Dabhol Power Project

4 April 2017

India opens its power sector to private foreign investors. Enron begins investigating opportunities in the Indian power sector. Enron executives pitch their ideas to the Indian power secretary, who is in the United States to encourage foreign participation in the Indian power sector.

Enron and General Electric sign a memorandum of understanding with the Maharashtra State Electricity Board (MSEB) to build the Dabhol project.

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The operating entity is the Dabhol Power Company, a joint venture. Enron is the majority owner, while General Electric and Bechtel each own 10% shares. The parties negotiate the terms of the deal. Enron obtains the necessary approvals for the project from the Indian government. The Dabhol Power Company and MSEB sign the power purchase agreement. Indian political parties opposing the ruling Congress party campaign on an antiEnron platform.

The opposition alliance wins the election in Maharashtra in March, and in May the new government appoints a committee of state ministers (the Munde Committee) to review the Dabhol project. The Munde Committee issues a sharply critical report that recommends scrapping the Dabhol project. The state government acts on this advice. Enron enters arbitration and seeks $300 million in compensation. The state government files suit in September to void the agreement, alleging fraud and misrepresentation. U. S. officials, including Energy Secretary Hazel O’Leary, warn India that its action will discourage foreign investment.

Rebecca Mark, Chairman of Enron International, meets with Bal Thackeray, the top power in one of the ruling parties. Afterwards, negotiations resume between Enron and the state. The state announces it will accept a revised agreement. The state and the Dabhol Power Company finalize the terms of the revised agreement. Legal challenges to the project by Indian groups continue, but are eventually dismissed. Enron obtains approval from the Indian government to expand the Dabhol liquified natural gas terminal to allow it to process 5 million metric tons annually.

Dabhol Phase I (740 megawatts) begins generating power. The state of Maharashtra stops paying for Dabhol as of its $22 million December 2000 bill. The state subsequently seeks to cancel the power purchase agreement. Enron begins arbitration proceedings. Secretary of State Colin Powell raises Enron’s problems regarding Dabhol in a discussion with India’s foreign minister. The Dabhol Power Company ceases operation of the Phase I portion of the plant and halts construction on the 90% completed Phase II portion (1,444 megawatts).

The Bush Administration releases the White House Energy Plan, which contains a provision that benefits Enron’s India operations. Vice President Cheney raises Dabhol in a meeting with Sonia Gandhi, the president of India’s opposition Congress Party. 2 Nov. 1995 Jan. 1996 Feb. 1996 1996-1997 1997 May 1999 Jan. 2001 April 2001 April 2001 May-June 2001 May 2001 June 2001 July 2001 The National Security Council leads a “Dabhol working group” with Administration officials, including Treasury, State, the Export-Import Bank, and OPIC officials. Christina B.

Rocca, Assistant Secretary of State, meets with Indian officials on Dabhol. Alan Larson, Undersecretary of State for Economic, Business and Agricultural Affairs, raises Dabhol with the Indian foreign minister and the Indian national security advisor. Talking points are prepared for President Bush to discuss Dabhol in a meeting with Indian Prime Minister Vajpayee on November 9. However, the topic is vetoed the day before the meeting on November 8, which is the same day that Enron discloses a stunning $586 million in previously unreported losses. July 2001 Oct. 2001 Nov. 2001

From the project’s inception, Enron strongly promoted Dabhol as a key element of its international strategy. 11 In 1996, Enron’s CEO and Chairman, Ken Lay, said, “This project serves as a cornerstone of Enron’s activities in India. We pursue additional projects in the country, we look forward to a long-term relationship with both the government and the people of India. ”12 As early as 1992, Thomas White, the president of Enron Power, stated: “In the future, Enron’s business will be 10% domestic and 90% overseas. ” 13 The Dabhol project was easily Enron’s most significant overseas endeavor in its size, cost, and political visibility.

According to Harvard Business School, Enron Development Corporation: The Dabhol Power Project in Maharashtra, India (A), 9-10 (revised July 6, 1998). Human Rights Watch, The Enron Corporation: Corporate Complicity in Human Rights Violations, 12-25 (January 1999). 9 8 7 Id. at 114; Financing for Indian Plant Secured, Houston Chronicle (Jan. 17, 1995). Enron, Enron International – Our Presence in India (2000) (available online at: http://www. ei. enron. com/presence/projects/india. html). Power Politics: Enron’s Plant in India Was Dead; This Month, It Will Go On, Wall Street Journal (Feb. , 1999) (“Enron was eager to get a jump on the potentially mammoth [Indian] market”). Enron Power Co Welcomes India Court Dismissal of Lawsuit, Asia Pulse (Dec. 3, 1996); see also India Draws Private Firms to Power Sector, Asian Wall Street Journal (Jan. 29, 1993) (“‘We’re very, very excited about it,’ says Joe Sutton, the Enron official overseeing the project. ‘We’re forging the way forward. This will be the cornerstone of other agreements’”). International Power Enron Power Lays Out International Strategy; Lands Philippine Project, Independent Power Report (July 17, 1992). 13 12 11 10 4

Enron, the 2,184 megawatt Dabhol plant is the largest gas-fired power plant in the world. 14 Dabhol also was important for other Enron plans. Dabhol was intended to be a major customer for liquified natural gas supplies from a project that Enron had entered into with the Qatar government. 15 As of 2000, Enron had 20-year contracts for 2. 1 million tons/year of liquified natural gas with two Middle Eastern suppliers. 16 A substantial element of the Dabhol project was construction of a modern port facility that could unload large tankers and a facility for regasification of the imported liquified natural gas. 7 Enron saw this liquified natural gas terminal as the hub of a future Enron gas network in India. 18 As of 2000, Enron was developing a natural gas pipeline project to carry the regasified liquid natural gas to Dabhol and customers north of Dabhol. 19 In addition, in January 1999,

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