DABHOL PROJECT

Enron Development Corporation.

One of the worlds largest natural gas-fired power
generation project.
Located at Ratnagiri in Maharashtra.
Agreement with Maharashtra State Electricity
Board(MSEB).
Two phases: 2,015MW
1,320MW





Attractiveness of market, Western Style
legal code, strength of democracy.

Selection of LNG as fuel instead of natural gas
and coal.

Qatari government partnership.

Choose of Gulf source to supply gas.

Development of modern port facility and
regassification facility.


Feb 1992
Advertisement for power plant near Delhi
Enron investigates, initiates discussions with World Bank & Union
Power Secy
May 1992
Power Secy encourages foreign participation in power sector
Enron willing to be a pioneer, asks for concessions in return
June 1992
Site shifted from Delhi to Maharashtra, 2-phase project
Phase 1 (695MW) to use fuel sourced locally
Phase 2 (1320MW) would include regasification, converting Phase 1
to LNG and raising additional capital

Chronology of Enrons Efforts in India
June-Oct
1992
Enron & MSEB sign MOU. Cap on power price to be at
Rs.2.40/kWh
Drafting of legal documents that defined risk sharing relationships
of owners, builders, operators and purchaser.
Enron presents the proposal to FIPB with Rajgopals support
Dec 1992
FIPB approves project but World bank report tags the project as
an expensive alternative to existing ones.
Mark protests, sites inexperience of World Bank with natural gas
plants and stresses on environmental benefits
Veiled warning from Mark , questions seriousness of economic
reforms in India.
Heavy lobbying by Enron. Officials pay courtesy & lobbying visits
to World Bank, Power Secy, MSEB Chairman, Chief Secretary of
Govt. of Maharashtra

February 1993
Project gains pace on arrival of Sharad Pawar as State CM.
GOMs five central concerns GOM guarantees, capital cost
comparisons, rates of return, escalation factor, and exchange rate
variation
GOM objects to projected 26.52% return to equity holders, Enron
threatens to withdraw
MSEB keen to have equity stake in the project
After negotiations, Enron lowers ROR to 25.22% and considers giving
MSEB 10% permanent equity ownership.
According to Enron, this would translate to 17.20% after considering
US taxes.
Others issues resolved gradually through negotiations
May 1993
Power Purchase Agreement defines relationship
between MSEB and DPC
Dispute resolution through international arbitration
if settlement not reached under Indian
jurisprudence.
Arbitration proceedings would be conducted in
London according to UNCITRAL rules

December 1993
The DPC and the MSEB sign the Power Purchase
Agreement on December 8, 1993.
Enrons Experience in Various
countries

1.United Kingdom

Place- Teesside

Capacity-1875 MW

EDCS Investment-$150 million

Year of Commercial Operation- 1993

Partnership with-ICI Chemicals





2.China

Place-Hainan Island

Capacity-150 MW

EDCS Investment-$135 million

Year of Commercial Operation Late 1995




3. Dominican Republic

Capacity-185 MW

EDCS Investment-$200 million

Year of Commercial Operation- Mid 1995

No. of years of Power Purchase Agreement- 20 Years




4. Turkey

Place-Marmara

Capacity-478 MW

EDCS Investment-$545 million

Year of Commercial Operation- Fourth quarter of 1997

Partnership with- State Power Utility


5a). Indonesia

Place- East Java

Capacity-500 MW

EDCS Investment-$520 million

Year of Commercial Operation-Mid 1997





5b). Indonesia

Place- East Kalimantan

Capacity-136 MW

EDCS Investment-$138 million

Year of Commercial Operation-Early 1998

Reasons for Failure
Bhartuya Janata Party (BJP) defeats the Congress and comes
to power in 1995.
BJO makes a lot of nationalistic noise. Their leaders said that
India should not be dicated by foregin power giants
A report on DPC is made.
Lack of Transparency in the agreement.
Some clearances were ignored due to the fast-track nature of
the project.
Cost of the project was greater than comparable projects. (4.49
Cr per MW vs. 3.6Cr per MW.
High Tariffs.
Environmental concerns raised by World Bank not addressed.
Project is cancelled in August 1995.
Ethical Dimensions
Allegations of bribes (courtesy visits to top officials)

Apathy towards the World Bank report

Imposition of High RoR

Imposition of high per unit rate

Apathy towards local sentiments