PPP FOR

INFRASTRUCTURE
PROJECTS
Case : Dabhol Power Plant
Date : 31st January, 2018

Presented By :
Ajay Jadhav (PT101117)
Rishabh Shah (PT102017)
Saurabh Dugad (PT100917)
Vaibhav Bhavsar (PT100517)
RISK ALLOCATION FRAMEWORK & LACUNAE
Risk Allocation Framework
Type of Risk Description Allocation
Political Risk Change in Govt. Enron
Corrupt Practices of govt authorities MSEB Lacunae Improvement
Central Govt.,
Legal Risk Implementation of Liberalization for foreign investment
MSEB Project Allocation was done
Financial Risk Fiscal Space of Govt. MSEB on the basis of personal Competitive Bidding should be
Investment from Private party-100 % DPC interest of an organization carried out.
Feasibility Risk Check on the background of Concessionnaire MSEB Fast Implementation and
Projection of Demand MSEB signing of MoU
Site Location DPC
Commercial Risk Guarantee of Minimum Power Purchase MSEB No Feasibility analysis by
MSEB Any project should be carried
Technical Risk Technology involved to run the Power plant DPC-
out with proper feasibility study
Insufficient technical know-how of MSEB MSEB and appraisal.
Procurement Risk No Proper competitive biddung MSEB Power Purchase Agreement
Supply Chain management of LNG Enron was one sided
Development of Transport System Enron Corrupt Practices Law Enforcement
Involving Local Distributors on later stage MSEB Lack of technical know how
Construction Risk Delay in the construction activities Enron in MSEB Involving Consultants
Phasewise Construction Enron
Currency Risk
Payments in US Currency MSEB
(Macro Economic)
Tarrif Sustainability Change in Tariff due to change in technology DPC

20-02-2018 PPP FOR INFRASTRUCTURE PROJECTS 2

RISK MANAGEMENT STRATEGIES
Stakeholder Risk Mitigation measure Improvement measures
•Final priceof the power would
depend on US dollar-rupee
exchange rate, oil price levels and
plant load factor
Commercial risk
•CounterGuarantee from GOI that if
MSEB defaulted on payment, it
For would be paid by GOI
Concessionnaire

Lobbying efforts by Enron to obtain

Legal risk
approvals at exceptional speed

Maintaining transparency regarding project

with all parties concerned
Political risk No mitigation measure adopted
Govt. reneging their commitments can be a
risk.
Financial Risk Local Currency Financing
For Public
Sector Proper Demand analysis before project
Commercial risk
implementation

20-02-2018 PPP FOR INFRASTRUCTURE PROJECTS 3

WHY DABHOL PROJECT FAILED ?

There was an absence of Competitive bidding

Only Enron’s concerns addressed in MoU and PPA

Lack of proper stakeholder management

Too fast project implementation without proper financial appraisal and technical analysis and assistance

MSEB’s promise to purchase electricity at plant load factor 90% and at much higher rate than other states

Unfair deal- Only in favour of Enron

20-02-2018 PPP FOR INFRASTRUCTURE PROJECTS 4

ENABLERS TO IMPROVE STRUCTURING & OPERATION

Risk management plan(Methodology, roles and responsibilities, Budgeting, Timing) and mitigation measures

Involving SMEs (Subject matter experts) in project area concerned

Inclusion of competitive bidding, exploring company profile

Foreign company forming consortium with local firm including SOEs

Fuel source to be specified beforehand

Pre-emptive stakeholder management strategies

Structuring contract tenure to match fuel supply requirements with service commitments

20-02-2018 PPP FOR INFRASTRUCTURE PROJECTS 5