Enron Case Study

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Category: Business and Industry

Date Submitted: 11/19/2012 09:54 PM

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Enron was presented with an opportunity to help India develop its electrical grid for the long term. This was a potentially large opportunity based on India’s size and need for a reliable power grid. However, in the process of setting up the Dabhol power plant there were numerous missteps from both Enron and the Indian government. From Enron’s perspective, different choices could have been made to better insure the success of the program. Some of those choices included:

 Clear definition of who would pay for the power. It was never clearly defined who would pay for the power produced at Dabhol, the MSEB or the end user. Because of this there was no strongly established revenue base for the plant. End user’s had a history of forcing the government to lower power prices and the MSEB was financially unstable.

 Project size. This was the largest power plant project in the world when it should not have been. Enron should have realized that this was the first project of its kind in India and should have scaled the size of the plant down. There was too much at risk once the project began to easily stop building once the political climate changed.

 Failure to establish a relationship within India prior to building the plant. It would have been wise to begin working with existing state owned power plants to establish a presence in India. If Enron could have helped India rebuild existing power plants and improve capacity they would have been in a better position to grow the electrical grid in the country.

 Enron did not fully understand or embrace the Swadeshi policy in India. They came in as an American company using sourcing external to India. They should have considered the impact that this would have from a publicity standpoint and worked with Indian suppliers and contractors.

These points along with others led to the demise of the Dabhol power project. In the end, Enron went into India with the same strategy they had...