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    The Enron Saga: Bhat 010 Dang 017 Minj 058

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    Sachin Bajaj
    The Enron Saga documents Enron's failed Dabhol power project in India in the 1990s. Enron signed agreements with Indian state entities to build a large power plant but the project faced issues including high costs, payment defaults, and opposition from new state governments. While Enron exploited weaknesses in India's political and legal systems, other factors contributed to the project's demise, including volatile fuel prices and the state electricity board's lack of negotiation experience. The document outlines lessons for India to negotiate better contracts and ensure projects are technically and financially viable.

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    The Enron Saga: Bhat 010 Dang 017 Minj 058

    Uploaded by

    Sachin Bajaj
    76 views7 pages
    The Enron Saga documents Enron's failed Dabhol power project in India in the 1990s. Enron signed agreements with Indian state entities to build a large power plant but the project faced issues including high costs, payment defaults, and opposition from new state governments. While Enron exploited weaknesses in India's political and legal systems, other factors contributed to the project's demise, including volatile fuel prices and the state electricity board's lack of negotiation experience. The document outlines lessons for India to negotiate better contracts and ensure projects are technically and financially viable.

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    Enron Saga

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    The Enron Saga documents Enron's failed Dabhol power project in India in the 1990s. Enron signed agreements with Indian state entities to build a large power plant but the project faced issues including high costs, payment defaults, and opposition from new state governments. While Enron exploited weaknesses in India's political and legal systems, other factors contributed to the project's demise, including volatile fuel prices and the state electricity board's lack of negotiation experience. The document outlines lessons for India to negotiate better contracts and ensure projects are technically and financially viable.

    Copyright:

    Attribution Non-Commercial (BY-NC)
    Download as PPT, PDF, TXT or read online from Scribd
    Download as ppt, pdf, or txt
    76 views7 pages

    The Enron Saga: Bhat 010 Dang 017 Minj 058

    Uploaded by

    Sachin Bajaj
    The Enron Saga documents Enron's failed Dabhol power project in India in the 1990s. Enron signed agreements with Indian state entities to build a large power plant but the project faced issues including high costs, payment defaults, and opposition from new state governments. While Enron exploited weaknesses in India's political and legal systems, other factors contributed to the project's demise, including volatile fuel prices and the state electricity board's lack of negotiation experience. The document outlines lessons for India to negotiate better contracts and ensure projects are technically and financially viable.

    Copyright:

    Attribution Non-Commercial (BY-NC)
    Download as PPT, PDF, TXT or read online from Scribd
    Download as ppt, pdf, or txt
    of 7

    The Enron Saga

     Bhat 010
     Dang 017
     Minj 058
    Enron

     One of the worlds largest energy companies.


     Headquartered in the USA.
     Also into communications, pulp, paper etc.
     “Americas most innovative company” - Fortune
    The Case
     In May 1992 India invited Enron Corp to explore the possibilities of building a large
    power plant of 2000 MW in Maharashtra and in June 1992 MoU was signed.
     In December 1993 Maharashtra State Electricity Board(MSEB) signed a power
    purchase agreement with Dabhol power corporation(DPC).
     The power plant was planned to be completed in two stages. In 1995 after the
    state elections, the new government scrapped the project, alleging corruption and
    high costs.
     Later, in the same year the project was renegotiated and MSEB’s stake was much
    higher than it had been in the initial contract.
     In May 1999 the first phase of the power plant was ready and operational.
    Maharashtra govt. allies wanted to stop the project because in their opinion the
    power produced was much too expensive, and shortly thereafter there were
    payments defaults to DPC.
     In 2001 the problems continued and in April the board of DPC authorized the
    management to terminate the contract.
    Role played by external
    environment

     In 1992 the government opened up electricity sector for private


    investments through Independent Power Producer (IPP) route.
     US Govt. Support - From the inception of the Dabhol project, Enron
    successfully enlisted the U.S. government in its support.
     Setting power tariff in dollar terms.
     Naphtha, Diesel and Liquefied Natural Gas (LNG) as the fuels for Dabhol
    - linking energy prices to the volatile international prices of oil.
     Weak Indian political & legal environment.
    Lessons learnt - MSEB

     Cautious when accepting binding agreements – fixed payments

    – to build its own substation and transmission lines.


     Techno-economical aspects of the projects like capital cost, type of fuel &
    plant location should have been examined by CEA.
     Financial situation was not evaluated critically.
     Electricity board personnel to be trained in management practices as it
    would have enabled them to negotiate better and also understand the
    nuances of a PPA.
    Options for Enron

     Involving NTPC to pick up controlling stake in DPC which would allow


    them to renegotiate the PPA.
     This would allow Enron to walk away from DPC and exit from the project
    hassle free.
    Cogentrix Case

     Very small company with no international exposure.


     Transfer of project location.
     Requirement of new transmission lines called for additional investment.
     Capital cost of the plant was too high as sighted by the expert committee.
     Did not exploit the weak legal environment of India as compared to Enron.

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