Case 1 Dabhol Case Study
Case Question #1 3
Contractual operational risk management/mitigation arrangements 3
Case Question #2 4
More accurate analysis of political risk 4
Involvement of a local partner 5
Better Dealing of MOU & PPA 5
Case Question #3 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.
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 …show more content…
It should have done a better analysis of the political environment of India and analysed the impact of change in power. The Power Purchasing Agreement between Enron and MSEB was a secret deal and thus it created conflicts among politicians who are elected democratically. The communication and transparency were clearly lacking in this project. Enron should have been more transparent in dealing with the politicians in order to create an environment of confidence.
Involvement of a local partner
Enron was not familiar about the Indian situation. It should have involved a credible local partner in a Joint Venture in order to understand the Indian scenario, bureaucracy and government better.
Better Dealing of MOU & PPA
1. Enron should have mentioned the specific details about the project costs (detailing the Civil costs, mechanical costs, electrical, instrumentation costs with further break up for engineering, procurement and construction) as required by the Indian Law.
2. Enron should have set a competitive pricing for the generation of electricity.
3. Enron should have mentioned in MOU when the 20 year contract would begin and when the electricity supply or payment would commence.
4. Enron to secure all the approvals taken from federal and state approvals.
5. Enron should have negotiated the PPA in such a way that it would supply part of its power supply (say 40%) to MSEB and remaining part to other power deficit states.
6. Considering the forex