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A release issued by representatives of the offshore lenders cited lack of progress towards "viable restructuring'' of the 2,184-MW power project, which has been lying shut since June 2001, as one of the reasons for the "reluctant'' decision.

MUMBAI, April 3

OFFSHORE lenders to the beleaguered Dabhol power project today voted in favour of termination of the power purchase agreement (PPA) between the Dabhol Power Company and the Maharashtra State Electricity Board (MSEB) "as soon as permission can be gained through the Mumbai High Court''.

The lenders took the decision after prolonged discussions in Singapore over the past couple of days.

A release issued by representatives of the offshore lenders cited lack of progress towards "viable restructuring'' of the 2,184-MW power project, which has been lying shut since June 2001, as one of the reasons for the "reluctant'' decision. The other reason being "extensive costs already incurred by the offshore lenders''.

If the PPA is terminated, MSEB would have to purchase the Dabhol power plant as per contract, the minimum price for which would be equal to the project's total debt.

If MSEB fails to pay, the Maharashtra Government, which has wholly-guaranteed the project, would be obliged to pay the purchase price. The project also has partial guarantees from the Centre.

MSEB, sole buyer of the purchase contract, has already rescinded the PPA and avoided contract in the Mumbai High Court citing performance flaws in the project and misrepresentation of facts.

Offshore lenders had earlier mooted the proposal for termination of the PPA by the Dabhol Power Company. Indian lenders had then obtained an ad interim injunction from the Mumbai High Court to prevent it.

The offshore lenders now "expect the Indian financial institutions to apply to the court for lifting of the injunction at the earliest opportunity," the release said.

According to the release, the Dabhol Power Company has outstanding debts of more than $1.5 billion or its equivalent in rupees. Of this, two-thirds is held by the Indian lenders while one-third is with the international financial institutions.

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