Enron's India plant now rusty ghost town

BOMBAY, India -- On a craggy hill overlooking a cove once used by gold smugglers, Enron Corp. set up a $2.9 billion dream enterprise -- what was to be the world's largest natural gas-fired electricity plant.

Nine years and a slew of court battles later, the 1,700-acre complex is a rusting ghost town with deserted roads and buildings. Its hospital, school, engineering institute, industrial sites and miles of mango orchards are eerily still. Several gas storage tanks -- each big enough to accommodate a Boeing 747 -- are empty.

Long before the corporate giant crumbled in Texas, its troubles had started in India, in the state of Maharashtra.

The sole customer of the project, the Maharashtra State Electricity Board, delayed its start and then refused to pay for the electricity. Enron accused the utility of reneging on its contract. The utility countered that Enron was charging some of the highest rates in the world.

At its height, the power plant in Dabhol, 200 miles south of India's industrial hub of Bombay, employed 15,000 people who bustled about in yellow helmets, constructing the last phase of the 2,184-megawatt plant.

It was to be Enron's largest overseas project, the biggest foreign investment in India, and the showpiece of U.S. economic relations with this nation.

The project was 90 percent complete. It was producing electricity -- its generators running on naphtha -- and was to convert to liquefied natural gas supplied through India's biggest fuel terminal.

But production and construction stopped in May 2001, and now only a few dozen men are left to guard the decaying empire.

Wants to sell assets

What remains is Enron's unsecured debt of more than $1.5 billion to Indian financial institutions and an additional $650 million owed U.S. lenders, which American taxpayers may end up reimbursing.

Enron and its U.S. partners, Bechtel and General Electric, want their assets sold for $1 billion.

But unloading Enron's Dabhol Power Corp. looks like a distress sale, especially since Enron filed for bankruptcy in the United States amid a scandal over its accounting practices and influence in Washington.

The bankruptcy proceedings have not touched the India operations, which are mired in separate court suits in Bombay. A Maharashtra court is hearing the state utility's complaint that Enron's high power charges were not covered by the agreement and Enron's counterclaim that the utility's refusal to pay violated the contract.

Critics see Enron's experience as the saga of a big corporation that used political muscle -- and alleged bribes -- to win a lucrative contract for a power plant that never should have been built.

"The government was taken for a ride," Madhavrao Godbole, a former government minister who headed an inquiry into the affair. Speaking to The Associated Press, he said: "Enron cheated India. ... It's an outstanding example of how a multinational company should not get into an agreement with a developing country."

In Enron's view, the Dabhol plant was the victim of unexpected economic changes, and its India spokesman, Jimmy Mogal, rejects the view that Indian officials were hoodwinked.

"No one had them signing the contract with a gun to their head," he said. "The government of Maharashtra and the government of India have completely reneged on their international contracts, signed not once but twice."

Enron has repeatedly denied allegations it paid bribes. It has never been charged with a crime in India.

U.S. Ambassador Robert Blackwill argues that India's failure to pay makes potential investors nervous about doing business in India.

"The Dabhol dispute feeds a chronic perception among the overseas investing community that India may not be ready yet for big-time international investment," he said. "I hear frequent buzz from the United States that the sanctity of a contract may now be in doubt here, a concern that can spell death to potential investments."