DPC, foreign lenders in legal tussle

Domestic lenders to Enron Corp's $2.9 billion Dabhol power plant are considering applying to a local court for a stay on arbitration proceedings begun by foreign lenders, who want to exit the stalled project, said an official with a domestic lender.

"We are looking at that (stay application), but it's a complex issue. We have to see whether there has been a violation of the inter-creditor agreement," the senior official at one of the domestic lending institutions said.

Nearly a dozen foreign lenders to Enron's Indian unit, Dabhol Power Co, began arbitration proceedings against the domestic lenders in a London court last week to recover their loans, after failure to agree on a plan for the plant's future.

"We have decided to get more legal advice from our lawyers and will be meeting again, probably next Monday," added the domestic institution official, who declined to be identified.

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The foreign creditors are seeking to recover $339 million in loans extended to the first phase of the project at Dabhol, 250 km south of Bombay. Total loans from overseas creditors amount to nearly $600 million.

The project has been idle since June 2001 when Enron, which owns 65 percent of the venture, shut it down after its sole buyer state-owned Maharashtra State Electricity Board fell $240 million behind in payments.

But local lenders, who hold the bulk of the project's $1.9 billion debt, plan to resist the foreign creditors' moves to enforce the takeover of the project by MSEB as they expect to recover their money by restarting the plant.

Foreign lenders are opposed to any restructuring.