Stakeholders: Identify all the major stakeholders in the DABHOL power project. What are the intended benefits and costs of this project for the stake holders? Analyze the roles, responsibilities and reward structure of the stake holders. Based on the case study do you foresee a need to change the reward structure?
Enron, Bechtel Enterprises, and General Electric—through offshore subsidiaries—formed Dabhol Power Company to build the first phase of a major power plant in Maharastra state in India. Later, part of the equity was sold to the Maharastra State Electricity Board. Enron is also a stakeholder as fuel supplier and as the operator of the plant. Bechtel’s construction arm has engineering, procurement, and construction stakes;
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MSEB
❖ Take-or-pay contract – MSEB to buy a minimum amount of electricity at a plant load factor of 90% as per 20yr contract irrespective of amount of energy used.
❖ MSEB to bear any increase in fuel price.
❖ MSEB to pay DPC $ 220 million per year.
❖ MSEB was required to build transmission lines from the power station to its power grid.
❖ MSEB to receive 30% profits of DPC annually.
State Government
❖ Guarantee from the state government in the form of Letter of credit for credit support also waived sovereign immunity.
❖ Main recipient of electricity due to the paucity of energy in the state.
❖ Provide land for construction of the power station, power, communications, water, and approach roads during construction.
Central Government
❖ Central government provided counter-indemnities.
❖ Escrow account over some of MSEB payments.
Oman Gas Company
❖ Entered into a contract with the DPC to supply gas.
Business Plan viability and Execution: Identify and discuss the original business plan of this project. Given the data of this case, was the DABHOL power project a feasible and worthwhile business proposition? In view of the business plan, critically comment on the project execution strategy.
Dabhol Power Company was a unlimited liability special purpose company (SPC) incorporated to
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