Sei sulla pagina 1di 14

Group Members

Parameswar Ghoshal
Priyanka Kochar
Pankaj Periwal
Vaishali More

A case study on Dabhol Power Plant

Contents

Background

Scope-Indian Power Sector

Evolution of Dabhol Power Project

Issues and challenges

Benefits for ENRON

Benefits for INDIA/MAHARSHTRA

Entry Strategy for ENRON

Aftermath

Indian Power Sector - Scope

Projected shortage of over 5,800 MW in Maharashtra


only by 2001-2002 and around 50,000 MW
nationwide
Estimate of overall 3.1 % loss in industrial production

Private; 4%
Central Govt.; 31%

State Govt.; 65%

Most SEBs close to insolvency: Average cost recovery


of only 78%
Different Tariffs for Industrial(High) and
Agricultural(very low, waive offs) consumers
High Transmission and Distribution losses

Need for Private Sector


Participation
The public sector alone will find it
difficult to raise sufficient resources
to invest on new power generation
projects for meeting the rapidly
increasing demand for electricity in
the coming years

Dominated by Public
Sector

Huge energy demand outpacing supply

India's Power Generating Capacity

Reforms

Invitations to private sector companies allowing 100% foreign equity

Protection against adverse exchange rate fluctuations

Import of equipment was permitted

Single window clearance mechanism was introduced

Foreign Investment Promotion Board(FIPB) was created to negotiate and approve


investments

Opening up of Indian Power sector for Foreign Investment

Evolution of Dabhol Project


Growth of

Party

Congress

in 8th year plan

Reforms encouraged
private and foreign direct
investment in all industrial
sectors.

MSEB(Maharashtra State
electricity board, a credible
SEB)
Widespread use of English(no
language barrier

Enrons Approach
Enron saw a large opportunity in India
to provide power
To earn profits
Phased plan was drawn out to first test
the concept and then to develop the
complete facility

Contract
2015 MW LNG based power generation
plant at Dabhol
Financing-643$million debt and
279$million equity
Project was planned in two
phases.Splitting of project was done so that
they get started and test Indias Credit
A 20 years power purchase agreement
was signed between MSEB and DPC in DEC
1993
Price tariff Rs 2.40 Rs per kWH

Phase 1 695 MW
Phase 2 1320 MW
Total
2015 MW

Issues and Challenges for Enron

Political instability

Lack of experience(In terms of foreign investments in India)

Fuel wasnt locally available

Local opposition(because of environmental risks, displacing people)

Technical risks

Financial risks

Transparency/corruption related issues

Penalty payments on not meeting the targets

World bank report: labeled Dabhol project as a liability

Potential benefits for Enron

Huge untapped market

Buying guarantee from MSEB

High tariff rates

Shielding from currency fluctuations (MSEB)

First mover advantage

Successful project completion would lead to future growth


opportunities

Potential benefits for India/Maharashtra

Growth of Indian power sector

Development of sectors dependent on


energy(Industry & Transport)

Ability to satisfy growing demand

Huge foreign Investments in India

Local Infrastructure and social development

Opening up to foreign investments in other sectors

Employment generation

Risk factors for India/Maharashtra

High project costs as compared to other similar projects

Liability to pay in case of default

Commitment to purchase 90% of the generated power

Civil unrest

Environmental concerns

No prior FDI experience

Project failure might result in loosing out on future FDI


opportunities

World bank report: Liability on the state

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 Indias generation
capacity)
Location was close to a port making it easy to transport fuel for the power
plant.
Maharashtra was one of Indias more developed states institutional risks
In were
Dabhol
comparatively lesser
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

Bank of America - $150 million

Phase 1

Overseas Pvt. Inv. Corp. - $100


million
IDBI + other Indian banks - $95
million
Exim Bank of USA - $298 million
Debt
funds

Proposed: Distillate fuel


(Diesel) sourced locally;
later switch to LNG
Revised: Naphtha

Debt
repayment
Purchase
contracts

Lenders

Raw
materials

Purchasers

Dabhol Project

Suppliers
Supply
contracts

Output
Equity
funds

Equity
investors

Enron Power Corp. - $223


million (80%) / $182 million
(65%)
Bechtel Inc. - $28 million
(10%)
General Electric - $28 million
(10%)

PPA based on Capacity


Payments and Energy
Payments
Enron - Rs. 2.40/KwH (initial)
Rs. 2.03/KwH
(revised)
Ministerial Committee Rs.
5/KwH (distribution +
inflation accounted)
695 MW (initial)
826 MW (revised)

Returns to
investors

Proposed:
26.52%
Revised: 25.22%

Cost:
Rs. 4.49 crore per MW (overall)
Rs. 3.65 crore per MW (core)
Total cost: $920 million out of $2.8
billion

Phase 2
To be worked out

Debt
funds

LNG

Lenders

Raw
materials

Purchasers

Dabhol Project

Suppliers
Forward Contracts with
Qatar Govt. for LNG

Debt
repayment
Purchase
contracts

Supply
contracts

Output
Equity
funds

Equity
investors

To be worked out

PPA based on Capacity


Payments and Energy
Payments
Enron - Rs. 2.40/KwH (initial)
Rs. 1.86/KwH
(revised)
Ministerial Committee Rs.
5/KwH (distribution +
inflation accounted)
1320 MW (initial)
1624 MW
(revised)

Returns to
investors

Proposed:
26.52%
Revised: 25.22%

Cost:
Rs. 4.49 crore per MW (overall)
Rs. 3.65 crore per MW (core)
Total cost: $1.88 billion out of $2.8
billion

The Aftermath

With the Enron bankruptcy, Enron's stake in DPC was bought out by GE and Bechtel.

In 2005, it was taken over and revived by the RGPPL (Ratnagiri Gas and Power Private Limited),
a company owned by the Government of India

The power plant Phase I which was renamedRatnagiri Gas and Power Pvt. Ltd(RGPPL) started
operation in May 2006, after a hiatus of over 5 years. However, the Dabhol plant ran into
further problems, with RGPPL shutting down the plant on 4 July 2006 due to a lack
ofnaphthasupply. TheQatarbased company RasGas Company Ltd. started supplying LNG to
the plant in April 2007.

The power station had resumed operations at 100% of its installed capacity of 1967 MW in
2010.

The 1,980MW plant had closed down last March, but even when gas becomes available, the
cost of power from the plant will be over Rs 5.50 per unit, which is far higher than other
sources of power for MSEDCL. There is no incentive for MSEDCL to buy this power, since it is
power surplus and is selling power to others.

It seems the project is en route to becoming another non-performing asset (NPA).

Thank You!