India

India's power sector is moving toward allowing 100-percent foreign ownership of generating plants. The Indian government is counting on independent producers to expand electricity capacity to meet desired targets by the end of the century. Annual growth in electricity demand in India is expected to average about 8 to 10 percent for the rest of the 1990s.

The central government has thus far opened up eight power plants to foreign investors. Several of these plants will be owned by U.S. investors {see Endnote 248}. During 1995, CMS Generation (a subsidiary of CMS Energy, both based in the United States) invested approximately $11 million in GVK Industries, the developer of a 235-megawatt gas/naptha-fired plant under construction in the state of Andhra Pradesh. CMS Generation has a total equity commitment to the project of approximately $20 million, representing a 25-percent ownership interest {see Endnote 249}. AES is building a $633-million, 420-megawatt coal-fired power project in Orissa {see Endnote 250}. Bechtel signed a Memorandum of Understanding for a joint venture with an Indian company to develop up to 1,000-megawatt of renewable energy capacity by the year 2000 {see Endnote 251}. Cogentrix signed an agreement for the purchase of electricity. Houston Industries is close to completing a deal to develop a 45-megawatt power plant in India. The company is already developing a $700 million 500-megawatt coal-fired plant {see Endnote 252}. Enserch signed a Memorandum of Understanding for a $450-million, combined cycle power plant in Kerala {see Endnote 253}.

Recently, a widely-publicized dispute between Enron and the Indian state government of Maharashtra underscored the potential conflicts that might arise between foreign investors and host governments. In 1995, a newly-elected nationalist Maharashtra state government decided to cancel a $2.8-billion power plant developed by the Enron Corporation after Enron and its partners (Bechtel Enterprises and the General Electric Company) had already spent $300 million. The newly-elected government alleged that the previous government had secretly negotiated the contract with Enron under terms that favored Enron and disadvantaged consumers. The cancellation had the effect of jeopardizing the credibility of India's economic reform program {see Endnote 254}. Enron later succesfully renegotiated a deal with the state government in early 1996, which called for a reduction in electricity rates and allowed the project to proceed. Enron and its solar joint venture partner, Amoco's Solarex, are also in the planning stage of a $100-million 50-megawatt solar power plant to be built in Rajasthan {see Endnote 255}.