1. Why do you think the results of the first negotiation were so skewed in favor of Enron?
2. In the second round, Enron appears to have traded off equity ownership for increased capacity. Its reduction in tariff of 1 cent per KwH appears to have been absorbed by the larger production quotas and the use of lower-priced naphtha fuel. Why was Enron willing to make this trade-off? Why did the state of Maharashtra get more for its willingness to allow Enron to restart the project?
3. What can be learned from the first two rounds of the Dabhol power project negotiations about engaging in big foreign direct investment projects that are highly visible on the world economic scene?
4. How did GE and Bechtel’s filing for arbitration move the dispute along?
5. What is the difference between GE’s deal versus Bechtel’s deal? Both had the same amount of equity in the DPP, so why was Bechtel able to get $15 million more?
6. What general principles can you come up with for foreign direct investors using interests, rights, and power to protect their investments in developing countries?
7. What general principles can you come up with for governments negotiating with foreign direct investors?
This case reviews the on-again, off-again history of negotiations surrounding the development, opening, shutting down, and ultimate restarting of the Dabhol Power Plant (DPP) project in the state of Maharashtra, India. The case chronicles and studies relevant events from 1992 to summer 2005. The four main parties were the Maharashtra state government of India, which alternated under the direction of the Congress Party and the BJP/Shiv-Sena party coalition; the Enron Development Corporation (Enron), which became defunct in 2001; Enron successors GE and Bechtel; and the central government of India. A lesser role was played by Indian and foreign debt holders. Interestingly, although one would expect the World Bank to be a player in a large infrastructure project like this, it was not, because the bank refused to invest in the original project. The case illustrates the challenges and surprises when a foreign investor works with state and national governments whose motivations are very different from those of private enterprise and who are vulnerable to changing political opinion. CHRONOLOGY OF EVENTS
• Early 1992: The Indian government passes a series of
reform acts that allow for a broad restructuring of the Indian energy sector. The path is cleared for significant foreign investment in India’s energy infrastructure.
• May–June 1992: Enron and the Indian government begin discussions about Enron’s developing a power project in the state of Maharashtra.
• June 1992–May 1993: A first round of negotiations takes place between Enron and the state of Maharashtra.
• December 1993: A binding agreement about the DPP project is signed between Enron and the state of Maharashtra.
• March 1995: Maharashtra state elections are held. The Congress Party loses control of the state government to the BJP/Shiv-Sena, a coalition of two nationalist political parties that had run on a platform of “Throw Enron into the Arabian Sea.”
Instructor’s Guide Negotiating Globally
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