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DPC lenders set to exit project, stop funds for C&P

The ABN Amro Bank led offshore lenders of US energy major Enron's Dabhol Power Company may exit the controversial power project, even as they have stopped disbursements towards care and preservation of the project since September 13.

"The 15-odd foreign lenders have now declined to disburse funds urgently needed for care and preservation of the project. Without funds for preserving the facility, DPC's physical assets will begin to deteriorate almost immediately, which in turn will further add to the overall cost of completion," DPC spokesperson Jimmy Mogal said.

Mogal said DPC has been given to understand that in absence of acceptable solutions by the Centre and Indian financial institutions, the offshore lenders might be inclined towards "the quickest exit route from this project".

The C&P cost for the 2,184 mw project over a period of 12 months amounted to $14 million, he said adding its contractors were pre-paid a certain amount when they commenced work immediately after construction contractors' termination on June 17.

The C&P contractors were scheduled to work for a fixed period of time, which ended this weekend.

The foreign lenders' refusal to disburse the crucial funds over care and preservation of the $3-billion project will also adversely impact the future performance of the plant, including maintaining tariff at an acceptable level, he said.

Mogal said due to suspension of construction, the cost to complete the project has already increased and in addition the interest cost for each day of delay was $500,000.

"Contrary to apparent suggestions made by FIs, the offshore sponsors clearly have no appetite to consider a hit on their investments in India made over nine years ago at the invitation of the Centre and the state government, given the total disregard to international contracts by MSEB and the Maharashtra government," he said.

He said in the current scenario wherein very little progress was made by the Centre and FIs to resolve the issue, the foreign lenders were very unhappy over MSEB, the Union and Mahara-shtra government to honour their contractual obligations. Future disbursal of funds from the foreign lenders would depend upon whether the Centre and the IFIs take a quick action to resolve disputes.

In a related development, the US Exim has also threatened to encash the FIs guarantee of Rs 14.01 billion forwarded to it by the IDBI-led consortium.

"We may require to draw upon the guarantees given to us by the Indian public sector FIs. If DPC finds itself in a position, where it lacks the financial resources with which it could service or repay the loan advanced to it by us," the US Exim Bank has submitted before the Bombay high court in its application for intervention in DPC's petition challenging the state regulatory commission's order.

The bank has also informed the court that of the $298.2 million advanced to DPC, approximately $221.7 million of principal remains outstanding and was owed by the us energy major to it.

"At the present date, the bank has loans and guarantee commitments totalling approximately Rs 56.40 billion outstanding in respect of transactions in India, " it added.

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