If the utilities had continued to own their generating capacity, they would have faced cost variations that changed with the average generation cost; but because they had divested the assets, they would face cost variations that changed with the marginal cost of electricity. They also provide at least initial protection against market power. In this second instance, lenders run the risk that a massive devaluation will make the project’s off-take so expensive in the local currency that off-takers cannot afford to purchase the output. The plant runs on naphtha supply and LNG. Most of the generating capacity built during this time was based on combustion turbines or diesel systems—the only generation plants that could be brought to operation within a year—which are characterized by low initial capital costs, but high operating costs. I have however, put some of the information from the case in screenshots below. It is clear that the situation in California put a stop to the deregulation movement around the whole world.
I would also like you to comment on the diagram that is included in Exhibit 1 of the HBS study shown in the screenshot below. The utilities could have protected themselves against high wholesale price by entering contracts for financial hedges, designed to cover risks of buying power from a volatile spot market while selling it at a frozen retail rate. This does not make the Dabhol case obsolete, as the economics of the contracts and political risk associated with the contracts still must be assessed even if a bidding process is used. Argument that the problem is inherent in de-regulated markets Difficulties in implementing competition in power markets so by now well known, as illustrated by California. The rapid build-out of IPPs during the s meant that with the impact of the Asian financial crisis in , the cost of electricity began to explode dramatically due to a combination of:
Dabhol power project case study ppt slide
Download ppt “Case Studies in Electric Power”. You could get very sophisticated about calculating the effects of the PPA contractor on the off-taker the calculation, but for purposes of this assignment, assume that the revenues and therefore prices charged by the off-taker must be increased by the capacity charges and the operating costs.
Per capita peoject use grew modestly during that time. Risk management is critical to protect organizational assets and to ensure case dabhol laws and regulations.
The costs of IPPs were often high because the new capacity was not consistent studh the least-cost expansion path and the private sector required high rates of return. The risks to scope, schedule, and cost. California Market Prices Prices before the California electricity crisis were relatively low. Should Price Caps be Implemented and if so, at what Level? Maybe there are customs duties; maybe added transmission facilities must be built; maybe labour costs are different.
A report by the World Bank already warned implicitly against the risk of over-commitment through the uncoordinated signing of PPAs, which essentially passed demand risk to the consumer through take-or-pay provisions. Finally, as part of your write-up, rabhol on whether you think the percent increase in revenues will affect the non-technical losses, which is stolen electricity. Xabhol a corollary, economics suggests that prices can move to short-run marginal when surplus capacity exists.
Dabhol power project case study ppt
DLIS creates, manages, and disseminates logistics It provides guidelines for its implementation that can minimise the threats by planning, policies, processes and procedures that can case your business get everything back to normal as soon as possible. This is a bit tricky because you want to find the time period before Dabhol had any effects on revenues and you need to find the number that is not distorted by subsidies.
Political instability dabuol poor sector planning have led to expensive electricity.
These fees are payable as long as the facility is available even poer not dispatched. Users, reeling from a slowing economy and higher rates, embraced calls for conservation.
Social activists, lawyers, villagers and farmers banded together in groups opposed to the Enron project. The chart below shows that the level of debt relative to aggregate income was dramatically increasing.
Dabhol power project case study ppt
This webpage puts together information of the Dabhol electric power plant case. The risks particularly associated with the second Oresund Bridge project is in its infrastructure. OPIC has debt facility to deal with the problem in Brazil.
If the plant does not make sense should the bank lend money. This project is really important for India. In Quest of Power. Hence, the risk of contract abrogation may soar. The PPA required a three hour horizon for full availability; stusy management protested that this provision did not contemplate ramping up from a cold start a requirement almost peoject power plant would have trouble with. Also, the outages did not necessarily correlate to the movement of prices on a given day.
Case Studies in Electric Power
Between and the regulated price to consumers fell by only 17 percent. The project has endured periods of technical default under the loan documents, due to non-payment by Meralco. The Dabhol case was a classic case where evaluation of the off-taker was a crucial element of credit analysis. The Future of Transmission? Include a couple of sentences in your summary about the implications of the case in the context of general project finance theory. Almost from the start, participants on all sides probed for weaknesses.
We believe in the goal of cheap power in abundance for India As project finance does not include financial history, you often need to do some detective work to evaluate unit costs for capital expenditures, operating costs and other items e. But that was not to be the case and thus the system was characterized by unnecessarily large risks.