54753660 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.

• 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

continue to focus on long-term PPAs. Further, we plan to continue to maintain a significant

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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.

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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

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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

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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:

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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

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.

Core Competencies of Reliance power

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Question Mark Star

Dogs(SBU’s) Cash cows

Reliance Power

• Reliance’s growth through backward and forward integration

• Low costs

• Strong and rising market shares

• Good profits

• Large-scale capacity

Value Chain analysis

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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

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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 SUMARY12

Reliance Power 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

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Reliance Power Weaknesses

W1: Effect on balance sheet due

to funding of new project

W2: Distribution- something new

for Reliance.

W3: Reliance dynamic

approach with creating

“total consumer

experience” could

complicate the process

W4: Financing Dadri project

a big liability

0.10

0.10

0.10

0.05

3.5

3.0

3.5

3.0

0.35

0.30

0.35

0.15

Threat of having not adequate working capital

Threat of potential

losses

Threat of losing

potential customers

Threat of not

completing the project

on time

Total Score 1.0 3.35

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Reliance Power

EXTERNAL FACTOR ANALYSIS SUMARY

EFAS (External factor analysis summary) table

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.

0.05 3.5 0.175Need to quickly implement the projects

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Reliance Power T2: Increase in interest rate.

T3: Other players in the

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

0.10

0.05

0.05

0.10

0.05

3.0

3.5

3.0

3.75

2.25

0.3

0.175

0.15

0.375

0.1375

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

Total Score 1 3.387

STRATEGIC FACTOR ANALYSIS SUMARY

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Reliance Power Strategic Factors Weight Rating Weighted

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

SO

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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) Weaknesses(W)

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Reliance Power ExternalFactors

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.

“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

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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

• www.google.com

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Reliance Power • www.wikipedia.com

• www. reliancepower .co.in

• “Strategic Management” by Azhar Kazmi

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