dhabhol power project

8/7/2019 Dhabhol Power Project

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Company

LOGO

The Dabhol Power ProjectCase Analysis

In the name of Allah the most

Merciful & Beneficent


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A ProTeam Presentation

Dr. Sikandar Khan

Ans Ali Ashraf

Muhamasd Waqas Khan

Ali Ashiq Kirmani

to

Mazhar JavedJunaid Ilyas

Inam Ul Haq

Salman Ahmad

by

Mehvish Ishtiaq


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Feasibility Study

(Is the idea prima facie promising?)

(Y

ES)

(Was the project worthwhile?)

(YES)

(Generation of ideas)

(Initial screening)


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Introduction

Dabhol power company was promoted in March 1993.100% foreign owned private company incorporated in India.By Enron corp USA, Bechtel Enterprises Inc. USA (constructing the plant),

and General Electric Co. USA (selling turbines).The power generated by the plant will be sold to Maharashtra State Electricity

Board (MSEB).

The cost was estimated at US$ 2.8 billionThe project is 2184 MWProject was initiated in 1992 and took

nine years to commence operation.The plant closed in June 2001 due to a

payment and contract dispute between the

Maharashtra state government and owners.The new elected government led to renegotiation of tariff rates that reduced

the profitability of the private firm.However, when a new govt was reelected, the condition of the pre-existing

agreement was revised, resulting in the private sector consortium Dabhol

power corporation DPC) stopping the project.


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Shareholding Pattern

50%

10%


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Timeline of the Project

(G.O.M, Enron, Bechtel, GE signMOU)

(PPA signed)

(Phase 1 begins, change of govt.

in Mah; project scrapped)

(renegotiation;

construction

of

phase1

resumes)

(pha

se1becomes

opera

tion

al)

(MSEB

begins

todefault)(Enron files for bankruptcy;DPC shuts down)

(Indian receivers tookcontrol of DPC)

Re-named Ratnagiri gas andpower /Started Oprations

2010 Running at 1850MW/B.E/14% ROI


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Details of the Power Plant

Total capacity 2,015 MWOriginally estimated cost of the plant - $ 2.8 billion


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PPA Details

Agreement for 20 years.

Implemented on BOO basis(Build, Own, Operate).

MSEB guaranteed to buy

90% of power produced.

MSEB to receive 30% of the DPC profitsannually.

MSEB to bear any increase in fuel price.


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Reasons for Non-Performance

By early 2002, Enron was variously termed radioactive,contaminated.

Maharashtra ordered the project to be halted because oflack of transparency, alleged padded costs andenvironmental hazards. But by then Enron had invested$300 million.

The congress government in Maharashtra was defeated inthe state polls in March 1995 and the new govt. of BJPand Shiv Sena came into power.

A committee led by deputychief minister recommended

scrapping of the project on

Aug 3, 1995.


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Other Reasons for Closure

Failure of GOI it refused to commit the resources tosolve the problems raised through the projects failure.

Failure of GOM govt. of Maharashtra was the sole

purchaser of power under PPA anda 15% equity holder in the project.

It utterly failed to participate

in the long workout efforts.


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Controversies

Lack of competitive bidding (transparent procurementmethod)

No EIA (environmental impact assessment) wascarried out.

One-sided MOU signed in favor of DPC (Worldbank).


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WORLD BANK TURNED DOWN FINANCING(when sought by central govt.)

It felt that the project was not economically viable. Project did not satisfy the test of least cost power. It was too large for the power demands of

Maharashtra.

Power tariffs higher than comparedto other independent powerprojects in the country.

Agreement was treated as

confidential.


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Dabhol Today

Current generation 1,850 MW at almost full capacity.

5% power will go to Goa, Daman and Diu after full capacity(1940MW)is achieved

Gas agreement with Reliance from KG Basin for 8.5mmcmd of gas

Selling price Rs. 4.34/unit almost double than other 4000MW plant atlest than Rs. 2 a unit.

2009-2010 year of breakeven, Started earning ROI of 14%

Looking forward for expansion of 2000MW in couple of years

Looking forward for the commencement of LNG terminal in 2011


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Findings

Based on the analysis, the appropriate return toequity holders should not be much greater thanthe cost of foreign debt given the PPA and thecounter guarantee by Government of India.

Payments by MSEB as perthe PPA has been guaranteed

by Govt. of Maharashtra and

counter guaranteed by Govt.

of India.Premium for equity appears excessive.


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Thanks

dhabhol power project

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