Domestic lenders sort out Dabhol financial strategy

The financing plan of Ratnagiri Power and Gas Company (RPCG) has come to settlement with the Industrial Development Bank of India (IDBI), ICICI Bank, State Bank of India (SBI) and Canara Bank coming together once again to lend Rs 6,000- 7,000 crore.

RPCG is the special purpose vehicle (SPV) floated jointly by National Thermal Power Corporation (NTPC) and Gas Authority of India Ltd (Gail) to acquire the idle Dabhol Power Company (DPC) assets from the high court and then run the plant.

The process of revival of DPC will begin with RPGC acquiring the DPC assets from the high court receiver. The DPC assets are in the possession of the court receiver, as the Indian lenders had filed petitions to block legal actions by Enron Corp and the foreign lenders. The amount received by the court receiver will be used to settle DPC's dues to Indian lenders and others.

The Indian lenders will essentially get back their old money and lock themselves in with a new commitment. The lenders have also agreed to a longer repayment period of 20-25 years for the loan to be given to RPGC, banking sources said. RPCG will use the funds to acquire the DPC assets from these lenders.

RPGC has already cleared the dues of the foreign lenders from the Rs 1,200 crore investment made by Life Insurance Corporation (LIC) in the government-guaranteed bonds and Rs 800 crore lent by a consortium of banks led by Punjab National Bank (PNB). The loan was syndicated by ICICI Bank.

As per the revival proposal, the total cost of the 2,184 MW power project plus liquefied natural gas (LNG) storage and regassification facility works out to about Rs 10,660 crore. The total cost includes Rs 7,700 crore for the power project.

The exact amount that the four lenders will lend to RPGC will depend on the price to be paid for the DPC assets, which are lying unused since 2001 following a dispute between the original promoter Enron and the sole customer Maharashtra State Electricity Board (MSEB).

The cost of the power plant is expected to be lowered from that considered in the revival package as the rise in the cost of LNG has put a question mark on the project viability with electricity selling price at Rs 2.30 per unit. The price of electricity was decided taking into consideration LNG price at $3.65 per MMBTU.

But the price of LNG has shot up much higher than $4 per MMBTU making the pricing unviable. The revived project cost is Rs 1,100 crore higher than a similar capacity greenfield would cost. Indian lenders have thus far avoided take a haircut on the principal amount of Rs 5,500 crore they lent to DPC.