Pursuing a policy of economic liberalization by the Indian government to open up the electricity sector to foreign investment, a senior Indian delegation invited Enron, along with other international investors to participate in the country's sector reform. As a result, the Power Purchase Agreement (PPA) for the Dhabol Power Project was signed in 1993 for a $2.8 billion combined-cycle 2,000 megawatt LNG power plant in Maharashtra, India's third largest state. Under the renegotiated PPA in 1995, Enron, GE and Bechtel, through their 8-1-1 joint-venture Dhabol Power Corporation (DPC), signed a take or pay off-take agreement to sell all the electricity to Maharashtra State Electricity Board (MSEB) for 20 years. The MSEB PPA is counter-guaranteed by the state and federal governments.
Since the Dhabol project went through various iterations, this paper will use the original structure as a basis for analysis.
BUSINESS | CONSTRUCTION OBLIGATIONS | PRIVATE FUNDING | SERVICE DELIVERY | SOURCE OF REVENUE |
BUSINESS - New: The project involves the construction of a power plant facility on a Greenfield basis by the project company and assumes no previous or existing business or customers.
CONSTRUCTION OBLIGATIONS - Build: The project company, Dhabol Power Company (DPC), assumes significant risk in association with the construction of a new power plant; these involve inherent risks during the construction of a major infrastructure project, including geological and design risk, cost overruns, delays etc.
PRIVATE FUNDING - Finance: The project entitles significant contribution from the consortium in the form of equity and diverse sources of financing including commercial banks, export credit agencies (ECAs).
SERVICE DELIVERY - Bulk: Project Company DPC is responsible for delivering services directly to a sole offtaker, in this case public entity Maharashtra State Electricity Board (MSEB), and does assume additional responsibility for customer service
SOURCE OF REVENUE - Fee: Since revenue stream for the project originates from a sole offtaker, in this case public entity Maharashtra State Electricity Board (MSEB), and the project company does not assume responsibility for customer service.