The Enron Saga
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Introduction
In 1996, Rebecca Mark, CEO, Enron Corporation, managed to wrest the controversial Dabhol Power Company (DPC) from the jaws of death. Five years later (2001), the survival of DPC was at stake. Both DPC and the Government of Maharashtra (GoM) have been accused of corruption and economic insanity. With the controversy regarding the price of power still raging and the latest payments crisis that the Maharashtra State Electricity Board (MSEB) faced, both Enron and GoM were desperately looking for a solution. The MSEB was not able to lift even the first phase supply fully. It was caught in a vicious circle with high fuel prices leading to low off take of Dabhol power into the grid. This in turn caused the unit capacity cost to rise. |
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In October 2000, the price of Dabhol power touched
Rs. 7.09 per kWh, due to the high price of fuel and the worsening
exchange rate. In January 2001, responding to Business World's query on
the state government's stand, Padmasinh Patil, energy minister, GoM,
said, "We will set up a review committee shortly. There are complex
issues to work out".
Analysts felt that the possibility of Enron selling out or invoking
penal clauses in its contractual agreement with MSEB, to exit could not
be ruled out.
In Quest of Power
In June 1992, a team of officials of the Government of India (GoI) toured the
USA with the aim of inviting power producers in the USA to invest in India.
Prior to this, the government drew up a list of projects in which the private
sector could participate. In addition to the coal based projects, (Refer Exhibit
II) there were two or three gas-based projects in the list. The Enron
Corporation showed interest in setting up a power station in India based on the
import of Liquefied Natural Gas (LNG).
Enron was one of the world's leading power companies and figured in the list of
the 500 largest corporations in the USA. In 1993, Enron's total sales stood at
US$ 7.1 billion (Rs. 22,000 crore) (1 crore = 10 million). At the time of coming
to India , Enron's experience in building and running power stations was limited
to a few stations in the US and the Philippines. (Capacities ranging from 28,
105 and 110 MW stations in the Philippines and a 110 MW station in Puerto Rico,
to 149 to 450 MW plants in the USA). In India, the size of the proposed station
would be 2500 MW.
On 15 June 1992, a team of officials from Enron Corporation arrived in New
Delhi. On 18 and 19 June, the team visited over half a dozen potential sites in
Maharashtra and on 20 June 1992, the MSEB signed a Memorandum of Understanding
(MoU) with Enron. The MoU specified that the MSEB would buy electricity and/or
capacity from Enron, which would build, own and operate (but not transfer) a
plant of about 2000-2400 MW capacity. The power station would be built near
Dabhol in the Ratnagiri district, about 300 km south of Mumbai. The MoU also
specified that the MSEB agreed that there was a need to set up a 2000 MW plant
to be run on LNG. The "electrical power purchase contract" would be a contract
for 20 years and would be structured to achieve a price of US $ 0.073/kWh (Rs.
2.34 per unit at the then prevailing exchange rates)." At the price quoted by
Enron for a unit, MSEB would be paying a sum of US $ 1300 million (Rs. 400
crores) every year for the total capacity of 2000 MW. The total payments for 20
years would be around 35 billion US dollars.
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