Diva of the Deal

How Enron's high temptress turned massive projects into a $2 billion wet dream for the company -- and an estimated $100 million profit for herself

The Indian politicians she dealt with had never seen anyone like her. "She was able to use her feminine side in a very constructive way, and she didn't care to diminish it," said an Enron executive who worked with her in India. Mark would wear one of her tailored business suits to a meeting in Bombay, and a short time later, don an Indian sari and a pair of sandals for a visit to the project site with local politicians. "She was very good at sensing that a minister or an executive at a powerful company was having difficulty in dealing with her, a woman," the source remembered. "So when that cultural chauvinism came up and there was something we needed, she'd back away and almost become subservient to a male counterpart."

Mark knew that the risks were enormous. She was working on the biggest single foreign investment project ever proposed in India. In the 15 years prior to Enron's entry into India, the total of all foreign investment in the country had been less than what Enron was proposing to invest in just one project. But fear and caution weren't Rebecca Mark's style. Action was.

Top of the Mark: Rebecca rose through the ranks at warp speed.
Fred Harper
Top of the Mark: Rebecca rose through the ranks at warp speed.
Pipe Dreams author Bryce is a veteran business journalist.
Pipe Dreams author Bryce is a veteran business journalist.

In addition to the political risk that came with the Dabhol project, there were huge capital risks. Enron, along with its partners, General Electric and construction giant Bechtel, were proposing a 2,015-megawatt power plant that would cost about $2.9 billion. Phase I of the project would burn naphtha, a fuel similar to kerosene and gasoline. The 740-megawatt power plant would help stabilize the local transmission grid and provide infrastructure for the more expensive second phase. Phase II meant liquefied natural gas, or LNG, and LNG infrastructure is very expensive. The fuel can be moved only by refrigerated tankers that cost hundreds of millions of dollars each. The infrastructure associated with the LNG terminal at Dabhol was going to be about $1 billion. That overhead and the cost of making LNG (it has to be frozen) and transporting it meant that Dabhol's fuel costs were likely going to be about $500 million per year.

Despite the high costs, Mark and Enron believed LNG would be their foothold in India. After Dabhol got up and running, the company planned to build a pipeline north to Bombay to carry gas from the LNG terminal to other power plants or big industrial customers near sprawling Bombay. The Indian government appeared to be excited about Enron's project. Not only would it help stabilize the country's overtaxed power grid, but it would provide a reliable source of energy that could attract new foreign investment to the western coast of India, particularly new industries. Sure, the plant was going to benefit Enron, but if it could be built at the right price, it would be very good for India, too.

And though Indian politics, logistics and other factors were important, the final justification of Dabhol was really very simple. Mark and her fellow Enron employees had to answer two key questions: Did India really need the power? And, more important, could India pay for it?

The answers were probably, and probably not.

India, with about one billion people, has nearly four times as many residents as the United States. Most of them are desperately poor. According to the World Bank, the average per capita income in India is just $450. That means that the vast majority of Indians cannot afford electric appliances or the electricity needed to run them. That fact shows up in the country's electricity consumption figures. Although India has four times as many people as the United States, it consumes about one-eighth the electricity.

When Indian residents do consume electricity, they often don't pay for it. When they do pay, it's often at prices that are far below the actual cost of producing the power. In his excellent book on the Dabhol project, Power Play: A Study of the Enron Project, Indian journalist Abhay Mehta estimated that in the Indian city of Delhi, about 54 percent of the power consumed in the city is simply stolen. In the state of Maharashtra, where Enron was building Dabhol, Mehta reports that the official estimate of the amount of power that was stolen was 15.7 percent. "However, since nearly 40 per cent of the total generation of electricity in Maharashtra is supplied without any metering, it is quite likely that the real losses are much higher than the official figure," wrote Mehta. "A realistic estimate of Maharashtra's T&D [transmission and distribution] losses would probably be around 30 per cent."

The theft of power provides critically important context for the Dabhol project. Who would be crazy enough to build a power plant in a place where 30 percent (or more) of the output was simply going to disappear?

The World Bank thought Dabhol was a bad project and refused to finance it. On April 30, 1993, the huge lending agency sent a letter to Indian authorities that said the Enron project was "too large for base load operation" in Maharashtra. The agency said coal was a better and lower-cost fuel than LNG for producing electricity in the region and that replacing coal-fired electricity with LNG-fired power from Dabhol would place a heavy financial burden on the Maharashtra State Electricity Board.

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