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Enron lenders agree to cut interest rates

The Indian unit of US energy giant Enron said that four local lenders have agreed to cut their rates on loans to its project which is under fire from critics for producing costly power.

ICICI, Canara Bank, State Bank of India and Industrial Finance Corporation of India have all agreed to cut rates by 450 basis points to 16.5 per cent, a spokesman of Dabhol Power Company said.

Dabhol Power Company is 65 per cent owned by Enron and is implementing a two-phase 2,184 MW power project in Maharashtra. Phase one of the project is already in operation.

The cuts will help in lowering the tariff at which Enron sells power to the Maharashtra government, he said.

The spokesman said the firm is considering a reduction in tariff but did not reveal details.

Last week, Industrial Development Bank of India agreed to drop rates by a similar margin.

The spokesman did not specify when the cuts by the financial institutions would come into effect.

The state government wants the project to be reviewed but is yet to take a final view.

Enron says the high tariff would come down next year when it switches over to the cheaper fuel of natural gas from naphtha.

The project cost of $1.9 billion is financed 70 per cent through debt.

Enron's project is among the few foreign power projects to have begun operations since India opened up its power sector in 1992.

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