Seven years can hardly be considered a long time in the life of a multinational energy major. By the very nature of the industry in which such companies operate, heavy investments are required, and there is a long gestation period before projects begin to pay out.
Enron International came to India in 1992 in response to an invitation from the Indian government to invest in the country's power sector. But the company may not have known what it was getting into when it agreed to put up a massive 2,140-Mw natural gas-fired power plant at Dabhol, near Ratnagiri, in southern coastal Maharashtra state.
The project has given Enron the status of being a pioneer in the Indian power sector. But the years since 1992 have been difficult and turbulent for Enron.
Indian bureaucracy, in general, and the Maharashtra state government, in particular, have not made life easy. There have been many occasions on which officials at the US firm must have wondered why they had opted to invest in India in the first place.
But the worst is over. In June of this year, the first phase of the Dabhol power project, with a capacity of 740 Mw, started up. The same month, Enron closed $1.87 billion in financing for the second, much-larger phase (OGJ, June 14, 1999, p. 34). The company has also joined forces with Japan's Mitsui OSK Lines and the Shipping Corp. of India (SCI) to build a new liquefied natural gas carrier to import feedstock for the Dabhol plant from a liquefaction plant in Qatar owned partially by Enron (see related story, p. 25).
"I would not say it has been the easiest project we have put up," said Joseph Sutton, who was chairman and CEO of Enron International until July, when he was named vice-chairman of Enron Corp.
"Even now, there is a controversy over the tariffs we are charging for the power generated (at Dabhol)," he said. "The depreciation in the value of the rupee has made the tariffs seem high. But we had made it clear right from the start that the tariffs would have to be dollar-denominated, since we could not have achieved financial closure if we had cast the project in rupee terms."
Sutton told OGJ that one of Enron's long-term goals in India is to deliver natural gas to the energy-starved western coast of the country. To realize this goal, the company plans to develop a natural gas pipeline system to serve customers in the region. Gas supplies will be secured through LNG imports.
Asked to comment on the political instability in India, Sutton said, "We remain bullish on India and will continue to move forward with our strategy. We have developed good relationships with the Indian and Maharashtra governments and will continue to provide value (while meeting) the country's energy needs."
