DeBeers

1
DeBeers

• Foray into retailing
• London store opening dogged by protests from
  Survival International Group Role of NGOs
• Protesting diamond mining in Botswana
• Other problems economic slowdown, conflict
  diamonds

Source NY Times
2
Oil spill

• Half the worlds oil tankers are the single
  hulled variety
• EU set to ban single hulled ships from its waters
  by 2005
• UN treaty banning single hulled tankers passed
  this year
• Problems of enforcement

Source NY Times
3
Venezuela

• To offer licenses to exploit Deltana Platform
• Multinational bidders British Gas,
  ChevronTexaco, ExxonMobil, BP
• Complex selection system how much business is
  awarded to local contractors, amount of fee the
  company will pay for the license, how much it
  will contribute to industry development fund
• Too much discretion in the hands of ministry
  officials

Deltana/ Orinoco River Platform
Source NY Times
4
AES

• Evaluate India as a potential foreign direct
  investment location for a power project. What are
  the pros and cons of investing in India?
• Identify the issues facing AES with regard to the
  IB Valley project. How are the challenges posed
  in India different?
• How can AES ensure commitment to social
  responsibility in India? Discuss this in the
  context of technology choice (CFB, PC, or PC with
  additional control technology) and other projects
  that it could pursue.

5
AES

• Ib Valley project
• Reviewed when State Government changed in 1996,
  on grounds of lack of transparency, high project
  costs and tariffs
• Counterguarantee not issued, financial closure
  not yet achieved
• Sought extension in implementation, due to
  inability to finalize financing
• AES and OPGC have also formed a JV to set up two
  more power units in the region
• AES bought a 49 stake in the Orissa Power
  Generation Company (Piled up liabilities, unable
  to pay staff since July)
• AES President Bakke appeals to Indian PM to
  settle grievances with state Government

6
(No Transcript)
7
Mangalore Power

• JV between Cogentrix Energy Inc and CLP Holdings
  (HK)
• Abandoned 1.3 billion power project (with
  investment of Rs 100 crores) in development since
  1992
• Political issue between the failing Congress Govt
  and aggressive BJP bent on proving that these
  projects had become avenues for large scale
  kickbacks
• Cogentrix, Enron and AES all lowered their
  tariffs or project costs
• Delays in getting Government clearances,
  long-standing litigation on bribery and
  environmental public interest lawsuits

8
Enron

• Enron trying to sell its 65 stake in Dabhol
  Power
• After stage II, GE Capital and Bechtel also
  planning to pull out from Dabhol
• The value of counterguarantees
• Dabhol Power hauling Central Govt. to
  international arbitration courts for failing to
  honor its obligations (MSEB cash strapped)

9
The Indian Experience

• Europes largest power company, Electricite de
  France (EDF) pulled out of power projects in
  India, worth 3 billion
• Long delays (seven years), slow pace of reforms,
  unacceptable tariffs.
• While EDF struggled to build a 1,000 megawatt
  plant in India, it added 34,000 megawatts in
  Germany and China
• India is an example of how not to do business in
  the power sector

10
Problems at AES

• The Shady Point incident
• More recently allegations of collusion with
  Williams Co in the California power crisis
• Drop in power prices due to U.S. slowdown, energy
  glut created by a power-plant building spree
• Heavy investment in S. America (Venezuela) hit by
  economic instability
• Plot to attack plant in Pakistan foiled

11
Values in Tension

• Cultural relativism - Nothing is sacred, nothing
  is wrong
• When in Rome, do as the Romans do
• 1980s European pharmaceutical companies offload
  PCBs in Nigeria
• Restoration of SS United States in Ukraine
• Absolutism (ethical imperialism) Many things
  that are different are wrong
• U.S. computer products firm in Saudi Arabia
• Balancing the extremes respect for core human
  values and local traditions

Source HBR
12
Doing well by doing good

• Corporate social responsibility
• Who cares? - Consumers care
• How much? - A lot
• Ford Motor Company
• Levi Strauss
• Motorola, AES

Source HBR