Sources said Marathon is looking at doubling Essar Power's capacity to 1,000 mw. The naphtha-fired power plant is expected to be eventually converted into a LNG-fired plant. Marathon Power Company has huge interests in oil and gas. It has gas fields in Russia, and has LNG supply interests in Japan. An LNG handling terminal may be set up at Hazira in the due course.

Nesler said Marathon has agreed to sell power to Essar Steel at a concessional rate for a period of 20 years. The original power purchase agreement provides for supply of 215 mw of power to EssarSteel at a concessional price for 20 years.

He said Marathon was confident of getting the approval of financial institutions and the Gujarat State Electricity Board for the takeover of Essar Power. The issues with the electricity board are expected to be sorted out only after the general elections.

Marathon is believed to have initiated talks with financial institutions for waiver of penal interest on overdue loans. Marathon has also sought a cut in interest rate on existing loans on claims of better credit worthiness. Essar Power's interest overdues as on December 31, 1998, stood at Rs 101.80 crore while overdue lease instalments stood at Rs 23.90 crore. Overdues on the original loan amount are estimated to be around Rs 55 crore.

Marathon is buying the entire 100 per cent equity stake from Essar group companies. Marathon and Essar group signed the final takeover agreement for Essar Power on Tuesday. Marathon is to make the payment to Essar within 90 days of the signing of the agreement.

Marathon isalso taking up all the liabilities which are estimated at over Rs 1500 crore. IDBI leads the consortium of lenders with a rupee exposure of Rs 150 crore and foreign currency loans worth Rs 57.67 crore. It has also given guarantee for external commercial borrowings to the tune of Rs 115 crore. IFCI has an exposure of over Rs 225 crore in the project.