Enron Corp. - University of California | Office of The President

creditworthiness. In addition, Enron knew from discussions with government officials in India that
they would oppose paying Enron for power from Dabhol at anywhere near the rates Enron intended
to charge and, in fact, was charging after the plant began commercial operations. Dabhol would not
be a strong contributor to earnings and profit.
(i) Other Enron international operations were financial disasters and were not
"high return projects" that "would lead to major earnings gains for years." For instance, Enron's
Dominican Republic power plant project was a disaster before ground was broken. Enron paid to
build a power plant in a country where existing plants were not being paid for. Enron went ahead,
because internal developers got the majority of their bonuses before construction ever began.
Likewise, at Batangas in the Philippines, developers promised – and were paid for – a water-cooled
power plant on flat ground, but engineers faced the all but impossible task of building the plant on
the side of a hill, using one road, and no access to water. Enron overpaid for each of its Central
American projects, all of which proved to be operational nightmares, unprofitable and virtually
impossible to unload, but Enron's internal developers always received their bonuses because they
were not awarded based on actual project earnings or results or even the ability to turn the key and
start the project, but on flawed and false projections of future profits.
(j) Enron was further falsifying its financial condition, especially its international
operations, through a technique known inside the Company as "snowballing." That is, Enron took
the escalating costs of bidding on large projects that it lost and, instead of expensing those costs in
the current period as required, rolled those costs over into some other unrelated international project
that Enron was bidding on or actually performing – in either event, avoiding recognizing those costs
in the current period.
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