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Foreign banks want to exit Enron India
March 17, 2003 18:49 IST
Foreign lenders to bankrupt Enron Corp's $2.9 billion Dahbol power plant want to pull out from the venture after endless bureaucratic delays to revive the stalled project.
In a letter to finance secretary S Narayan, the offshore banks, led by ABN AMRO Bank, said they would pursue repayment of loans worth nearly $339 million.
"Given the lack of progress over the last 18 months and the extensive costs already incurred by us, we are no longer able to support a restructuring of the project," the banks said in the letter.
"We are therefore seeking repayment of our loans together with all outstanding interest and other sums owing to us."
The letter was dated February 26 and was signed by Flavia Mistry, vice president at ABN AMRO's financial restructuring and recovery group for the Asia Pacific region, on behalf of ANZ Investment Bank, Bank of America Corp, Citigroup Inc's Citibank and Credit Suisse Group unit CSFB. A copy was obtained by Reuters.
"We have decided to secure repayment through pursuit of Dabhol Power Company's tariff claim, termination of the power purchasing agreements and...claims under government of Maharashtra and government of India guarantees," the letter said.
The controversial 2,184 MW Dabhol power plant, Enron's largest Asian asset, has been idle since June 2001. The U.S. energy trader shut it down when its sole customer, the loss making Maharashtra State Electricity Board, fell $240 million behind in payments.
Nearly 30 banks and foreign government-run financial agencies including the US based Overseas Private Investment Corporation, have lent $1.9 billion to build the plant, which is 65 percent owned by Enron.
General Electric Co and privately held Bechtel own 10 percent each, while the remaining 15 percent is held by the MSEB, the provincial utility and sole customer of the power plant.
The Indian lenders are led by the Industrial Development Bank of India, the State Bank of India Ltd and ICICI Bank while the foreign lenders include Citibank, ABN AMRO and Bank of America.
The Bombay High Court in March last year granted a request by the creditors to appoint a receiver to ensure the idle plant is properly maintained. It also barred the plant from becoming part of any US court-supervised bankruptcy proceedings.
Dabhol served a pre-termination notice of the power purchase agreement on the electricity board in April 2001 but did not follow up with a termination six months later, as required, due to the bankruptcy of Enron.
Analysts say a termination of the agreement now could take the spat to international arbitration in London.
The Maharashtra and the Indian governments have guaranteed up to around $600 million of the project's debts.
IDBI, the lead lender, proposed in August that the electricity board should buy power generated from the plant at 2.86 rupees per unit, a proposal shot down by the Maharashtra government - the owner of the board - which termed it as very costly.
The central government in November then decided to allow state-run National Thermal Power Corp, India's largest power utility, to operate the power plant but this is yet to happen."Whilst we welcome such an initiative, the history of the project prevents us from reviewing our decision to pursue our legal rights at this stage," the banks said in the letter.
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