Enron & The Dabhol Power Company

This case has multiple uses. It can be used to illustrate market entry challenges in India. It could also be used in a section on political risk or in a regional business class on India. The case illustrates the problems facing a division of a large multinational company as it does business in a developing nation. It illustrates the difficulty of predicting and understanding local political conditions and coping with the threat of project cancellation or forced renegotiation. It also raises issues dealing with the appropriate rate of return for a large capital-intensive project in an uncertain political environment, corruption, and transfer payment equity. This is a rich case that can be the basis for discussion on various other issues, such as: the usefulness of a local partner in dealing with political issues, how to establish a positive corporate reputation through public relations, the dangers of being accused of bribery, the visibility of infrastructure projects developed by foreign companies, and the nature of development projects and project finance. Finally, the case also provides insights as to how Enron structured development projects and, given Enron's bankruptcy, provides a good backdrop for discussions of why the bankruptcy might have occurred.