Enron was willing to make the huge investment due to following reasons: firstly, from the political perspective, the available investing environment has engaged. By the 1990! s, India experienced the ideological changes, government embraced a free market approach, including de regulations and loosening of foreign direct investment (FDI).
Also Rao! s government allowed foreign private company to set power projects with no restrictions. (Hill, 2003.
pp 124).
This was a good opportunity for Enron, the largest US natural gas company to exploit the India market, as the local government showed a open attitude for FDI; secondly, India! energy (power, fuel, gas) problems were serious, they lacked integrated supply system and efficient capacity. These shortages required developers to facilitate some significant investments, because since 1990! s India economy revealed a rising trend, more capacities would be needed in national constructions, so there must be some one or some company to shoulder the task in order to meet the customers! demands in future years. Furthermore the state of Maharashtra has political stability and economic growth.
It does exist high risks in building the power project, but Enron might consider the benefits are possibly overcome all costs; thirdly, from the perspective of the corporation itself, Enron implemented its worldwide expansion in energy projects, especially in developing countries. Therefore India as a big market in Asia would reasonably attracted Enron! s FDI, and Enron might take full advantages of its present dominance to create their international business, not only getting profits but also help the renascent economy in India. Thus the investment should be a reciprocal trade. The major long-run benefits that Enron foreseen are carving out the way to enter the Asian markets, and India is the preferred channel of distribution. As the Dab hol Project need long time to build and be put into use, the first-mover advantage for Enron company is sustainable, they could easily set up barriers in the market.
The Essay on Stock market Investment
All investors are faced by decision making task before they make any investment. They make use of technical analysis, gut feel and fundamental analysis while performing an investment analysis before they make their decision. These decisions are greatly influenced by the extant portfolio theory. This theory tries to minimize the risk and maximize on the returns by careful selection of assets. This ...
The benefits are not possible to compensate for the risks involved, because this is a really high risky project. According to authorities, financially the India project has been a disaster, banks that are involved in it have approximately $1. 5 billion in loans and loan guarantees that remain outstanding, and they are threatening to seize the plant outright. ( web).
Enron actually could not possess the ability of solvency, because the investment is too big and even they signed some contracts with India government or US government about the compensation afterwards. It is uncertain whether those governments could really fulfil their roles to protect.
Once the project failed, it is not possible for Enron to find another buyer.
