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Dabhol plant sale to be delayed

The sale of bankrupt Enron's $2.9-billion Dabhol power plant will be delayed by several weeks due to disagreements between its foreign shareholders and its lenders, officials at domestic lending institutions told Reuters on Thursday.

The creditors had planned to conclude the sale by end-March after receiving 'expressions of interest' from several global and Indian firms for the foreign shareholders' 85 per cent stake in Dabhol Power Company, whose plant has lain idle since last June after a dispute with its local partner.

"The due diligence and financial bidding process will be delayed, and it is unlikely that we can finish the sale process by end-March," said an official, who declined to be identified.

One of the main disagreements is over the destination of the proceeds, another official told Reuters.

"While the lenders want the amount raised from the sale to come in to a special account which they will maintain, Enron wants the proceeds first," he said, without elaborating.

Ruined energy trader Enron, which has made the largest bankruptcy filing in US history and is the target of investigations by Congress and the Justice Department, owns 65 per cent of Dabhol, its largest investment in Asia.

GE and Bechtel Corp own 10 per cent each, while a provincial utility, the Maharashtra State Electricity Board, which is also the plant's sole customer, owns the remaining 15 per cent.

Among the creditors are Indian banks and institutions, foreign banks and multilateral agencies, which together have lent the project $1.9 billion.

Can't service loans

Dabhol was set up to build and operate the 2,184-MW plant on the west coast of India, about 250 km south of Mumbai.

The plant's 740 MW first phase started operations in May 1999, and its 1,444 MW second phase was nearly complete when Dabhol halted construction after the local utility partner fell $240 million behind in payments for power already supplied.

After Dabhol and the utility were at an impasse for months, Enron and the other foreign shareholders said they wanted to exit the project.

Finally on January 30, the project's lead creditor, the Industrial Development Bank of India, invited initial bids for the 85 per cent foreign stake.

Among the global firms that expressed interest were British Gas, Royal Dutch/Shell and French utility Gaz de France.

Indian firms that are in the race are petrochemicals maker Reliance Industries Ltd, private power utilities BSES Ltd and Tata Power Co and state-run Gas Authority of India Ltd, the country's largest natural gas distributor.

Dabhol has received outstanding loans worth $51 million and guarantees totalling $221 million for phase one from domestic banks and institutions. It continued to make quarterly payments on those loans, including the latest payment in December.

But with the plant idle, Dabhol is unlikely to make its next payment due in March, a company official said on Thursday.

"It does appear to be difficult at this point of time that we will be in a position to service outstanding loans as on March 31," an Enron spokesman in Bombay told Reuters.

Indian rules stipulate that banks must make bad debt provisions if a loan to a project that has started functioning is not serviced for six months.

Indian lenders include IDBI, state-run State Bank of India the country's largest commercial bank, and ICICI Ltd, a financial services firm listed on the New York Stock Exchange.

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