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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.
To consistently enhance our competitiveness and deliver profitable growth.
To practice highest standards of corporate governance and be a financially sound
company.
To be a responsible corporate citizen nurturing human values and concern for society.
To improve the lives of local community in all our projects.
To be a partner in nation building and contribute towards India’s economic growth.
To promote a work culture that fosters learning, individual growth, team spirit and
creativity to overcome challenges and attain goals.
To encourage ideas, talent and value systems and become the employer of choice.
To earn the trust and confidence of all stakeholders, exceeding their expectations.
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
To be the largest private sector power generation company in India
To be the largest hydro power generation company in India
To be the largest green power company in India
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
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Reliance Power continue to focus on long-term PPAs. Further, we plan to continue to maintain a significant
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
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Reliance Power Distribution-something new for Reliance.
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.
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Reliance Power
PEST analysis of 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%
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Reliance Power 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
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.
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Reliance Power
Porter’s Five Forces Model
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.
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Reliance Power
Threat of Substitute Products:
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
Market Growth
Low
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.
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Question Mark Star
Dogs(SBU’s) Cash cows
Reliance Power
Core Competencies of Reliance power
• Reliance’s growth through backward and forward integration
• Low costs
• Strong and rising market shares
• Good profits
• Large-scale capacity
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Reliance Power
Value Chain analysis
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.10
Reliance Power
Reliance Power growth strategy
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
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Reliance Power
INTERNAL FACTOR ANALYSIS SUMARY
IFAS (Internal factor analysis summary) table
Internal Factors Weight Rating Weighted
score
Comments
Strengths
S 1: Huge Capacity generation in
pipeline
S2: Growth in EPC division
S3: Established and good
Image
S4: Reliance – Long term
Investment
S5: BSES – part of Reliance
S6: Strategically Located
Power Projects
.10
.10
.25
.10
.05
.05
4.0
3.5
3.0
4.0
3.0
3.0
0.40
0.35
0.75
0.4
0.15
0.15
An aid to overcome competitor’s threat
Will attract potential investors
Creation of goodwill
A reliable Company
A preference factor for customers
An aid to overcome competitors
Weaknesses
W1: Effect on balance sheet due
to funding of new project
W2: Distribution- something new
0.10
0.10
3.5
3.0
0.35
0.30
Threat of having not adequate working capital
Threat of potential
losses
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Reliance Power for Reliance.
W3: Reliance dynamic
approach with creating
“total consumer
experience” could
complicate the process
W4: Financing Dadri project
a big liability
0.10
0.05
3.5
3.0
0.35
0.15
Threat of losing
potential customers
Threat of not
completing the project
on time
Total Score 1.0 3.35
EXTERNAL FACTOR ANALYSIS SUMARY
EFAS (External factor analysis summary) table
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Reliance Power External Factors Weight Rating Weighted
score
Comments
Opportunities
O1: Huge scope in power
sector.
O2: Setting up largest
thermal plant in Orissa,
which has huge deposits
of Coal Reserves.
O3: Good timing with the
passing of Electricity Act
O4: Reaping returns of
generating power
O5: Abundance of
intellectual capital in
India
O6: Nearly half the
geographical area
doesn’t have electricity-
Distribution Opportunities
. 10
.15
.10
0.1
0.05
0.1
4.0
3.5
3.0
4.0
3.0
3.0
0.40
0.525
0.30
0.4
0.15
0.3
Market Expansion
An encouragement for the management
A beneficial move for the company by the government
An opportunity to go for R & D and expansion
An opportunity for the company to hire people at low cost
An opportunity to earn more profits
Threats
T1: Any delay in project implementation.
T2: Increase in interest rate.
T3: Other players in the
market, like Tata
0.05
0.10
0.05
3.5
3.0
3.5
0.175
0.3
0.175
Need to quickly implement the projects
Need to find cheaper sources of finance
Need to decrease costs to outplay their
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Reliance Power T4: Future plans depend on
government policy
T5: Dealing with state
regulators who
determine tariff rates
T6: Remote possibility
opportunities back
firing
0.05
0.10
0.05
3.0
3.75
2.25
0.15
0.375
0.1375
competitors
Need to maintain good amicable relationship with the government
Lower costs of operations to absorb their bargaining powers
Need to have alternate strategies
Total Score 1 3.387
STRATEGIC FACTOR ANALYSIS SUMARY
Strategic Factors Weight Rating Weighted
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Reliance Power score
S3: Established and good Image
S4: Reliance – Long term Investment
S6: Strategically Located Power Projects
W2: Distribution- something new for Reliance.
W4: Financing Dadri project a big liability
O1: Huge scope in power sector.
O2: Setting up largest thermal plant in Orissa,
which has huge deposits of Coal Reserves.
O6: Nearly half the geographical area doesn’t
have electricity- Distribution Opportunities
T1: Any delay in project implementation.
T3: Other players in the market, like Tata
T4: Future plans depend on government policy
T5: Dealing with state regulators who
determine tariff rates
0.15
0.07
0.05
0.08
0.05
0.10
0.10
0.08
0.15
0.07
0.05
0.05
3.0
3.75
2.75
2.5
3.75
3.0
2
2
2.75
2.5
3.0
1.5
0.45
0.2625
0.1375
0.2
0.1875
0.3
0.20
0.16
0.4124
0.175
0.15
0.075
Total Score 1 2.71
TOWS MATRIX
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Reliance Power
SO
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.
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Reliance Power TOWS MATRIX
Internal Factors
ExternalFactors
Strengths(S) Weaknesses(W)
Opportunities(O) SO Strategies
Use established and good
image to skim the huge
potential of the power
generation sector
WO Strategies
Use distribution which is
something new for the
company to reach and cover
those places which have no
electricity to generate more
revenue
Threats(T) ST Strategies
Use strategically located
power plants to eliminate the
threat of other players in the
market
WT Strategies
Finance the projects in such a
way that any delay in project
implementation 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.
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Reliance Power “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
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.
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Reliance Power
REFERENCES
www.google.com www.wikipedia.com www. reliancepower .co.in
“Strategic Management” by Azhar Kazmi
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