The government has mandated the State Bank of India, Life Insurance Corporation, IDBI and ICICI Bank to issue guaranteed bonds in order to generate funds required to re-start the Dabhol power project.
According to the government and the lenders to the project, an estimated Rs 5,500 crore (Rs 55 billion) is required up front for settling foreign shareholders' claims and the project up and running.
The restart of Phase I of the 2,184 MW facility, completion of Phase II and setting up the gas facility are estimated to cost around Rs 950 crore (Rs 9.50 billion).
The finance ministry brass will meet representatives of LIC, SBI, ICICI Bank and IDBI on Thursday to discuss the restart of the project.
Sources said that of the overall government guarantee of Rs 3,054 crore (Rs 30.54 billion) that has been sought, Rs 1,400 crore (Rs 14 billion) would be used for arriving at a settlement with the overseas lenders for a debt buyout.
The guarantees are to help lenders raise loans with 10-year tenures at an interest rate of 7.75 per cent.
Banks will also be required to extend fresh loans of Rs 2,951 crore (Rs 29.51 billion) to be repaid over 13 years at an interest rate of 9 per cent.
The government intends to rope in Infrastructure Development Finance Company, LIC, Power Finance Corporation and the Rural Electrification Corporation for raising the debt.
The existing Rs 3,565 crore (Rs 35.65 billion) debt extended by Indian lenders is to be continued for 13 years at 9 per cent.
The lenders will also be asked to convert debt amounting to Rs 781 crore (Rs 7.81 billion) into equity, and Gail India and National Thermal Power Corporation will be required to chip in with equity investment of Rs 1,198 crore (Rs 11.98 billion) to operate and complete the project through a special purpose vehicle.
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