The Maharashtra State Electricity Board (MSEB) is to issue domestic bonds to pay for a 30 per cent stake in the Dabhol power project being built in the state by US company Enron.

The state deputy chief minister, Gopinath Munde, said that the first tranche of $38 million is to be launched immediately, with MSEB to take the option to retain any oversubscription, Reuters reports.

In October, Maharashtra received a $33.8 million loan from the Indian Power Finance Corp. as part of its contribution towards the $2.93 billion Dabhol project. The MSEB has established a special company called the Maharashtra Power Development Corp. to invest in power generating schemes including Dabhol.

Dabhol will have an eventual power generating capacity of 2184 MW. The first phase will generate 740 MW. Currently Enron holds an 80 per cent equity stake in the project, the Bechtel Group holds ten per cent and GE holds ten per cent. However, as part of a deal when the contract for Dabhol was renegotiated, MSEB is to take a major equity stake in the power station.

The Maharashtra bonds will be issued in four types for seven to ten years. JM Financial and Investment Consultancy Services has been appointed sole advisor for the issue, while Canara Bank and the Bank of Maharashtra will be the joint arrangers of the offering. Maharashtra state is providing an unconditional guarantee for the repayment of interest and the principal on the bond series.