"Many energy companies have invested in closed or repressive countries -- arguing that their investment would help develop the local economy and thereby improve the human rights situation. But in this case, Enron has invested in a democratic country -- and human rights abuses there have increased. Enron hasn't made things better for human rights; it has made things worse." |
Responsibility: Financing Institutions and the Government of the United States
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Table of Contents
Key Individuals Named in this Report I. Summary and Recommendations II. Background: New Delhi and Bombay III. Background to the Protests: Ratnagiri District IV. Legal Restrictions Used to Suppress Opposition to the Dabhol Power Project V. Ratnagiri: Violations of Human Rights 1997VII. Complicity: The Dabhol Power Corporation VIII. Responsibility: Financing Institutions and the Government of the United States Appendix A: Correspondence Between Human Rights Watch and the Export-Import Bank of the United States Appendix B: Report of the Cabinet Sub-Committee to Review the Dabhol Power Project Appendix D: Correspondence Between the Government of India and the World Bank |
Phase II Financing
With an estimated cost of $1.5 billion and a capacity of 1,440 megawatts, Phase II of the project is slated to be almost twice the size of the $920-million, 740-megawatt Phase I.289 Initially, the same actors, primarily the U.S. governments Export-Import Bank and OPIC as well as private investors, were expected to finance Phase II. Ex-Im Bank, for example, could have extended up to $500 million for the second phase of the project.290 OPIC and Ex-Im Bank involvement, however, was suspended in May 1998 because of the underground nuclear tests that India and Pakistan had recently conducted: President Clinton imposed sanctions against India and Pakistan prohibiting the extension of all non-humanitarian aid and trade programs, including OPIC and Ex-Im Bank financing. Enrons response was that, as a company doing business in India, we were not and we are not in favor of sanctions....291 The company predicted that sanctions would be lifted by the end of 1998.
Currently, Enron is in a lot of trouble. With the nuclear tests, OPIC and Ex-Im funding has been suspended. Enron is not as big as other oil companies and cannot finance projects of this size off their balance sheet, so they have to rely on financing like OPIC and Ex-Im. India is a big project and the lack of financing will hurt them.295 Enron scrambled to handle the setback, announcing on September 1, 1998 that it had secured $1 billion in financing from international commercial banks. The company obtained a $200 million loan guarantee from the Export-Import Bank of Belgium and $50 million from the Export-Import Bank of Japan (J-Exim) as part of the $1 billion financing package.296 The company also announced that $300 million would be obtained from Indian banks, led by the Indian governments Industrial Development Bank of India. The State Bank of India announced an in principle agreement to loan $150 million for Phase II of the project.297 On November 9, 1998, the Indian governments Industrial Finance Corporation provided an $83 million loan for Phase II.298 The State Bank of India and state-owned Industrial Development Finance Corporation announced their intent to loan $100 million for Phase II.299 The Indian government, however, did not extend a counter-guarantee for Phase II.300 Following the announcement that it had secured financing, the company said that it would begin construction of Phase II in the fourth quarter (October to December) of 2001.301
289 Enron Seeking Power Plant Funding from Indian Financiers, Platts Commodity News, June 28, 1998. 290 Japans Sumitomo Asked to Lead India Power Plant Funding, Platts Commodity News, July 20, 1998. 291 Sanctions Against India May be Lifted by Year-endEnron, Press Trust of India, September 1, 1998. 292 Enron Assessing Impact of Sanctions on India, Reuters, May 14, 1998. 293 Enron Says Sanctions Wont Slow India Plant, Reuters, May 19, 1998. 294 Enron India Power Plant Funding Threatened by Sanctions, Platts Commodity News, May 13, 1998. 295 Human Rights Watch interview with David Kirsch. 296 Enron Unit Secures Funds for India Power Plant, Reuters, September 1, 1998. 297 State Bank of India Approves Loan to Enron, Reuters, November 4, 1998. 298 Indias IFC Extends $154 Mln in Loans to 2 Power Projects, Reuters, November 9, 1998. 299 Sangita Mehta, SBI, IDFC to Enter Takeout Deal for Dabhol, Business Standard, Bombay, November 12, 1998. 300 Enron Ties Up $US1 Billion for Phase 2 of Indian Project, Press Trust of India, September 1, 1998. 301 Enron Unit Secures Funds for India Power Plant, Reuters, September 1, 1998. 302 U.S. Lifting of Sanctions, Boost to Infrastructure Projects Likely, Business Line, November 7, 1998. | |