Assuming that the measures for

mitigating operational risks that

underpinned the Dabhol power
projectwere a problem, discuss how
Enron may have demonstrated "credible
commitment to the Dabhol power
The Dabhol Power Company (DPC) formed to operate the plant was 80% owned by Enron along with GE (10%) and Bechtel
project.
(10%).The total equity investment done by the 3 foreign companies
was USD 276 million.

Q2

Enron agreed to invest a sum of over USD 3.1 billion in India in a matter of 3 days.
Two months after signing the MoU, Enron submitted detailed implementation proposals to Indias Foreign Investment
Promotion Board, and on its recommendation, split the project into two separate phases.
With completion of Phase II of Dabhol project, it would run on Qatar sourced LNG, where Enron had extensive interest.
To proceed with the Dabhol project, Enron needed to secure more than 150 federaland state level clearances. They had to deal
with various land and legal issues.
Enron persevered to educate the Indian public about the benefits of the project by running full page advertisements in leading
newspapers dailies

Q3
Suggest approaches to manage
risks in an unstable political and
institutional environment
associated with nonrecourse/limited
recourse
ENRON could have
been transparent in communicating the terms and conditions
to MSEB .
finance.

All the Terms and conditions should have been thoroughly examined by MSEB
before getting into a contract involving Foreign investment.
Instead of foreign currency denomination of tariff payments, DPC could have
allowed MSEB to pay in local currency i.e INR so that the rate will turn out to be
low for the consumers and the foreign exchange risk will be minimized.
It could have included local investors and diverse political parties and make
them stake holders so that incase of a change in government ,any risks related
to policy decisions could be mitigated.
ENRON structured the deal in their favor which was later identified by CEA &
World Bank.They could have made the deal beneficial to both the parties.
In order to avoid such risks, project should have been audited by an independent
auditing agency involving risk managers and financial agreement experts so that
any future event related to political instability doesnt hamper the project.

Suggest approaches to manage

risks in an unstable political and
institutional environment
associated with nonrecourse/limited
recourse
The Shareholding
distribution should have a sizeable representation from the
local nationalized company to ensure the interests of both the parties.
finance.

While engaging large projects for national benefit, payment guarantees should
be ensured along with a competitive bidding process involving multiple
companies interested in the project.

Thank you