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History of Enron's Dabhol power plant

The board of Dabhol Power Company, 65 per cent owned by Enron Corp, on Wednesday authorised the management to terminate its contract to sell power to Maharashtra.

The decision follows repeated defaults by the Maharashtra State Electricity Board on bills for electricity supplied by Dabhol.

Enron is India's largest foreign investor and is building the country's largest power plant with a total capacity of 2,184 MW.

The first phase of the project with a generating capacity of 740 MW began operating in May 1999. The second phase, which will add 1,444 MW of capacity, is expected to be completed this year.

The board's decision empowers the DPC management to issue a notice of termination any time it chooses.

The following traces the history of the troubled project:

• May-June, 1992: India invites Enron Corp to explore the possibility of building a large power plant in Maharashtra.
• June 20, 1992: Initial memorandum of understanding signed between Enron and Maharashtra government for a plant with capacity of 2000-2,400 MW. The Maharashtra State Electricity Board is expected to pick up a 10 per cent stake.
• Jan 2, 1993: The Foreign Investment Promotion Board clears proposal for a 1,920 MW plant, expandable to 2,550 MW.
• Dec 8, 1993: The power purchase agreement signed between Dabhol Power Company and MSEB for a 2,015 MW project to be implemented in two phases.
• March-June, 1995: Following state elections, a new Maharashtra government, headed by the Shiv Sena, scraps the project, alleging corruption and high costs.
• Nov 1995: Project re-negotiated with a final capacity of 2,184 MW. MSEB's stake is upped to 30 per cent -- 15 per cent in the first phase, and a further 15 per cent upon completion of the project.
• May, 1996: India extends counter-guarantee to the project, under which the federal government promises to cover any defaults by the state utility.
• May, 1999: Phase one of the project with a capacity of 740 MW begins operating.
• June-Oct 2000: Maharashtra government allies demand scrapping the project because of the cost of the power it produces.
• Oct, 2000: MSEB defaults on its October payment to DPC.
• Dec, 2000: Maharashtra state announces plan to review the project, stating that the tariff is too high.
• Jan, 2001: Enron invokes the Maharashtra government counter-guarantee after MSEB defaults on both November and December payments.
• Feb, 2001: The Credit Rating Information Services of India Ltd cuts ratings on bonds issued by Maharashtra government due to defaults on payments owed to Dabhol. Enron invokes the Union government guarantee.
• April, 2001: Enron issues a notice of arbitration to the Indian government to collect on the December bill of Rs 1.02 billion.
• April, 2001: Enron invokes the political force majeure clause in its contract with MSEB, stating that unfavourable political conditions have prevented it from fulfilling contractual obligations.
• April 23, 2001: DPC and its lenders meet in London to discuss the payments issue. Enron seeks lenders' permission to issue a notice of termination.
• April 25 2001: The board of Dabhol Power Company authorises management to terminate the contract any time it chooses.

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