ICICI Bank, SBI oppose sale of Dabhol facilities

The plan to hive off Dabhol power plant's LNG facilities has run into rough weather with two of the main lenders to the project, State Bank of India and ICICI Bank, objecting to the sale.

The two banks are reported to have approached the power ministry saying that the sale would force them to book a loss on their balance sheets. The banks together lent close to Rs 4,000 crore for the revival of the project in 2005.

Analysts pointed out while in terms of absolute numbers, the banks may only be looking at losses to the tune of Rs 500 crore each, they would be wary of taking on another NPA on their books, especially a high profile one like Dabhol.

The total asset value of the project was estimated at Rs 10,000 crore at the time of the settlement, of which around Rs 2,500-3,000 crore is the value of the LNG terminal including the regassification plant.

But the LNG terminal is only around 50 per cent complete and the cost of completion has escalated from the initial estimate of Rs 500 crore to Rs 1,000 crore, said banking sources.

And the question of who will foot the bill for the power plant's revival is hanging fire as the FIs have refused to infuse more money into the project.

While the petroleum ministry is keen on hiving off the LNG facility to an LNG operator, such as Petronet LNG, the ministry of power is opposed to the move.

Mukesh Ambani's Reliance Industries is also said to be in the race for the plant. The financial institutions (FIs) have already refused to invest any further in the plant, pointing out that already the debt equity ratio for the project stands at 6:1, against the 3:1 norm for power projects.

The combined exposure of the five FIs "" ICICI Bank, IDBI, SBI, Canara Bank and IFCI ""is close to Rs 9,600 crore.

The debt component includes the current exposure of the FIs to Dabhol and the long-term bonds backed by government guarantee that was used to buy out the foreign lenders.