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DPC lenders meet to decide seizure

Lenders to Enron Corp's $2.9-billion power project in India began a two-day meeting on Monday to decide whether to seize the asset.

Nearly 30 financial institutions lent $1.9 billion to build the 2,184 MW gas-fired power plant and adjacent LPG facility located 250 km south of Mumbai.

"We want to brief all the lenders and then take a collective decision by Tuesday," said a senior official of the Industrial Development Bank of India, which heads the creditors' committee.

The Dabhol power project is bankrupt Enron's largest asset in Asia and one of its most valuable properties still on the block.

Should the lenders seize the asset, Enron could lose the ability to influence the price received and how the proceeds are distributed.

Houston-based Enron, which in December became the largest US corporation ever to file for bankruptcy court protection, has seen its legal and financial standing in disposing of the Indian plant already greatly weakened in recent weeks.

Last month the Bombay high court granted a request by Indian creditors to appoint a receiver to ensure the plant is properly maintained until the facility is sold. It also barred the plant from becoming part of bankruptcy proceedings overseen by a New York court.

The Indian court took the action after a holding company through which Enron owns a 65 per cent stake in the plant filed for bankruptcy protection in a New York court. By doing so Enron sought to get a US court to assert a right to oversee the sale process.

GE and Bechtel Corp, a privately held US contractor, each own 10 per cent stakes in the project, and the Maharashtra State Electricity Board the remaining 15 per cent.

The 740 MW first phase of the Dabhol power plant started operating in May 1999. The 1,444 MW second phase was nearly complete when construction was halted last June after its sole customer, a nearly bankrupt local utility, fell $240 million behind in payments.

In recent months the plant, located on the Arabian Sea coast, has begun to rust in the salty sea air due to inadequate maintenance.

CREDITORS

Among the more than 20 foreign lenders to the project are Citibank, ABN AMRO Bank, Bank of America and multilateral agencies including the US government-run Overseas Private Investment Corporation.

Apart from IDBI, Indian lenders include State Bank of India and New York Stock Exchange-listed ICICI Ltd.

Speaking after the receiver took control of the plant last Tuesday, IDBI chief P P Vora told Reuters that seizure of Enron's Indian assets would be "the next logical step".

IDBI officials have also indicated that if the assets were seized, the process of selling the plant, the largest private direct investment ever in India, might need to be restarted.

That is because in January lenders invited bids for the 85 per cent foreign equity holding. By seizing the asset, the lenders would now be selling the plant itself.

Seven companies have expressed interest in bidding for the plant. The potential multinational bidders include British Gas, Royal Dutch/Shell and French utility Gaz de France.

The Indian companies in the race are Reliance Industries Ltd, BSES Ltd, Tata Power Co and Gas Authority of India Ltd.

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