Dadri stuck in Ambani power game

Lenders are not willing to carry out an appraisal of the project until the dispute is settled.

The spat between the Ambani brothers has taken a toll on the financial closure of Reliance Energy Ltd's (REL) 3,740-MW Dadri power project.

Lenders are not willing to carry out an appraisal of the Rs 11,000 crore project until Reliance Industries Chairman and Managing Director Mukesh Ambani and Reliance Industries Vice-Chairman and Managing Director Anil Ambani resolve their dispute.

REL has sought a 90:10 debt-equity ratio for the project against the normal 70:30 ratio for funding power projects.

A 90:10 debt-equity ratio will mean a consortium of lenders will have to extend loans of as much as Rs 9,900 crore. REL is implementing the project through a special purpose vehicle, Reliance Energy Generation.

"We are still to take a view on the project. The Ambani brothers have to sort out their differences first. Unless the differences are sorted out, lenders cannot take a view on funding the project," a banker who is one of the proposed lenders to the project said.

A REL spokesman declined to comment on the development saying the company's policy was "not to react to speculation".

Several banks and financial institutions had shown interest in funding the project soon after it was announced, but are now jittery because of the tussle between the brothers over control of the Reliance group.

The banker said, "Promoters (of the Reliance group) have to resolve differences between them" before lenders could work towards financial closure.

Banks will be funding the Dadri project on a non-recourse basis, where lending is secured against the project's assets and the borrower is not personally liable.

REL plans to implement the gas-fired power project in phases, beginning with 1,200 MW. The first phase's debt requirement is about Rs 3,200 crore.

Reliance Energy had first made a presentation to a group of banks in May 2004 and urged bankers to agree to 90:10 debt-equity ratio for the Dadri project. The outbreak of hostilities between the Ambani brothers slammed the brakes on closing a funding deal for the project.