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Dabhol's domestic lenders to buy out offshore debt — SPV to float bonds to raise funds

Anil Sasi

New Delhi , April 13

GAS and Power Investment Company (GAPIC), a special purpose vehicle set up by the Indian lenders to the $3-billion Dabhol Power Company (DPC), is close to buying out the project's foreign debt component of around $600 million.

The recently formed company, in which IDBI and State Bank of India have a stake, would raise money by issuing bonds to pay off the project's offshore lenders, Government officials said.

The Union Cabinet has already cleared a proposal to stand guarantee to the Indian lenders involved in restarting the project. "Foreign lenders have agreed to sell their portion of DPC's debt to the Indian lenders and have also signalled their willingness to take a 25-per cent cut on the original loan amount," a Government official said.

The settlement of the debt owed to the offshore lenders, led by ABN Amro Holding NV and Bank of America, is expected to be the first step in an attempt to restart the project. But a big roadblock would be the attempt to settle the equity claims of the General Electric (GE)-Bechtel combine, the officials said.

GE and Bechtel together own 85 per cent of DPC, after the combine bought out Enron's 65-per cent stake in the project. The domestic negotiations team led by Indian lenders, who have been working towards reaching a settlement for restarting the project, have come in for some flak from the Centre since they "rather tamely" let GE and Bechtel pick up all of Enron's stake after the Houston-based firm filed for bankruptcy proceedings.

"The Indian negotiators were clearly caught napping. With the 20-per cent stake that the GE-Bechtel combine held earlier, they had much less leveraging power. Now, with a controlling stake of 85-per cent stake with GE and Bechtel, the domestic lenders would have a stiff task trying to settle the combine's claims even after they buy out the offshore debt," a senior Government official said.

The Indian lenders have been talking to the GE-Bechtel combine and also with the Overseas Private Investment Corporation of the US to agree upon the equity claims made by the stakeholders, the officials said.

The Dabhol project has been lying idle since 2001. The project was being set up in two phases, with a 740-MW first phase and a 1,444-MW second phase. Following a commercial dispute between the Maharashtra Government and DPC over electricity tariffs, the Maharashtra State Electricity Board stopped buying power from the project.

Domestic lenders to the project, who have an exposure of close to Rs 5,500 crore in the embattled project, have been in negotiations with stakeholders to restart power generation at the station.

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