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Indian lenders go to court over Enron's Dabhol

Indian lenders to Enron's $2.9 billion Dabhol power project sought a court injunction on Wednesday to stop US courts getting authority to oversee distribution of Dabhol's assets.

The chairman of the Industrial Development Bank of India, which leads the effort to sell the Dahbol project, said the action responded to a move by other Enron creditors to give a US court authority to handle claims against the bankrupt Houston-based company.

"The parent company's creditors' committee has written a letter to us saying all matters relating to Dabhol be transferred under the jurisdiction of a New York court," IDBI chairman P P Vora told reporters.

"We are moving the Bombay High Court with a plea that this letter be treated as null and void."

Enron filed for bankruptcy on December 2, becoming the biggest US corporate failure ever. The rapid collapse of the one-time Wall Street darling, which kept vast debt hidden off-book, is now the subject of US Congressional and Justice Department investigations.

Vora said creditors of the US parent company had formed a committee to press their claims and now wanted a say over Enron's Indian assets too.

But Vora rejected a report in the Wednesday edition of a financial daily saying lenders -- both foreign and domestic -- would soon petition a Bombay court to put the facility into receivership.

"Highly placed sources told the Economic Times that the FIs (financial institutions), who have lent 70 per cent of the total project cost of $2.9 billion, have decided to move the court and seek the appointment of a receiver," the newspaper said.

A spokesman for Dabhol Power, the company Enron set up to build and operate the plant, confirmed it had defaulted on some offshore loans last year. The same official told Reuters earlier this month that Dabhol was unlikely to make its next payment to domestic lenders due at the end of March.

IDBI FILES A SEPARATE CASE

Meanwhile, IDBI filed a separate petition in the Bombay high court against bankrupt Enron Corp and its Dabhol Power Company to restrain them from taking any action jeopardising "interests of financial institutions in the assets of the idle 2,184 mw project."

"We have filed a case restraining DPC and Enron from taking any action harming our interest in the project assets. The lenders are only asking for protection and preservation of DPC's assets. There are no plans to take over them," an FI official said.

He said the lenders were not even enforcing security and that no court receiver was been appointed for attachment of assets of the $3billion power project.

The case is listed on the Bombay high court for hearing on Thursday, the official added.

The lenders' move to 'protect their interests', according to another FI official, could have triggered from the fact that DPC has given them an ultimatum over release of funds of about $10 million for its sustainence, including critical care and preservation of the plant, payment of salaries to over 150 employees at the plant site and Mumbai office.

"On March 18, DPC had again petitioned the lenders to release funds of about $10 million. Setting a deadline of March 25, the company had said it would be compelled to commence termination process of all its employees if the required funds were not provided," the official said.

CONTROVERSY-RIDDEN

The 2,184 MW Dabhol power project has been mired in controversy from the time it was first proposed in the early 1990s by Enron, which was then just embarking on growth that was to make it one of the 10 largest US companies by market value.

The 740 MW first phase started operating in May 1999. The 1,444 MW second phase was nearly complete when construction was halted after its sole customer, a nearly bankrupt local utility, fell $240 million behind in payments.

The utility was contractually obligated to buy 90 per cent of Dabhol's output, despite the fact demand could be met by other providers of much cheaper power.

The plant, located on the west coast of India, about 250 km south of Bombay, is the largest LNG-fueled plant ever built in the world. It now sits rusting away in the salty sea air as money for maintenance has run short.

Enron owns 65 per cent of the project, its largest investment in Asia.

GE and Bechtel Corp own 10 per cent each, and the Maharashtra State Electricity Board the remaining 15 percent.

Creditors had hoped to sell the plant by this month after receiving "expressions of interest" in January from altogether seven big multinational and Indian companies.

But the lenders and the plant's owners are now deadlocked over sharing the divestment proceeds.

The potential multinational bidders include British Gas, Royal Dutch/Shell and French utility Gaz de France.

The Indian companies in the race are Reliance Industries Ltd, BSES Ltd, Tata Power Co and Gas Authority of India Ltd.

Among the creditors are Indian banks and institutions, foreign banks and multilateral agencies, 26 sources in all, which together have lent $1.9 billion.

Indian lenders include IDBI, State Bank of India, and ICICI Ltd, a financial services firm listed on the New York Stock Exchange.

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