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June 21, 2001
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Money > Business Headlines > Report June 21, 2001 |
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Indian lenders ready to infuse $200 million for DPC phase IIBS Banking Editor Indian lenders to the controversial $3-billion Dabhol Power Company have decided to go on the offensive and force the company to complete phase II of the project. Three Indian lenders-Industrial Development Bank of India, ICICI and State Bank of India-are prepared to pump in fresh loans, even if the foreign lenders are against it, to complete the project. Indian lenders will discuss the issue with their global counterparts through teleconferencing over the next few days. If 66 per cent of the lenders support this strategy, they can compel DPC to restart work on the project, 97 per cent of which is complete. If DPC is unwilling to bite the bullet, lenders can invoke the equity ownership clause and take over the project since the shares are pledged to them. "The current situation does not warrant that. However, the lenders are seriously thinking in terms of taking control of the project and forcing the company to complete it," said a source familiar with the development. According to Stone and Webster, the lenders' engineer, the completion of project would require infusion of $400 million. Lenders are willing to shoulder 50 per cent of the cost while the rest will be borne by the promoter in the form of equity infusion. According to sources, construction engineer Bechtel which terminated the contract sourced machinery from Japan and J-Exim -- which has $210 million worth of exposure in phase II of the project -- and is likely to invoke the accelerable guarantee clause. This will force the Indian lenders to take a hit immediately. They want to go on the offensive to prevent the development. The domestic lenders are also keen on completion of the project, as this is the best possible option before them, as chalked out by Stone and Webster. The lenders' engineer has projected the cost implications of four possible scenarios. The cost of project completion is pegged at $400 million, while the cost of termination of the project is around $520 million ($400 million plus $120 million for demobilisation and remobilisation). The third option-suspending the contract-will cost around $460 million ($400 million plus $60 million for remobilisation). Finally, appointment of third party contractors to complete the project which may prove very expensive in future as the guarantee offered by the existing contractors will not be applicable in case of any fault with the project. Powered by YOU MAY ALSO WANT TO READ:
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