be forthcoming given the current state of affairs of Enron.

Officials said that a suggestion was also made to OPIC that till an independent financial advisor is engaged and an evaluation of the two routes of sale of assets and equity is obtained, the lenders can meanwhile initiate action for preparation of the bid document for sale of assets.

Sources also disclosed that during the meeting of IFIs with the OPIC team, it was pointed out by Mr Connelly that OPIC has held discussions with the offshore sponsors who are ready to give necessary support for setting up the data room, provided the lenders are ready to fund the costs thereof. However, the IFIs have refused to fund the due diligence costs including the costs for setting up the data room.