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In the name of Allah the most

Merciful & Beneficent

The Dabhol Power Project
Case Analysis

A ProTeam Presentation…


Dr. Sikandar Khan

Ans Ali Ashraf
Muhamasd Waqas Khan
Ali Ashiq Kirmani
Mazhar Javed
Junaid Ilyas
Inam Ul Haq
Salman Ahmad
Mehvish Ishtiaq
Feasibility Study
(Generation of ideas)

(Initial screening)

(Is the idea prima facie promising?)


(Was the project worthwhile?)


Dabhol power company was promoted in March 1993.

100% foreign owned private company incorporated in India.
By Enron corp USA, Bechtel Enterprises Inc. USA (constructing the plant),
and General Electric Co. USA (selling turbines).
The power generated by the plant will be sold to Maharashtra State Electricity
Board (MSEB).
The cost was estimated at US$ 2.8 billion
The project is 2184 MW
Project was initiated in 1992 and took
nine years to commence operation.
The plant closed in June 2001 due to a
payment and contract dispute between the
Maharashtra state government and owners.
The new elected government led to renegotiation of tariff rates that reduced

the profitability of the private firm.

However, when a new govt was reelected, the condition of the pre-existing
agreement was revised, resulting in the private sector consortium – Dabhol
power corporation DPC) stopping the project.
Shareholding Pattern


Timeline of the Project
(Phase 1 begins, change of govt.
in Mah; project scrapped)
(G.O.M, Enron, Bechtel, GE sign

co neg
(PPA signed) ph nstru otiat
res ase ctio ion;

(phase 1 becomes operational)

um 1 no
es f

Running at 1850MW/B.E/14% ROI


(Indian receivers took

control of DPC)

b egin
Re-named Ratnagiri gas and
(Enron files for bankruptcy; (MS fault)
power /Started Oprations
DPC shuts down) to d
Details of the Power Plant

Total capacity – 2,015 MW

Originally estimated cost of the plant - $ 2.8 billion
PPA Details

Agreement for 20 years.

Implemented on BOO basis

(Build, Own, Operate).

MSEB guaranteed to buy

90% of power produced.

MSEB to receive 30% of the DPC profits


MSEB to bear any increase in fuel price.

Reasons for Non-Performance

 By early 2002, Enron was variously termed ‘radioactive’,

 Maharashtra ordered the project to be halted because of
lack of transparency, alleged padded costs and
environmental hazards. But by then Enron had invested
$300 million.
 The congress government in Maharashtra was defeated in
the state polls in March 1995 and the new govt. of BJP
and Shiv Sena came into power.
 A committee led by deputy
chief minister recommended
scrapping of the project on
Aug 3, 1995.
Other Reasons for Closure

 Failure of GOI – it refused to commit the resources to

solve the problems raised through the project’s failure.

 Failure of GOM – govt. of Maharashtra was the sole

purchaser of power under PPA and
a 15% equity holder in the project.

 It utterly failed to participate

in the long workout efforts.

 Lack of competitive bidding (transparent procurement

 No EIA (environmental impact assessment) was
carried out.
 One-sided MOU signed in favor of DPC (World
(when sought by central govt.)

 It felt that the project was not ‘economically viable’.

 Project did not satisfy the test of least cost power.
 It was too large for the power demands of
 Power tariffs higher than compared
to other independent power
projects in the country.
 Agreement was treated as
Dabhol Today

Current generation 1,850 MW at almost full capacity.

5% power will go to Goa, Daman and Diu after full capacity(1940MW)
is achieved

Gas agreement with Reliance from KG Basin for 8.5mmcmd of gas

Selling price Rs. 4.34/unit almost double than other 4000MW plant at
lest than Rs. 2 a unit.

2009-2010 year of breakeven, Started earning ROI of 14%

Looking forward for expansion of 2000MW in couple of years

Looking forward for the commencement of LNG terminal in 2011


 Based on the analysis, the appropriate return to

equity holders should not be much greater than
the cost of foreign debt given the PPA and the
counter guarantee by Government of India.
 Payments by MSEB as per
the PPA has been guaranteed
by Govt. of Maharashtra and
counter guaranteed by Govt.
of India.
 Premium for equity appears excessive.