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Enron controversy

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  • 1. ENRON AND DHABOL POWER COMPANY
  • 2. Nirmal Kandth V ( 71 ) Nikhil Pariath ( 72 ) Jai Patel ( 73 ) Stephanos Paul ( 74 ) Pishraody Ranjit ( 75 ) Pravin Dhas ( 76 ) Prianca Pereira( 77 ) Priyanka Luharuka ( 78) Ramya H V( 79 ) Pentakota Rao( 80 )
  • 3. • Govt. invites private sector 1991 • Enron invited to India by Govt. of India • MSEB signs MOU with Enron 1992 • FIPB grants approval • PPA negotiations start • Central electricity authority clears project1993 • Govt. of Maharashtra signs guarantee • Govt. of India signs guarantee • Split into two phases1994
  • 4. • Phase 1 financing ($920 million)completed • BJP-Shiv sena comes to power • MUNDE committee recommends cancelation1995 • New deal announced • London tribunal agrees to terminate proceedings against Govt. of Maharashtra1996 • Phase 1 begins operation & Phase 2 financing of $1.87 billion secured • Congress(I) wins state elections1999 • Rebecca Mark leaves Enron • Govt. official announces contract should be renegotiated due to high power cost2000
  • 5. • Feb-Enron invokes Indian govt. guarantee to collect $17 million overdue bills • April- Issues a notice of arbitration to Indian govt. to recover $21.9 million; MSEB agrees to pay $28.6 million • May-Govt. sets up Godbole committee; Enron rejects payment of $29.1 million saying it was submitted “under protest” • Sep-Letter to India PM from Ken Lay 2001-The year of Twist and Tales
  • 6. Pest Analysis Industry: rivalry Amongst existing competitors (SEB’s,NTPC ETC.) Economic: What was at stake while the project was being rolled out? Political: Who supported and who were the forces against it? Social: How were the people affected amidst the turmoil? Technical: Did it have the required specifications? Bargaining power of buyers Bargaining power of suppliers Threat of Entrants: Cogentrix of US; Daewoo of Korea etc. Threat of substitutes: State run coal based electricity boards
  • 7. Political factors: • Eagerness of Indian govt. • Defeat of Sharad pawar • BJP-Shiv sena govt. stiff resistance of the project • Munde committee Economic aspects: • Tariff rate too high(Rs 2.40 /unit; other PSU Rs 2.15/unit) • In 2001, power from Dabhol was four times more expensive than that from domestic • Enron was looking for an escape route
  • 8. Social factors: • Local people opposed the Project • Numerous opposition organizations were formed • Enron used local thugs to attack opposition activists • In 1999 ‘Human Rights Watch’ reported violation of human rights Technical aspect: • Built for use of LNG but used Naphtha in phase 1 • DPC was unable to ramp up to peak levels within the contracted time • This carried a whopping penalty of Rs 4 billion on each occasion • MSEB established that Enron failed on one important criterion - the inability to deliver to technical specifications
  • 9. Present scenario-2009 • Renamed as Ratnagiri Gas and Power Pvt. Ltd.(RGPPL) • Started operation again in 2006 but was closed on 4 July 2006 due to lack of Naphtha supply • Qatar based Rasgas Ltd. supplied LNG in April 2007 • Plant operational a now with 900MW LNG fired capacity
  • 10. Subsequent developments in power sector since 2001 • Electricity act 2003: An Act to consolidate the laws…for taking measures conducive to development of electricity industry, promoting competition therein, protecting interests of consumers and supply of electricity to all areas • National electricity policy,2005: A significant portion (Say 15% of the new capacity) should be committed to trading or other forms of competitive power markets • Draft tariff policy,2005: “All the power needs to be procured competitively”
  • 11. Sector-wise Installed Capacity in %age State- 52.5 Central- 34 Private- 13.5 Break-up of Energy Sectors Total Thermal- 64.6 Hydro-24.7 Nuclear- 2.9 Renewable Energy Resources- 7.7
  • 12. Major players in Power Sector Today Public Sector • NTPC • NHEPC • SEB • NPC Domestic Private Sector • TATA Power • RPG Group • Reliance Energy International Private Sector • China Light and Power • Marubeni Corporation
  • 13. Current Tariff Rates Units (KW) Charge ( Rs ) 30 Rs 1.85 50-70 Rs 2.90 >100 Rs 3.60 Fixed Charges Rs 20
  • 14. Bibliography • Tony Allison, Enron's eight-year power struggle in India , January 18, 2001. August 21, 2009 <http://www.atimes.com/reports/CA13Ai01.html> • Five Forces Guide. The Internet And The Business Environment, Stefan cel Mare University of Suceava, July 20, 2008. July 22, 2009 < http://www.scribd.com/doc/377404/Five-Forces-guide> • Dabhol, Wikimedia Foundation, Inc. August 20, 2009. August 20, 2009. <http://en.wikipedia.org/wiki/Electricity_sector_in_India>