THE DABHOL

POWER PROJECT
- Case Study
Group:- 2
Aditya Ranjan (4A)
Gaurav Gupta (20A)
Minakshi (39A)
Rohit Chandra (57A)
Introduction
 Dabhol Power Project - considered as one of the MOST CONTROVERSIAL
projects undertaken in India with the help of foreign investment, after the
economic liberalization of the early 90’s
 Promoted by Enron Corp, USA
 Envisioned as 2 phases (1st of 695MW and 2nd of 1320MW) in Maharashtra
 Mired in controversy, right from inception to closure
 ‘Victim’ of political one-upmanship
 Finally shut down in 2001.

Enron Development Corporation (EDC)

 It was a energy sector participant in UK, Argentina, Philippines, Columbia, India

and China.
 It was seeking opportunities to create solutions for complex energy solutions
ranging from fuel supply to natural gas processing and power generation.
 All the projects were project financed and had long termed contracts and price
was agreed upon in advance.
 EDC significant accomplishment was first phase of two phase power project in
Dabhol, its partners in the project were General Electric and Bechtel
Chronology of Enron In India
Enron's involvement in India was marked by a series of efforts, negotiations, and controversies. Here is a
chronological overview of key events related to Enron's activities in India:

•1993: Enron signs a memorandum of understanding (MOU) with the Maharashtra State Electricity Board (MSEB) to
build the Dabhol Power Project, a large gas-based power plant.
•1995: The Dabhol Power Project construction begins, with Enron as the lead developer. The project is expected to be
one of the largest foreign investments in India at the time.
•1996: Enron secures a Power Purchase Agreement (PPA) with the MSEB, outlining the terms and conditions for the
purchase of electricity generated by the Dabhol plant.
•1997: Construction delays and cost overruns plague the Dabhol project. The project's cost escalates significantly.
•2001: Enron formally inaugurates the Dabhol Power Plant. However, disputes over tariffs, pricing, and contractual
issues with the Indian government and the MSEB intensify. The MSEB stops payments to Enron due to ongoing
disputes.
•July 2001: Enron files for bankruptcy in the United States, becoming one of the largest corporate bankruptcies in
history up to that point. This event further complicates the Dabhol project's future.
•November 2001: The Indian government terminates the power purchase agreement with Enron, citing various
issues, including contractual violations.
•2005: The Indian government takes over the Dabhol Power Project, and the plant is eventually sold to a consortium
led by the National Thermal Power Corporation (NTPC).
•2006: The restructured Dabhol Power Project begins operations under the ownership of NTPC, with a significantly
reduced capacity compared to its original design.
•2007: The project is renamed the Ratnagiri Gas and Power Private Limited (RGPPL), and it continues to face
operational and financial challenges.
•2015: The RGPPL faces financial difficulties and operational constraints, struggling to generate sufficient power to
meet demand.
•2020s: The Dabhol Power Project (RGPPL) continues to operate with a reduced capacity, and its future remains
ENRON ENTRY STRATEGY
WHY DABHOL ??
• State board was profitable, and this reduced the revenue risk - the state board
could pay Enron for power generated.
• A large demand for power existed in the state.
• Maharashtra already generated close to 10,000MW (12% of India’s generation
capacity)
• Location was close to a port making it easy to transport fuel for the power
plant.
• Maharashtra was one of India’s more developed states – institutional risks
were comparatively lesser.

IN DABHOL
• IAS officer in charge held talks with Enron.
• Enron officials spoke to MSEB who were open to entering into an agreement.
• Enron proposed a phased 2000 MW LNG plant. MSEB agreed to this.
• Phased plan was drawn out to first test the concept, and then to develop the
complete facility: 695 MW was to be developed in Phase 1,1320 MW was to
be developed in Phase 2
Failure of Dabhol Power Project - FACTORS
Cost Overruns: The project was originally estimated to cost around $2.5 billion, but the actual
costs escalated significantly, reaching an estimated $3.6 billion.
Political and Regulatory Issues: The Dabhol Power Project was plagued by political and
regulatory problems right from the beginning.
Environmental Concerns: The project faced opposition from environmental groups and local
communities who were concerned about the environmental impact of the power plant.
Contractual Disputes: Disagreements over the terms of the power purchase agreements, which
dictated the price at which the power generated by the plant would be sold to the Maharashtra
State Electricity Board (MSEB), led to protracted legal battles and delays.
Financial Instability: The financial stability of the project was compromised due to the escalating
costs, disputes, and delays. Enron, the lead developer, faced financial difficulties globally, and this
impacted its ability to support the Dabhol project financially.
Public Outcry: Public outcry and media scrutiny further complicated the project's prospects.
Government Intervention: In 2001, the Indian government terminated the power purchase
agreement and took over the Dabhol Power Project. This was a significant blow to the project's
backers and led to extensive legal battles.
International Arbitration: Enron and other investors initiated international arbitration
proceedings against the Indian government seeking compensation for their losses. These legal
battles continued for years.
Key Learning
•Clarity in Contracts and Agreements: Ambiguities and disputes in contracts can lead to costly
legal battles and project delays.
•Political Stability: Frequent changes in regulations and political disputes can disrupt project
timelines and investor confidence.
•Risk Assessment: A comprehensive risk assessment can help investors anticipate challenges
and plan accordingly.
•Due Diligence: Understanding the local context is vital for project success.
•Transparency and Accountability: Promote transparency and accountability in project
implementation.
•Community Engagement:Public opposition can lead to project delays and reputational damage.
•Financial Viability: Escalating costs can lead to financial instability and project failure.
•Legal Dispute Resolution: Lengthy legal battles can be financially draining for all parties
involved.
•Adaptability: Be prepared to adapt to changing circumstances.
•Government Partnerships: Building positive relationships with government stakeholders can
facilitate smoother project execution.
•Reputation Management: Protect and manage your company's reputation.
•Sustainability and Environmental Compliance: Adhering to environmental standards is not only
responsible but also helps prevent legal and operational issues.
•Stakeholder Communication: Maintain open and transparent communication with all project
stakeholders, including investors, government officials, local communities, and the public.