A Resurgence For Enron's Power Plant?
I read with interest "Enron: Maybe megadeals mean megarisk" (International Business, Sept. 4), about Enron Corp.'s Dabhol power project being built in the Indian state of Maharashtra. As an Indian-American, I am appalled at the state government's decision to cancel the project. I believe Indians ought to appreciate foreign investors who show courage and commitment by coming to an alien culture and developing costly power projects by taking enormous risk.
Vijay P. Khasat
I have to disagree with your conclusion that Enron miscalculated the political situation in India. The Dabhol power project will be back on track, and very soon, for the following reasons:
First, the central government in India doesn't want to develop a reputation as a risky place for foreign investors. That is why the central government is against the Maharashtra state breaking the contract and will end up pressuring the state government to renegotiate.
Second, Maharashtra doesn't want to pay Enron for breaking the deal, which it must if the court rules for Enron.
Third, the Dabhol power plant is vital to Enron's growth, because it is linked to many projects it is negotiating in Asia. Therefore, it will make the best deal possible to ensure that it gets done. Enron has already invested $200 million in the power plant, which it will lose if the project is canceled and the court rules in favor of the Maharashtra government. Consequently, this will encourage Enron to offer a better deal than any other company.
Finally, the central Indian government will be pressured to complete the deal. No other foreign company will do the project, and India doesn't have the technology to implement it itself.
Finance, Economics & Commerce Ministry