The Indian financial institutions (FIs) led by the Industrial Bank of India (IDBI) have fixed the reserve price of the $3 billion Dabhol Power Company at $700 million.
At a meeting in Singapore last week with the two prospective bidders -- BSES and Tata Power Company --for the controversial 2,184 MW power project, IDBI chairman P.P. Vora reportedly took a hard line and told them in no uncertain terms that they should be prepared to put in at least $700 million for the project.
BSES and Tata Power have evinced interest in acquiring an 85 per cent stake in DPC (65 per cent of Enron Corporation of the US and 10 per cent each of Bechtel Enterprises and General Electric's equity).
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"Technically, no bid has been called for. But for all practical purposes, the reserve price has been fixed at $700 million as the IDBI chairman made it clear to the BSES and Tata Power brass that DPC would not be sold cheaper than this," an institutional source said. Both the companies seem to have accepted the IDBI stand on the project's price as they are planning to start due diligence of the project, after signing a confidentiality agreement with DPC.
The FIs have taken a proactive role in scouting for a white knight for DPC because they would end up sinking hefty sums in the venture. The total exposure (both funded and non-funded) of the Indian banks and financial institutions to DPC is about Rs 6,100 crore -- about 70 per cent of the debt component of the project built on a 70:30 debt: equity ratio. IDBI has the maximum exposure (around Rs 2,300 crore), followed by the State Bank of India (Rs 1,800 crore) and ICICI (Rs 1,700 crore). Besides, the Industrial Finance Corporation of India (IFCI) and Canara Bank also have exposure to the project.
The Singapore meeting focused on completing Phase-II of the project and the sale of the shareholding oh Enron, Bechtel and General Electric to either of the prospective new buyers, BSES and Tata Power.
DPC has mothballed phase I of the project (740 MW) some time back. Phase-II of the project, 90 per cent of which has been completed, includes a LNG processing facility of about 5 million tonne per annum.