Indian lenders to the 2,184 mw, $2.9 billion Dabhol Power Company have reached an agreement with the US Overseas Private Investment Corporation to sign a memorandum of understanding to buy out Opic's over $200 million exposure to the beleaguered power project.
The US government agency had directly lent $140 million to the project and insured another $200 million provided by the US banks. The arrangement will cover both the debt exposure as well as insurance cover.
An institutional investor said the "understanding" with Opic is on similar lines as was reached with the foreign lender earlier. Indian banks and institutions are likely to buy out the foreign lenders and Opic at about 20 per cent discount to the face value of their exposure.
In other words, accumulated interest on the principal amount will not be calculated while paying their dues. However, the exact quantum of discount could not be confirmed as sources are not willing to divulge this unless the deal is signed.
Following the understanding, legal experts on both sides will work out the nitty-gritty of the MoU over the next few weeks. This decision was arrived at the lenders meeting held in Washington last week.
The domestic lenders were represented by State Bank of India managing director T S Bhattacharya, ICICI Bank deputy managing director Kalpana Morparia and Industrial Development Bank of India executive director Jitender Balakrishnan.
This is the second successful step in an attempt to clear the DPC imbroglio. Under the first step, the domestic lenders met 20-odd foreign lenders to DPC in the third week of January 2005 in Singapore.
In the third stage, Indian lenders will negotiate with General Electric and Bechtel. Subsequently, there will be meetings with the Maharashtra State Electricity Board.
DPC shut the plant in May 2001 after a dispute with its sole customer and part shareholder, the MSEB. Since then, a series of meetings has been held across the world by various stakeholders.
The imbroglio has resulted in over two dozen court cases and arbitration proceedings, as the stakeholders, including DPC's majority shareholders, General Electric and Bechtel Group, as well as the foreign lenders, have been trying to recover their investments.
General Electric and Bechtel now own 86 per cent of DPC after buying Enron's 66 per cent stake in April 2004. The MSEB owns the rest.