The deadline for striking the deal - which was to expire on Thursday - has been given another lease of life till June 27 next year.

The agreement with the US company is subject to certain conditions which are yet to be met. Announcing the decision to extend the deadline, an Essar release said this will enable the new generation power company to complete the conditions stated in the MoU.

``In order to provide sufficient time to all parties, it has been mutually decided both by Essar and Marathon to extend the validity of this by 200 days,'' said the company release.

One of the crucial conditions yet to be met is the permission by the Gujarat Electricity Board (GEB) for continuation of the present power purchase agreements with the electricity board and the Essar Steel, one of the group companies. Essar Power supplies 215 MW power to the steel venture of the company. The state government had allowed this because both the steel and the power company belong to the same group.

Since Ruias wanted continuation of the existing arrangement (with the steel outfit) even after the change of the ownership of the power company, they had sought the government's approval for the same. The government is yet to respond.

Secondly, Marathon which had proposed restructuring of the entire debt profile of the power company by reducing the interest rates and extending the maturity profile of the debt - which in turn would reduce the cost of the tariff - has not yet been cleared by the financial institutions.The US company has made a series of presentations to institutions seeking a reduction in interest cost on Essar Power's Rs 1,550-crore outstanding loans, and changing the debt profile as well.

Marathon has sought a 4 per cent reduction in interest rates from 19 per cent to around 15 per cent and extension of the loans period from seven to nine years to 12 to 14 years. This is likely to bring down the tariff by 8 paise per unit and saving of about Rs 20 crore for GEB.

On the no-objection certificate for the continuation of the sale of power to Essar Steel, Gujarat government officials said discussion can only be initiated if the power company puts forward a concrete comprehensive plan for the proposed sell off. Clarification from the government is required because after the change of ownership the supply of power to the steel company may be perceived as ``third party sale'' which is not allowed by the state. Essar Power is jointly promoted by Prime Hazira (Mauritius-based holding company of the group which has a 49 per cent stake), Essar Steel and Essar Oil (which hold 42 per cent and 9 per cent respectively). Essar Power has an equity base of Rs 523 crore.