Faced with the possibility of taking a $272 million hit, foreign lenders to Dabhol Power Company are opposing the domestic lenders' plan to restart the 658 mw first phase of the Dabhol power project.
In a communication to the Centre, they have insisted on a comprehensive solution that will cover their $272 million exposure to the 1,444 mw second phase as well, since the counter-guarantee covers only their $100 million exposure to the first phase.
The foreign lenders' stand is crucial because they have a veto to stall the domestic institutions' plan of restarting the first phase with the help of the state-owned National Thermal Power Corporation.
"The offshore lenders to Dabhol have written to the Centre communicating their opposition to restart the first phase of the project without trying to find a solution to the project as a whole. They have also voiced their opposition in various meetings with the domestic lenders," officials in the lenders' consortium told Business Standard.
The inter-creditors' agreement clearly specifies that the project cannot be restarted without the agreement of all the lenders. Dabhol Power owes the bulk of the $272 million to Citibank, Bank of America, ANZ Bank, Credit Suisse First Boston and ABN-Amro.
Foreign lenders fear that once the first phase is restarted and a possible buyer for Dabhol Power found, the second phase, which is yet to commence operations, will take a backseat.
The domestic lenders led by the Industrial Development Bank of India are trying to restart the first phase of the project, which has been gathering dust for the last 18 months. This has been prompted by the fact that unless the plant restarts operations soon, it will become junk.
Further, the domestic lenders will be able to recover a part of their over Rs 5,000 crore (Rs 50 billion) exposure to Dabhol Power through the sale of power to the Maharashtra State Electricity Board.
Foreign lenders are also apprehensive about their remaining $90 million exposure to the project despite the counter-guarantee.
"The Union government has said unless the arbitration on the suspension of the power purchase agreement by MSEB is resolved, they will not honour the counter-guarantee," officials in the lenders' consortium added. The foreign lenders had taken a direct exposure of $100 million to the first phase, of which about $10 million has been repaid.
The sale of 85 per cent equity held in Dabhol Power by the three US companies--Enron Corp, General Electric and Bechtel--has also taken a backseat with the lenders returning the earnest money of $1,00,000 submitted by seven companies, along with their expressions of interest.
