Indian lenders to the 2,184 megawatt Dabhol power project are set to buy out the over $200 million debt exposure of the US Overseas Private Investment Corporation to the Dabhol Power Company.

The norms for the buy out will be finalised at a two-day meeting of lenders with Opic in Washington beginning on March 7. "The single-point agenda of the meeting is to buy out Opic's exposure," an institutional source said.

Opic, a US government agency, directly lent $140 million and insured another $200 million provided by US banks. The Indian lenders will buy out Opic's exposure at a discount, though the exact discount is not known.

State Bank of India [Get Quote] Managing Director TS Bhattacharya, ICICI [Get Quote] Deputy Managing Director Kalpana Morparia and Industrial Development Bank [Get Quote] of India (IDBI) Executive Director Jitender Balakrishnan will represent the Indian lenders at the Washington meeting.

At a meeting in Singapore in the third week of January 2005, a major roadblock to finding a solution to restarting the Dabhol Power Company's gas-fired power project was cleared. The meeting succeeded in making DPC's 20 foreign lenders, including Opic, agree to sell their $600 million debt at a discount.

The operational 694 Mw Phase I of the project was shut in May 2001 following a dispute with its sole customer, the Maharashtra State Electricity Board.

The Indian lenders have lent $1.3 billion to the power project. The foreign lenders include Bank of America, Citicorp and ABN Amro.

The Indian lenders plan to set up a special purpose non-banking finance company, Gas and Power Investment Company (GPIC), for buying the loans of the foreign lenders.