Enron corporation's power project in India Essay

Enron corporation's power project in India - Essay Example Enron entered into a contract with the Maharashtra Sate Electricity Board (MSEB) by risking its and its allied companies’ stakes in Dabhol Power Project (DPP). The discussions for the project started with the two principal stakeholders from the Indian side, the Indian state of Maharashtra and the other was Maharashtra State Electricity Board (MSEB). The project proposal of building a 2015 megawatt power plant with the investment of US$3 billion was given a green signal initially (Negotiation-project-India, 2010). Enron was not the only principal stakeholder; it was a sort of joint collaboration with the investment of 10% each by General Electric and Bechtel. Sustenance of the project was detriment to the availability of Liquefied Natural Gas to power the plant, which Enron planned to secure from one of its joint venture in Qatar, 1200 miles away from the power plant situated in Dabhol. The project was the largest ever project taken by Enron in India, supposed to produce electr icity in two phases. In the first phase it was planned to produce 695 megawatts from the locally available LNG, while the second phase target was to produce 1320 megawatts through natural gas channeled from Qatar (Negotiation-project-India, 2010).Enron was expecting huge profits from this project for the company investors from the MSEB of Maharashtra. It took just five days to materialize the contract by signing a memorandum of agreement between the MSEB and DPP. (Negotiation-project-India, 2010).... Sustenance of the project was detriment to the availability of Liquefied Natural Gas to power the plant, which Enron planned to secure from one of its joint venture in Qatar, 1200 miles away from the power plant situated in Dabhol. The project was the largest ever project taken by Enron in India, supposed to produce electricity in two phases. In the first phase it was planned to produce 695 megawatts from the locally available LNG, while the second phase target was to produce 1320 megawatts through natural gas channeled from Qatar (Negotiation-project-India, 2010). Enron was expecting huge profits from this project for the company investors from the MSEB of Maharashtra. It took just five days to materialize the contract by signing a memorandum of agreement between the MSEB and DPP, representing Enron of purchasing electricity at the rate of 7.3 US cents per kilowatt hour (Negotiation-project-India, 2010). What went wrong that the project failed? From the very start, it was a mistake made by the management at Enron to invest in a technology-efficient project in India without attempting an analysis of Indian socio-political environment. One thing became clear that the project was cleared without adhering to set legal and corporate procedures, essential for such a huge global venture. It also became evident that Enron adopted the unethical path in securing the contract. It was totally in the darkness over the political unsettling environment in India. All its negotiating and renegotiating expertise failed as the MSEB could not pay the bill against the used electricity. Enron had to confront opposition from many fronts; it had to initiate counter-campaigns to create positive conditions in its favor; legal battles also ensued.