Vietnam and Enron

I am just now reading The Smartest Guys in the Room, a book about Enron and the reason’s for its fall. It is amazing how much stupidity, venality and hubris there was in the company. The book is a portrait of a place with money as its only North Star. I am sure at points employees and management believed that they were changing the world for the better (the initial deregulation of the natural gas market could be seen that way), but mostly, especially in later years, it was about making as much money as possible. And money to individuals not to the company or shareholders, which led to some real criminality, as evidenced by the numerous convictions of management. On the other hand, I was a bit surprised how many people got out of Enron and into good jobs without any issues.

The book is great, although sometimes reading about all the bad behavior becomes a slog.

One thing that caught my eye was that Enron International tried to make power deals all over the world, including Vietnam. In 1997, Enron announced that it is in the final stages of negotiations on several projects in Vietnam worth up to $3 billion. Two, at least, were still in the works in 2000. The first was a direct reduced iron (DRI) plant with a few partners. DRI is an input into steel making, and it must have been part of Enron’s push into metals trading (the company liked to buy real assets in order to have better information to push to trading). The second was a 675MW gas-fired power plant in Soc Trang to take advantage of some associated gas that was being burned off.

No surprise, Enron actively lobbied for government support. Even though most of management were basically libertarians with strong beliefs in the moral and economic righteousness of free markets. Everything should be deregulated, in their view. Yet, both of these projects “could only be done” with support of the US government. In fact, Enron lobbied the government to lift some provisions barrings US agency assistance to projects in Vietnam. Shortly thereafter, these provisions were lifted and the US Trade Development Authority provided almost $1m for preliminary studies for these projects. And I have no doubt that Enron would go back to the till for more money as the projects advanced.

Anyway, neither was built. The consortium building the DRI plant found another partner in 2000 (and I don’t know why - there’s nothing that I could find online). Even then, it was never built. The gas plant was also not built, and board meeting notes from late 2000 mention that “Vietnam issues [were] resolved with minimum impact to bottom line.” There have been a number of power plants built in Soc Trang since then, but it’s hard to tell if any of these were Enron’s specific plant.

Industry articles from the period do say that all big foreign investment projects had problems getting built, partly because of difficulties negotiating with the government. The biggest holdup was price of tariffs. Right now, from what I understand, the guaranteed tariffs are actually pretty good in Vietnam (around 15 cents per kwh). But there are uncertainties over that figure, because it expires soon and needs to be renewed. Investors continue to make investments, though, so let’s hope they don’t get burned.