Britain-based investment bank N M Rothschild, the financial adviser appointed by the consortium of domestic lenders to Dabhol Power Company, has recommended against restarting the 750 mw first phase of the project.

Tractabel, the technical consultant to the project, had put the cost of reviving the first phase at $15 million.

Confirming the development, an institutional source said: "Yes, the restarting of Phase-I has been put off. Rothschild has recommended against it. Now the plan is to go for a complete solution and not any piecemeal arrangement." Delhi-based Punj Lloyd has been maintaining the plant since it was mothballed in May 2001.

The decision to defer the restart of Phase-I is significant because foreign lenders to the project have been demanding this.

"Every stakeholder in the company, both equity holders and lenders, is now pushing for a total solution. Since the Overseas Private Investment Corporation is also pushing for a comprehensive solution, there is hope that an asset sale will be concluded," said a source.

Besides being a lender, OPIC offered political insurance cover to the promoters and foreign lenders to the project.

It is understood that OPIC has offered to buy out the debt of other foreign lenders at a steep discount to arrive at a faster solution. However, this could not be confirmed.

The exposure of foreign lenders to the project is around $480 million. The team of foreign lenders includes ABN Amro Bank, Credit Suisse First Boston, ANZ Investment Bank, Citibank and OPIC.

The Indian lenders have a collective exposure of around Rs 5,850 crore (Rs 58.50 billion). Of this, Rs 3,350 crore (Rs 33.50 billion) is funded exposure and the rest is in the form of guarantees.

Indian lenders have also been pushing for a sale of Enron's 65 per cent stake in the company.

If that is done, it will be easier for them to sell the assets of the company as bidders are not interested in going for an equity buyout fearing huge litigation.

General Electric and Bechtel hold a 10 per cent stake each in the beleaguered project, while the Maharashtra State Electricity Board holds 15 per cent in it.