The Hindu Business Line : Reliance gas find flares Dabhol lenders

RELIANCE Industries Ltd's (RIL) gas find in the Krishna-Godavari Basin has created a host of new problems for lenders to the Enron-promoted Dabhol Power Company.

According to sources here, the bidders for DPC had lost interest in the gas-handling facility and preferred sourcing the gas from domestic sources, including RIL's KG basin. RIL, which had struck about seven trillion cubic metres of gas, has been aggressively pitching for supply around the country, which includes to fertiliser and power plants. BSES was also among the companies which had expressed interest in the DPC power plant.

DPC has a liquefied natural gas (LNG) storage and re-gasification facility in the vicinity of the power plant equivalent to about five million cubic metres (2.25 million tonnes assuming one cubic metre of LNG equals 0.45 tonnes). The original proposal by Enron was to import LNG from Qatar and re-gasify it at the Dabhol facility for firing its power plant. The actual LNG requirement of the 2,450-MW (Phase I 826 MW+Phase II 1,624 MW) power plant then estimated for operating at 85 per cent plant load factor was estimated at 2.1 million cubic metres (0.95 million tonnes).

The sources said the project promoters had hoped to sell the excess gas to other downstream units. Some of the public sector fertiliser units and power plant in the country had also expressed interest in sourcing the gas from Dabhol. However, the gas finds have completely altered the perception. The sources said, "If this gas is available in the domestic market where is the need to import it in the form of LNG."

The primary reason for excluding the gas-handling facilities is on account of substantial reduction in the fixed costs, which in turn would translate into lower power tariffs. DPC had loaded the fixed costs of the gas-handling facilities on to power tariffs, which was one of the major reasons for high power tariffs from the project. The all-inclusive fixed charge from the project was estimated to be in the region of about 5 cents per kilowatt hour (Rs 2.40 a unit).

Once the gas-handling facilities are excluded, the sources said, the fixed cost component would come down to about 3 cents (about Rs 1.44) a unit. Only the fuel charges need to be paid to the supplier, which was part of the variable cost, the sources added.

However, any project split would have to be approved by the lenders as they have a charge on the physical assets till such time as all the project debt was repaid.

The total project investment amounted close to about $3 billion for both phases, including the gas-handling terminal.

The sources said investment in the gas-handling terminal alone was close to $1 billion. Accordingly, the sources said some of the lenders or the equity holders would have to either take the hit in finding buyers for the project.

Lenders exposure in DPC is a little over $2 billion. Of this, domestic financial institutions and banks alone have an exposure, which include IDBI, ICICI, SBI and Canara Bank equivalent to $429 million directly.

In addition, IDBI has also provided deferred payment guarantees to the US Exim Bank for a $298 million loan to DPC.

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