Search the Internet          Tips  Sites: Finance, Investment

Japan bank may invoke Enron loan guarantee

The Japanese Bank for International Cooperation has warned it may invoke the guarantee provided by Indian banks for the foreign loan used to help build a $2.9-billion power plant which has quit operating, an Indian financial daily reported on Thursday.

The Economic Times, citing unnamed sources, said the Japanese government-run bank had "sounded a grim warning" during a meeting last week in Bombay with officials of the Industrial Development Bank of India, which often serves as a representative of all Indian banks in this matter.

No IDBI official could be contacted to comment on the report.

The paper said that JBIC had a direct fund exposure of $258.21 million to Dahbol Power Company, set up by Houston-based energy giant Enron Corp to build a 2,184 MW power plant south of Bombay.

The newspaper said Indian institutions -- IDBI, ICICI, State Bank of India and IFCI -- had guaranteed $524.24 million in foreign loans to the project, work on which was halted earlier this month.

Generating capacity of 740 MW was completed in 1998, while a second phase adding another 1,444 MW was almost complete when Bechtel and other contractors ceased work on June 16.

DPC has been embroiled in a dispute with the cash-strapped state utility, the Maharashtra State Electricity Board, which is the sole buyer of its power and has defaulted on payments of $48 million to DPC.

The state utility stopped buying power from DPC in May.

YOU MAY ALSO WANT TO READ:
The Enron Saga

Tell us what you think of this report