The funds raised from the sell-out of power stake will be used by the company to contribute as the promoters contribution to the total bailout package.

At present, Prime Hazira, an overseas corporate body (OCB) owned by Prashant Ruia, is having a majority 49 per cent stake in the company while Essar Oil is having another nine per cent stake.

Cash-starved Essar Steel has also entered into an export securitisation deal with Thyssen of Germany to raise around $ 300 million by issuing floating rate notes (FRNs). The export receivable for the next three years have been locked into this deal which will help the company to tide over the current financial crisis.

The financialinstitutions, led by IDBI, on its part, have already sent a proposal to the finance ministry, clearing a mega package to salvage the steel companies. The companies include, Essar Steel, Rajinder Steel and Ispat Industries of the Mittals. IDBI chairman G P Gupta has already made it clear to the finance ministry that a bailout package to steel companies will depend on strict financial discipline on the part of the promoters, close control over end-use of funds and tight norms for financing.

The buyers of Essar Power stake, officials say, could be the Indian mutual funds or those companies which are interested in investing in infrastructure projects. This include Infrastructure Development Finance Company and IL&FS. The price at which Essar Power shares would be sold would be determined by DLJ who are specialising in infrastructure projects around the world.

Essar Power is currently operating a 550 mw power plant in Hazira, feeding the Essar Steel plant and Gujarat State Electricity Board (GSEB). The companyhas signed an attractive power purchase agreement (PPA) with the GSEB which gives it guaranteed returns.