Dabhol Power

Project
Group 3
Gajendra Kumar Gupta
Garlapati J Akhileshwar
Nischal Singhal
Shrikarpagam G
 Introduction
Enron Corp aimed to build, own & operate a
power station to provide 2015MW power in Dabhol Enron Corporation
Largest FDI into India and 1st private power  Diversified service provider in
project to have financing in place natural gas industry
2 March 1995 was when financing for DPC was  $9 billion revenue & $453 million
completed (for phase1) net income in 1994
DPC was only one completed out of 8 plants  5 subsiadaries to tap global power
approved requirement growth-

Financing done through debt and equity 1. Enron Operations Corp (EOC)
2. Enron Capital & Trade Resources
(ECT)
Multiple stakeholders and contractors while
constructing and operating the plant 3. Enron Oil & Gas (EOG)
4. Enron Global power & Pipelines
(EPP)
5. Enron Development Corporation
(EDC)
EDC and developing countries

Ongoing projects in 90s

Enron Development Corporation
 Satisfying infrastructure & energy needs
in emerging economies China – construct $135mil 150 MW fast track project;
Operate, fuel management and turnkey construction
 Solutions for energy problems – fuel contractor; 50% EPP ownership interest
supply, natural gas processing & power
generation
Turkey – financing $545mil 478MW gas-fired powered;
 Key components – risk analysis & 50% stake, operator and turnkey contractor
management
1. Creditworthiness
Dominican Republic – completed 1st phase $200mil
2. Political risk 185MW plant; 20-year power purchase agreement
3. Project financing

 Project in India was one of the largest Indonesia – construct $520mil 500MW gas-fired
plant; 20-year purchase agreement , 50% stake,
turnkey contractor & plant operator
 India and its power sector
India and Maharashtra
 920mil population at 2.3% growth/year
 $370 per capita income(1991), widespread
poverty
 Maharashtra 79 mil population (3rd) and 30% of
industrial product (1st)
 Power sector controlled by state govt.
 1st 5-year plan – self sustainability
 Core sectors controlled by govt. till 1992
 IMF 1.8 billion loan exhausted in 1991, need for
reforms (delincensing)
Indian Power sector
 71% thermal(coal) , 26% hydroelectric, 3% nuclear
 NTPC(center owned) -31%, states – 65%, private – 4% only
Issues
 Demand vs supply; 3.1% loss in industrial production
 State Electric Boards (SEB) - inefficient pricing policy,
rural subsidies; $500 million debt; 78% cost recovery
 Inefficient operations with avg. Plant load factor of 56%
 22% transmission and distribution losses
Reform
 Liberalization in '92 – private investment in infrastructure
 2 electricity acts allowing private sector to build &
operate power station and 100% foreign equity allowed
 Potential 16% return on investment for PLF of 68.5%
 2-part tariff – fixed costs and variable costs (cost of fuel)
 Import of equipment & fuel permitted and tariff reduced
 Investment Promotion Cell (IPC) and Foreign Investment
Promotion Board (FIPB) were setup
About the project
Location – Dabhol, Maharashtra
Evolution of project
Natural gas-fired combined cycle
power generation project
Two phase project - 2015 MW (625MW Attractiveness Gulf
Choice of fuel
+ 1320 MW) plant of India agreements
33 month construction period
Western style legal LNG best fuel Lack of reliable
code and contracts source long-term local
Inital purchase agreement of 20 years
supply of gas

LNG train
Contruction of $920 million phase-1 of Use of English
contracts
plant began in 1995 Qatari govt.
partnership for
Costly LNG supply
Strength of
transportation of
democracy
LNG
Limited distance
to gulf and
MSEB as credible Need for reliable modern port
buyer suppliers facilities
 Stakeholder agreements & responsibilities

Dabhol Power Company (DPC) ▪ Construcution and fuel handling

facilities
Bechtel ▪ Financing of the project
EDC General Electric
Enterprises ▪ Managing fuel supply and contracts
•$223 million •$28 million •$28 million ▪ Generating base & peak loads as
equity equity equity per MSEB agreements
•Major •Construction •Construction ▪ Operate with 'good industry
contributor for contractor for contractor for practices' as per local conditions
project the project the project

Lenders
Roles & Responsibilites

Overseas Private Export-import

Bank of America IDBI etc
Investment Corp bank of US
▪ Purchaser of power for the project
• $150 million • $100 million • $95 million • $298 million ▪ Provide land and other basic
facilities for construction
▪ Providing transmission lines to
from power station to grid
Maharashtra State ▪ Capacity payments to DPC as per
Electricity Board (MSEB) PPA agreement
 Even though the project might not have been
completely successful, some impressive solutions
Conclusion found to problems during the project

Issue Solution/Approach
This project was 1st of its kind in India
and encouraged private participation Lack of reliable local Import agreements for LNG with gulf
source of LNG countries
Due to several issues, the control was
taken up by the government Large capital costs Agreements with reliable stakeholders for
The project was exposed to risks & long term profits
issues like
Creditworthiness and Careful analysis of project purchaser &
o Political risk exchange rate variations location and revenues tied to USD

o Social and environmental issues Project economics Financing by multilateral lending

institutions like US Export-import bank;
o Partnership risks PPA for guarenteed revenues
o Economic risks
Political risk Assurance by participation from
o Regulatory issues international/foreign organisations like
Overseas Investment Corporation
The inconsistency of support from the
changing governments was detrimental Power supply deficit of Electricity acts; incentives for private
India investments in power sector; setting up
Enron filed for bancruptcy in 2001 IPC and FIPB to assist foreign investment

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