Foreign lenders to Enron Corp's $2.9 billion stalled Dahbol power project said on Thursday they had launched arbitration proceedings in a London court to recover their loans and exit from the Indian project.
The move comes after the foreign lenders told Enron's Indian unit, Dabhol Power Company, earlier this month to scrap its power purchase deal with the Maharashtra State Electricity Board that would force the loss-making utility to take over the plant.
Indian lenders, who hold most of the project's $1.9 billion debt, have vowed to resist the moves by the foreign creditors to enforce the takeover of Dabhol by the state utility and collect nearly $340 million in loans. They believe they can get their money back by restarting the plant.
Nearly a dozen foreign lenders to the Dabhol Power Co project said in a statement they had begun the arbitration action against the Industrial Development Bank of India, ICICI Bank, State Bank of India and IFCI Ltd.
The lenders, led by ABN AMRO Bank, said in a statement they had filed "a notice of arbitration under the rules of the United Nations Commission on International Trade law".
The $339 million being sought by the foreign creditors covers their loans to the first phase of the project at Dabhol, 250 km south of Mumbai. The project has been idle since June 2001 when Enron, which owns 65 per cent of the venture, shut it down after MSEB fell $240 million behind in payments.
If the Indian lenders, who are mainly state-owned, lose the arbitration case, the foreign creditors can invoke guarantees that the governments of India and the state of Maharashtra have given them for the first phase of the project.
And if the funds raised by invoking the guarantees are insufficient, the foreign banks can lay claim to Dabhol's unpaid dues owed to them by the state utility, bankers said.
Nearly 30 financial institutions were involved in lending $1.9 billion to build the 2,184 MW gas-fired power plant and an adjacent LNG facility.
Total loans from overseas creditors, which includes the US-based Overseas Private Investment Corp, to the project amount to nearly $600 million.
Apart from Enron, General Electric Co and privately held Bechtel Group Inc each own 10 per cent of the equity while MSEB holds the remaining 15 per cent.