The Enron Saga

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Excerpts

In India the power sector was dominated by Central and State government owned organizations. In most of the cases, any State Electricity Board (SEB) was the sole generator, transmittor and distributor of power. Power was generated by Central Utilities such as NTPC, NHPC, Nuclear Power Corporation, Damodar Valley Corporation and NEEPCO; State Electricity Boards which were state-owned utilities; licensees such as BSES and CESC and Independent Power Projects (IPPs). Transmission and distribution was mostly in the hand of SEBs with the sole exception of Orissa where power distribution was in the hands of the private sector. In 2000, India's power generation capacity stood at around 96600MW (Approx. 478 billion units).3 The major portion of the capacity was set up by SEBs (58%). This was followed by centrally controlled plants which contributed 34%. IPPs started contributing to installed capacity only as recently as 1996....

or or PayPal (7 USD)

The MoU between Enron and MSEB was signed prior to the examination of the terms and conditions and implication of the project. Among the parameters that should have been examined were the capital cost of the plant (on which the price of electricity depends), the type of fuel to be used, the location of the plant etc.

The project generated much controversy in Maharashtra. Of the two main opposition parties (the BJP and Shiv Sena) , the BJP was in the forefront of the opposition to the project on a number of grounds. Their primary contention was that the deal indicated corruption at the highest level. In January 1995, elections to the Maharashtra state assembly were announced. Enron was made a key issue in the elections. Gopinath Munde, leader of the BJP, visited the Enron site and promised to throw "the project in the Arabian Sea". Business Line and Frontline carried long and detailed articles on the PPA, which had been kept secret up till then......

The MSEB's inability to pay DPC was rapidly emerging as a threat to the viability of phase II of the project which involved a generating capacity of 1, 400 MW and an LNG terminal of 5 million tons.There was an increasing possibility that the dispute over phase I might end up in international arbitration, if MSEB failed to pay up and the state government refused to bail out the ailing MSEB. The PPA had provisions for arbitration in case a dispute could not be resolved through negotiations......

Exhibit I: Chronology of Events
Exhibit II: Cogentrix Power Project