Alan K. Henderson's Weblog

Enron’s collapse bears some striking similarities to Solyndra, namely, a business model that increasingly depended on government support for profitability. When that government support didn’t come in time, Enron’s house-of-cards collapsed.

After the World Bank declined to fund the Dabhol project, U.S. government entities provided key funding for the project. OPIC ultimately supplied Dabhol with a total of $160 million in loan guarantees and $200 million in risk insurance. The Export-Import Bank provided a roughly $300 million loan in late 1994.89 (Of this, $202 million is outstanding, but four Indian banks have guaranteed the loan, eliminating any risk to U.S. taxpayers, according to an Export-Import Bank spokesperson.)

In addition, numerous Clinton Administration officials supported the project. For example, Commerce Secretary Brown wrote to India’s minister of Commerce before a January 1995 trip to India, asking the minister to facilitate “financial closing” of the Dabhol project “in time to be celebrated during my visit.” Once in India, and accompanied by Ken Lay, Secretary Brown oversaw the signature of loan agreements by Dabhol Power Company with U.S. Export-Import Bank and OPIC. In visits to India, Treasury Secretary Robert E. Rubin and Energy Secretary Hazel O’Leary expressed Washington’s concern that India stand by commitments to investors. For example, Secretary O’Leary warned India that it was hurting its reputation with foreign investors.

Here’s the salient point: like Solyndra, Enron was a favorite of environmentalists, and Enron was a huge backer of the Kyoto Protocol. A decade ago, people liked to talk about links between Enron’s chairman, Ken Lay, and President George W. Bush. But they leave out that the main thing Lay was urging on Bush was the ratification of the Kyoto Protocol. Enron probably would have fared much better under a Gore administration. Enron thought they’d make money on the trading operations from a cap and trade scheme. After Enron’s collapse, an internal memo from the late 1990s came to light that said Kyoto would “do more to promote Enron’s business than almost any other regulatory initiative outside of restructuring the energy and natural gas industries in Europe and the United States,” and concluded that Kyoto would be “good for Enron stock.”