Enron sews up funds for Dabhol’s 2nd phase

MUMBAI, MAY 6: Enron International, the wholly-owned subsidiary of Enron Corp of the US, on Thursday announced the financial closure of t...

MUMBAI, MAY 6: Enron International, the wholly-owned subsidiary of Enron Corp of the US, on Thursday announced the financial closure of the Dabhol Power Company’s (DPC) $1.87 billion phase – II for the construction of a 1,624 mw power plant. The financial package with five loans totalling $ 1.41 billion and equity investments of $452 million is the first instance of liquified natural gas (LNG) terminal and associated 1624 mw power plant financing in the country, said a company statement.

Commercial operations of the second phase will start in late 2001. "Financial closure of the second phase realises Enron’s goal of bringing natural gas to the west coast of India. We are proud to have Dabhol as Enron’s flagship in India and look forward to participating in future integrated energy opportunities in the country," Enron International’s chairman and chief executive officer, Joseph W Sutton, said.

The primary construction contractors for the second phase are affiliates of Enron, Bechtel, and General Electric.DPC’s second phase will use natural gas contracted from Oman and Abu Dhabi. In phase-2, Enron is to hold 80 per cent while Bechtel Enterprises Holdings Plc, and GE Capital Structured Finance group are to hold 10 per cent each.

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Maharashtra State Electricity Board (MSEB) has the option to acquire 30 per cent from Enron’s share of 80 per cent. Of the total debt of $ 1.41 billion, rupee loans equivalent to $333 million have been secured from a consortium led by the Industrial Development Bank of India with ICICI Ltd, State Bank of India (SBI), Industrial Finance Corporation of India (IFCI) and Canara Bank as participants.

On the foreign currency side, $497 million has been arranged by global co-ordinators SBI, ABN Amro Bank, Credit Suisse First Boston, ANZ Investment Bank and Citibank. Canara Bank, Bank of America, Development Bank of Singapore and Credit Lyonnais acted as a senior lead arrangers for this facility while the Overseas Private Investment Corporation (OPIC) provided $60 million in project financeloans.

Fuji Bank acted as the agent for a $433 million export credit loan with the Japanese Export Credit Agency (ECA) providing $258 million of this amount, and commercial banks chipped in with $175 million. Commercial banks in this tranche have been insured by the Japanese Ministry of International Trade and Industry (Miti).

Additionally, export credits of $90.8 million was contracted by way of a syndicated loan. This facility is insured by Office Nationale du Ducroire, Belgium (OND). ABN Amro Bank acted as the agent for commercial banks extending the facility. Both the $433 million, and $90.8 million export credits are backed by guarantees from domestic financial institutions.

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The DPC transaction has many firsts to its credit. It marks the first ever LNG terminal financing in the country. Multiple suppliers of LNG to DPC include 20-year contracts with Oman LNG Company to buy 1.6 million tonnes of LNG per annum and 480,000 tonnes more from Abu Dhabi Gas Liquification (ADGAS). These transactions do notinvolve a direct government guarantee or government purchaser of any sort. LNG suppliers will depend on the credit of DPC and MSEB. The foreign currency debt of slightly over $1 billion is the largest ever tranche of this genre, and DPC financing — with a combined phase 1 and phase 2 capacity of 2,184 Mw — makes it the largest of a gas-powered independent power purchaser.