Bus 519 Assignment 3 Final Paper.

1806 Words Aug 20th, 2013 8 Pages
Project Management - BUS 519

Assignment #3
“Politics, Institutions, and Project Finance: The Dabhol Power Project”

Abstract
Dabhol Power Project is a massive combined-cycle power plant on the western coast of India 's Maharashtra state in which Enron had majority shares. The Dabhol power plant was initiated in 1992 and took nine years to commence operation. The project was planned to construct 2,184 megawatts, which Enron believed it was the largest gas-fired power plant in the world. Politics, institutions and finance led to a dispute between the Maharashtra state government and the plant owners, and the project was closed in June, 2001. In this case we will evaluate the role that these factors played in the Dabhol Power Project.
…show more content…
Technological Risk Technological risks are the technical or performance limitations that endanger the project. Technological risks were considered minor to equity investors. For instance, Bechtel had vast experience of several power and LNG Projects. As expected the project did not suffer any major technological difficulties during construction and initial operations.

Describe the nature of each risk and why the risk is significant to project success.
Development Environment risk It is the risk that the development of the project will cause destruction to the surrounding natural environment through catastrophic environmental pollution. From inception, Dabhol was faced with controversy. Memorandum of understanding was signed by Enron and Maharashtra state government to develop a 2,000 MN LNG-fired power plant at Dabhol. Agreement was made in principle over the US$3.1 billion project which was made unusually quickly. (Custom book 2011 pg 30). Both central and state government failed to conduct a financial appraisal of the project and conclusion for the approval was made without competitive bidding. The MOU failed to specify when the 20 year contract would begin and lacked a specification as to when electricity supply or payment would commence.
Economical Risk Economic risk is the chance that macroeconomic

More about Bus 519 Assignment 3 Final Paper.

Open Document