Case 1 Dabhol Case Study
Contents
Case Question #1 3
Conclusion 3
Overview: 3
Contractual operational risk management/mitigation arrangements 3
Case Question #2 4
Conclusion 4
More accurate analysis of political risk 4
Involvement of a local partner 5
Better Dealing of MOU & PPA 5
Case Question #3 5
Conclusion 5
Mitigating political risks 5
Mitigating economical risks 6
ENRON: DABHOL POWER PROJECT
Case Question #1
Critically analyze and comment on the contractual operational risk management/mitigation arrangements that underpinned the original Dabhol Power Project.
Conclusion
Overview:
The Electricity Act was amended in March 1992 to provide incentives and a fixed component of 16% rate of return to the investors, following this act a delegation of central government officials visited the USA and UK to woo the foreign investors and this in-turn instigated the confidence of foreign investors. This can be substantiated by several MOUs being signed after the event.
Contractual operational risk management/mitigation arrangements
a. Reduced Financial Risk
Status of “Pioneer Project” Fast track projects: This project was categorized as a fast track project and for such fast projects the central government decided not to follow the standard public tendering process instead it would negotiate with the IPPs for individual projects. The rationale was that government was not in a strong negotiating position and therefore the financial risk to the IPPs had to be reduced to entice them to invest in India.
b. Project Site of your choice
Government’s invitation to visit India and investigate power plant development opportunities – Given a free hand to choose potential site.
c. Response of Central Government
Highly favorable response of Central Government and State Government officials in the Maharashtra State Government to the proposal of Enron stating to build the largest of its kind gas fired power plant.
d. Formal MOU signed
In May 1992 India invited Enron Corp to explore the
Case Question #1 3
Conclusion 3
Overview: 3
Contractual operational risk management/mitigation arrangements 3
Case Question #2 4
Conclusion 4
More accurate analysis of political risk 4
Involvement of a local partner 5
Better Dealing of MOU & PPA 5
Case Question #3 5
Conclusion 5
Mitigating political risks 5
Mitigating economical risks 6
ENRON: DABHOL POWER PROJECT
Case Question #1
Critically analyze and comment on the contractual operational risk management/mitigation arrangements that underpinned the original Dabhol Power Project.
Conclusion
Overview:
The Electricity Act was amended in March 1992 to provide incentives and a fixed component of 16% rate of return to the investors, following this act a delegation of central government officials visited the USA and UK to woo the foreign investors and this in-turn instigated the confidence of foreign investors. This can be substantiated by several MOUs being signed after the event.
Contractual operational risk management/mitigation arrangements
a. Reduced Financial Risk
Status of “Pioneer Project” Fast track projects: This project was categorized as a fast track project and for such fast projects the central government decided not to follow the standard public tendering process instead it would negotiate with the IPPs for individual projects. The rationale was that government was not in a strong negotiating position and therefore the financial risk to the IPPs had to be reduced to entice them to invest in India.
b. Project Site of your choice
Government’s invitation to visit India and investigate power plant development opportunities – Given a free hand to choose potential site.
c. Response of Central Government
Highly favorable response of Central Government and State Government officials in the Maharashtra State Government to the proposal of Enron stating to build the largest of its kind gas fired power plant.
d. Formal MOU signed
In May 1992 India invited Enron Corp to explore the