Enron Set To Lose Heavily If Sells Dpc Stake At Cost

Enron Corp, which has a 65 per cent stake in the $1 billion equity of Dabhol Power Company, is likely to take a big hit on its return on equity (RoE) if it sells the stake at cost to the government. Cost-plus power projects like Dabhol are assured of a 16 per cent RoE.

Considering the $650 million capital being infused by Enron Corp in DPC since 1996, the annual 16 per cent return works to $97.5 million.

If the Houston-based energy major exits midway, it could stand to lose heavily since the 1,444 mega watt second phase of the project is not yet operational.

Given the fact that the second phase of the project was nearing completion before the current stalemate, it is assumed that Enron has invested its entire equity portion of $650 million.

DPC executives, when contacted by Business Standard, were tightlipped about the extent of equity investment made by Enron till date.

Following Enron Corp chairman Kenneth Lay