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In 2001, enron embroiled in long running dispute with various levels of govt in India. Dabhol Power Project, a 2184 mw power project in Maharashtra. In 2001, Enron had five main businesses including. Enron wholesale services Enron energy services Enron transportation services By 2001, Enron was involved in energy infrastructure projects across the globe. Most of its Energy related businesses were in developing countries Revenues were tied with US $ Incentive payments were tied to the NPV of the projects
In 1991 Congress(I) won elections and P.V. Narsimha Rao became PM Introduced free market reforms in July 1991 and opened power industry to private FDI Ruling party in Maharashtra was Congress (I) with Sharad Pawar as CM (1990-95) In 1995, Maharashtra state election campaign BJP pledged masses to review the Dabhol project BJP and its won elections in the state and formed Govt with Manohar Joshi as CM and formed Munde committe In 1996, Rao resigned as party president after being charged with bribery In 1998, BJP formed a 13 party coalition govt with A. B. Vajpayee BJP govt this time took a moderate stance towards freemarket liberalization
Construction Begins
On march 2, 1995, Enron completed the financing for phase-1 Construction started soon New state govt decided to put the project under review
Renegotiation
On cancellation of project, Enron filed for arbitration and claimed $300 millions in damages In September, Rebecca offered renegotiations Renegotiations resulted into settlement of the issue and costs were reduced New contract was signed in April and construction was resumed in December 96
New problem
In Maharashtra state election campaign in 1999, Congress party promised if elected to halt DPCs second phase and renegotiate power tariff In 2000, MSEB sold 50% stake in DPC to Enron MSEB was purchasing 33% -60% output
Enrons Response
Enron invoked central govt guarantee to recover $17 million owed by MSEB Construction on phase 2, 95% completed was stopped. In September, CEO of Enron proposed selling the DPC equity for approximately &1.2 billion & the purchase of offshore lenders debt for $1.1 billion, for a total cost of 2.3 billion.
Conclusions