Evaluate Enron's negotiation strategy with

respect to Dabhol project and its implementation

Group 3:
Akash Bangani 12065
Dipika Bhura 12077
Gaurav Khetan 12082
Neetu Rathod 12118
Rajiv Govindan 12098
 About Dhabol Project
• Deal between DPC and MSEB
• Closed financing in 1995.
• Equity Holders: EPC ($223m), Bechtel ($28m),
GE($28m)
• Total Debt: $643 m
 Negotiation Strategies
• Proposed to be a pioneer and get special
grants from the govt. – could be a risky
proposition
• Obtain Local souring of raw material initially –
gain confidence and support of local suppliers.
• Initial power tariff set to R2.04/KwH.
Renegotiated to Rs. 2.03. The price was
deemed to be high.
 Contd..
• Highlighted the need of economic reforms by the
way of foreign investments.
• Initially proposed an equity rate of return of
26.52%. Was renegotiated to 25.22%. 10 %
permanent stake offered to MSEB.
• Agreed to meet the demand requirement failing
which had to pay a high penalty.
• No local partners hence was looked as a foreign
body who could exploit India
 Contd..
• Political risk analysis missing. Assumed that
the successive governments would stick to the
rules.
• Arranged for funding themselves hence in a
better position to negotiate with the lenders.
Thank You