Project finance
Enron has announced that it has secured $1.9 billion financing for the second stage of the Dabhol power project, located south of Mumbai, India.
Enron reported that the financing will include loans of $1.43 billion, of which $1.1 billion is from foreign banks and commercial institutions, and $333 million in local currency from Indian commercial and development banks. The remaining $452 million will be financed through equity. Enron International, a wholly-owned subsidiary of Enron, holds an 80 per cent stake in Dabhol phase 2. GE and Bechtel each hold a 10 per cent stake. The Maharashtra State Electricity Board (MSEB) has the right to acquire 30 per cent of Enron’s holding later.
Enron faced several difficulties in obtaining finance. For example, when the US imposed economic sanctions in response to the recent Indian nuclear tests, Enron was unable to get funding from the US Export-Import Bank. Instead, it tapped into Japanese and Belgian government finance, with Japanese Export Credit Agency providing $258 million, and the Office Nationale du Ducroire of Belgium $90.8 million. Joseph Sutton, Enron’s chairman and CEO of the international unit, said that Enron had an advantage in India because it has already worked with a variety of political parties to get phase 1 off the ground.
Stage 2 of Dabhol is for 1624 MWe, fuelled by gas from Oman and Abu Dhabi. Construction will start immediately, with commercial operation scheduled for late 2001. Enron hopes that the private port and gas-storage facility will serve as a hub of a pipeline network Enron hopes to build in India.
Phase 1, a $1 billion, 826 MWe plant, has started commercial operation, after a long and tortuous history. The first phase is a joint venture between Enron (50 per cent), MSEB (30 per cent), Bechtel (10 per cent) and GE (10 per cent).
The total project has been valued at $3.1 billion, and includes a LNG tanker and regasification terminal. This year, India will hold its third set of national elections since 1996.