MSEB chairman Yashwant Bhave told The Financial Express on Friday that it has recently communicated this to the Dabhol Power Company.

Incidentally, DPC has acceded to MSEB's stand and conveyed its no objection for this arrangement.

"The MSEB which had picked up 30 per cent equity in the first phase (740-mw) will go in for a 30 per cent stake after the completion of DPC's second phase by the end of 2001," he said.

Mr Bhave said the MSEB would have to shell out nearly Rs 650 crore for picking up 30 per cent equity at this juncture. "Instead, we have decided to utilise these funds for systems improvement which is the need of the hour," he added.

As per the equity structure of the first phase, Enron held 50 per cent equity, 10 per cent each by Bechtel and GE and 30 per cent by the MSEB. The MSEB had coughed up nearly Rs 750 crore to take the 30 per cent equity.

"Had the MSEB decided to pick up 30 per cent equity at this point of time, it will have to bear the construction risk and provide construction support. Simultaneously, the MSEB would have to give a performance guarantee through the payment of letter of credit," a senior MSEB official said.

However, he hastened to add that with MSEB's decision to defer its equity decision, it would not have to bear these risks and make various payments as expected by the lenders for this project.

Moreover, the MSEB as a 30 per cent equity-holder would have to bear indemnity as the Dabhol project is being implemented by the non-recourse funding route. "It is a cautious decision in a bid to avoid all these additional risks, especially when the MSEB is sailing through rough weather," an official added.

The MSEB official said that in view of its decision, Enron would have to look for other equity partners basically to "consolidate its balance sheet." According to him, Enron can increase its equity by 15 per cent by offering it to some partner as its balance sheet does not permit huge debt.

Meanwhile, DPC sources confirmed Enron's move to divest 15 per cent to some partner and thereby increase its equity portion to 65 per cent.

The total foreign debt for phase-II is pegged at $1,082.4 million, taking the debt equity ratio to 70:30. The foreign debt portion was raised mainly from Exim Bank of Japan and MITI.

Enron has also managed to procure about $90.8 million from OND of Belgium and had raised about $557 million in commercial loans from ABN Amro, Citibank, Bank of America and ANZ Grindlays.