Reliance Power

Reliance Power Reliance Power Mission •

To attain global best practices and become a leading power generating company.

•

To achieve excellence in project execution, quality, reliability, safety and operational efficiency.

•

To relentlessly pursue new opportunities, capitalizing on synergies in the power generation sector.

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To consistently enhance our competitiveness and deliver profitable growth.

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To practice highest standards of corporate governance and be a financially sound company.

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To be a responsible corporate citizen nurturing human values and concern for society.

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To improve the lives of local community in all our projects.

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To be a partner in nation building and contribute towards India’s economic growth.

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To promote a work culture that fosters learning, individual growth, team spirit and creativity to overcome challenges and attain goals.

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To encourage ideas, talent and value systems and become the employer of choice.

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To earn the trust and confidence of all stakeholders, exceeding their expectations.

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To uphold the guiding principles of trust, integrity and transparency in all aspects of interactions and dealings.

Vision •

To build a global enterprise for all our stakeholders

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To be the largest private sector power generation company in India

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To be the largest hydro power generation company in India

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To be the largest green power company in India

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To be the largest coal mining company in India

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Reliance Power Strategy Reduction of Cost of Power Generation We intend to continue our focus on reducing the cost of power generation by acquiring and developing captive fuel sources that will insulate us from the volatility in the market price of fuel and can thus leverage our operating efficiencies. Such a move is pursuing economies of scale, securing favorable financing and sharing resources among our various power projects and with our affiliates.

Ensuring Fuel Supply Securing adequate supplies of fuel is critical to the success of a power project. To ensure fuel security, we continue to take proactive steps to ensure access to sufficient coal reserves domestically and globally by investing in additional overseas opportunities that are a strategic fit with our business. While we have secured fuel supplies for our entire coal-fired portfolio, we will continue to strive to control the entire supply chain to ensure continued and uninterrupted availability and control costs.

Focusing on Power Deficit Regions We intend to locate our power projects and enter into off-take arrangements in power deficit regions that typically support higher market-wide tariffs. We will continue to concentrate our off-take arrangements on the Western and Northern regions of India, which we believe will comprise the bulk of power demand in India. We also intend to focus our merchant off-take sales in these two regions to derive better returns on power generated from our projects.

Establishing an Optimal Mix of Off-take Arrangements We intend to continue to pursue an optimal mix of long and short-term PPAs to minimize the risks and maximize returns for our shareholders. For power projects situated closer to load centers, we have entered into and will continue to enter into a mix of long and short-term PPAs to achieve a balanced portfolio. For power projects located in other locations, we intend to continue to focus on long-term PPAs. Further, we plan to continue to maintain a significant 2

Reliance Power portion of merchant power in our portfolio to take advantage of favorable prices in the electricity spot market.

Targeting Additional Revenue Sources We are actively pursuing opportunities to target additional revenue sources, including by selling carbon credits and fly ash. Our Sasan, Krishnapatnam, Chitrangi and Tilaiya power projects will be eligible for the CDM benefits as a result of the supercritical technologies. ash procurers in NCR and Western Uttar Pradesh. We expect that we will be able to generate additional revenue from the sale of fly ash when more of our domestic coal-fired power projects commence operations.

SWOT ANALYSIS Strength:•

Huge Capacity generation in pipeline

•

Growth in EPC division

•

Established and good Image

•

Reliance – Long term Investment

•

BSES – part of Reliance

•

Strategically Located Power Projects

Weakness:•

Effect on balance sheet due to funding of New project

•

Distribution-something new for Reliance. 3

Reliance Power •

Reliance dynamic approach with creating “total consumer experience”

could

complicate the process •

Financing Dadri project - a big liability

Opportunities:•

Huge scope in power sector.

•

Setting up largest thermal plant in Orissa , which has huge deposits of Coal Reserves.

•

Good timing with the passing of Electricity Act

•

Reaping returns of generating power

•

Abundance of intellectual capital in India

•

Nearly half the geographical area doesn’t have electricity-Distribution Opportunities

Threats:•

Any delay in project implementation.

•

Increase in interest rate.

•

Other players in the market, like Tata

•

Future plans depend on government policy

•

Dealing with state regulators who determine tariff rates

•

Remote possibility opportunities back firing.

PEST analysis of Reliance Power 4

Reliance Power

Political Forces: The Government of India has a mission of “Power to all” by 2012. Government is having very ambitious plans for increasing the capacity of the power sector and hence is encouraging power sector companies like RPower.

Economic Factors India is in the rising phase of its economy curve, the economy of the country was growing at 9 % before it is affected by recession in 2008. Even during recession also it managed to touch 7.9% while developed countries suffering from negative growth. The per capita consumption is expected to increase 1000 KWH. So, this provides huge opportunity for Reliance Power 5

Reliance Power Socio cultural factors With a population of India increasing and the scenario of the country is changing from survival to consumption mode, the demand for electricity continue to be on increase. As a result of which power generation sector promises increasing returns to those who have already positioned themselves strongly in this sector

Technological factors: The operational efficiency of a thermal power plant is only 30% that is very poor Also, the advantages of low installation cost is disserted with the invention of nuclear power.

Porter’s Five Forces Model

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Reliance Power

Threat of New Entrants: With the government deregulation there is always a threat of new entrants into the market. Reliance power and other companies in the power sector always face the threat and as such they have to prepare themselves for the competition against the new entrants.

Rivalry among existing firms: Reliance power has competition against already established players like NTPC, Tata, Jindal, Adani NHPC, Jaiprakash Power Ventures Ltd, etc . So the company has to prepare itself for competition against them. The company should formulate its strategy in a way that it minimizes its costs and quotes less price for the different bids.

Threat of Substitute Products: 7

Reliance Power The generators, solar energy are the main substitutes for the electricity. The company has to formulate its strategy accordingly.

Bargaining power of buyers: This factor does not affect the company a lot because the company supplies electricity in a particular area and there is no other player in the same area, so the buyers cannot bargain.

Bargaining power of sellers: The bargaining power of sellers which include suppliers of coal, technology, manpower has a impact on reliance power and they should formulate their strategy accordingly.

BCG Matrix For Reliance Power

High

Question Mark

Star

Market Growth Low Dogs(SBU’s)

Cash cows

Low Market

Share

High

Reliance power comes in the category of question mark as they have a low market share and the market growth is very high.

Core Competencies of Reliance power 8

Reliance Power

•

Reliance’s growth through backward and forward integration

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Low costs

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Strong and rising market shares

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Good profits

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Large-scale capacity

Value Chain analysis 9

Reliance Power A value chain is a chain of activities for a firm operating in a specific industry. The business unit is the appropriate level for construction of a value chain, not the divisional level or corporate level. Products pass through all activities of the chain in order, and at each activity the product gains some value. The chain of activities gives the products more added value than the sum of added values of all activities. It is important not to mix the concept of the value chain with the costs occurring throughout the activities.

Reliance Power Plans to span over entire value chain in the power business.

Reliance Power growth strategy 10

Reliance Power 

Generation of power



Transmission of power



Distribution of power



Trading of power



Bundling of services to maximize customer satisfaction

Generation of power  Fuel Sources: Coal, Natural Gas, Naptha, Diesel etc  Equipment Provider: Domestic Equipment Manufacturers, Global Equipment Vendors

Transmission Utilities :  Central Transmission Utilities  Power Grid Corporation  Private Transmission Licensees  State Transmission Utilities Distribution Utilities  State Electricity Boards  State Distribution Utilities  Private Distribution Utilities

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Reliance Power Ultimate Consumer  Agricultural Consumers  Industrial Consumers  Retail Consumers

Supporting Activities 

Ensuring Fuel Supply  Secure access to coal reserves

 Acquired 3 coal mines from Sugico Group, Indonesia with capacity to generate 10 GW in 2010  Investment of Rs.300 billion in Andhra Pradesh by 2017



Focusing on Power Deficit Regions



Reduction of Cost of Power Generation  Large reserves  Ensuring fuel supply  Reducing unit cost of fuel  Gas recovery project



HR Strategy : Recruitment of intellectual Workforce

INTERNAL FACTOR ANALYSIS SUMARY 12

Reliance Power IFAS (Internal factor analysis summary) table Internal Factors

Weight

Rating

Weighted Comments score

Strengths S 1: Huge Capacity generation in pipeline

.10

4.0

.10

3.5

S2: Growth in EPC division S3: Established and good Image

0.40

An aid to overcome competitor’s threat

0.35

Will attract potential investors

.25

3.0

0.75

Creation of goodwill

.10

4.0

0.4

A reliable Company

.05

3.0

0.15

A preference factor for customers

.05

3.0

S4: Reliance – Long term Investment S5: BSES – part of Reliance S6: Strategically Located Power Projects

13

0.15

An aid to overcome competitors

Reliance Power Weaknesses W1: Effect on balance sheet due

0.10

3.5

0.35

0.10

3.0

0.30

to funding of new project W2: Distribution- something new for Reliance. W3: Reliance dynamic

Threat of having not adequate working capital Threat of potential losses Threat of losing

0.10

3.5

0.35

potential customers

0.05

3.0

0.15

Threat of not

approach with creating “total consumer experience” could complicate the process W4:

completing the project on time

Financing Dadri project a big liability

Total Score

1.0

14

3.35

Reliance Power EXTERNAL FACTOR ANALYSIS SUMARY EFAS (External factor analysis summary) table External Factors

Weight

Rating

Weighted Comments score

Opportunities O1: Huge scope in power

. 10

4.0

.15

3.5

sector. O2: Setting up largest thermal plant in Orissa,

Market Expansion 0.40

0.525

which has huge deposits

An encouragement for the management

of Coal Reserves. O3: Good timing with the

.10

3.0

0.30

passing of Electricity Act O4: Reaping returns of generating power O5: Abundance of

0.1

4.0

0.4

An opportunity to go for R & D and expansion

0.15 0.05

3.0

0.1

3.0

0.05

3.5

intellectual capital in

An opportunity for the company to hire people at low cost

India O6: Nearly half the

A beneficial move for the company by the government

0.3 An opportunity to earn more profits

geographical area doesn’t have electricityDistribution Opportunities Threats T1: Any delay in project implementation.

15

0.175

Need to quickly implement the projects

Reliance Power T2: Increase in interest rate.

0.10

3.0

0.3

T3: Other players in the

0.05

3.5

0.175

0.05

3.0

0.15

0.10

3.75

0.375

0.05

2.25

0.1375

market, like Tata T4: Future plans depend on government policy T5:

Dealing with state regulators who determine tariff rates

T6:

Remote possibility opportunities back firing

Total Score

1

3.387

STRATEGIC FACTOR ANALYSIS SUMARY 16

Need to find cheaper sources of finance Need to decrease costs to outplay their competitors Need to maintain good amicable relationship with the government Lower costs of operations to absorb their bargaining powers Need to have alternate strategies

Reliance Power Strategic Factors

Weight

Rating

Weighted score

S3: Established and good Image

0.15

3.0

0.45

S4: Reliance – Long term Investment

0.07

3.75

0.2625

S6: Strategically Located Power Projects

0.05

2.75

0.1375

W2: Distribution- something new for Reliance.

0.08

2.5

0.2

W4: Financing Dadri project a big liability

0.05

3.75

0.1875

O1: Huge scope in power sector.

0.10

3.0

0.3

O2: Setting up largest thermal plant in Orissa,

0.10

2

0.20

0.08

2

0.16

T1: Any delay in project implementation.

0.15

2.75

0.4124

T3: Other players in the market, like Tata

0.07

2.5

0.175

T4: Future plans depend on government policy

0.05

3.0

0.15

T5:

0.05

1.5

0.075

which has huge deposits of Coal Reserves. O6: Nearly half the geographical area doesn’t have electricity- Distribution Opportunities

Dealing with state regulators who determine tariff rates

Total Score

1

TOWS MATRIX SO 17

2.71

Reliance Power It reflects how strengths can be used to take advantage of opportunities. Reliance power has a established and good image, therefore it can skim the huge scope in power sector.

WO It implies how you overcome your weaknesses to take advantage of your opportunities. The distribution which is something new for the company can be used to cover and reach the places where there is no electricity, therefore distribution opportunities arise.

ST It implies how the strengths can be used to overcome threats. The strategically located power projects of the reliance power can be used to deal with the threats of the other players in the market like Tata Power etc.

WT It implies you overcome your weaknesses to avoid threats. The financing of the Dadri project which is a big liability should be prevailed over to tackle any delay in the implementation of other projects.

TOWS MATRIX Internal Factors

Strengths(S) 18

Weaknesses(W)

Reliance Power External Factors Opportunities(O)

SO Strategies

WO Strategies

Use established

and good Use

image

the

to

potential

skim of

the

generation sector

distribution

huge something

new

which

is

for

the

power company to reach and cover those places which have no electricity to generate more revenue

Threats(T)

ST Strategies Use

strategically

WT Strategies located Finance the projects in such a

power plants to eliminate the way that any delay in project threat of other players in the implementation market

could

be

handled.

ROLE OF STRATEGY Every company on a small level with very low risk or a multinational company with much more to lose than just money on the line has to have a strategy to make its name in the world with other companies in mind. Strategy is as important in an organization like walking for a human. Behind every successful organization there is a strategy. “It may be hard for an egg to turn into a bird: it would be a jolly sight harder for it to learn to fly while remaining an egg. We are like eggs at present. And you cannot go on indefinitely being just an ordinary, decent egg. We must be hatched or go bad.”-C.S.Lewis The idea from above statement says in strategy you cannot just attempt something that you have to or will do just like that you need to take small and control in sometimes brave steps to 19

Reliance Power achieve what you desire and have to be patient because in planned strategy to work time is your biggest friend and sometimes the worst enemy. Sometime it takes years to be where you want your organization to stand. In a competitive business environment you have to realize the brutal facts of Market environment, Financial and Economic conditions. You need to ask yourself the hard questions before making a strategic plan weather it can be achieved or not and have to make sub small plans those will help you. You have to think of the value added to the organization after the completion of your strategy.

CONCLUSION After completing this assignment, which was more of a research, I came to a conclusion that in any business, successful or a newly established, if not managed well and unable to take advantage of its opportunities can come to its knees. So for a business to run successfully we have to manage its Competitors and threats that may affect the performance of a business. The power generation and transmission industry, being Reliance Power’s most significant market area, continues to undergo significant changes as more users in growth markets gain access to power generation, the importance of end-to-end solutions increases and technology continues to evolve. Another trend is an increased emphasis on the role of distribution of power. These changes have demanded agility and flexibility from industry players to adapt to new market conditions rapidly. Thus, Reliance Power aims at capitalizing on efficiency and its skill in execution as well as demand supply chain management to respond to these requirements.

REFERENCES

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www.google.com 20

Reliance Power •

www.wikipedia.com

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www.reliancepower.co.in

• “Strategic Management” by Azhar Kazmi

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