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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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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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 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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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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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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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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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

Question Mark Star

High

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

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• 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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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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 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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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

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IFAS (Internal factor analysis summary) table

Internal Factors Weight Rating Weighted Comments

score

Strengths
An aid to overcome
S 1: Huge Capacity generation in
.10 4.0 competitor’s threat
0.40

pipeline
.10 3.5 Will attract potential
0.35 investors
S2: Growth in EPC division
.25 3.0 0.75 Creation of goodwill
S3: Established and good
Image
.10 4.0 0.4 A reliable Company
S4: Reliance – Long term
Investment
.05 0.15 A preference factor for
3.0
S5: BSES – part of Reliance customers
.05 3.0 An aid to overcome
S6: Strategically Located 0.15
competitors
Power Projects

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Weaknesses

W1: Effect on balance sheet due 0.10 3.5 0.35 Threat of having not
adequate working
to funding of new project
capital
W2: Distribution- something new Threat of potential
0.10 3.0 0.30
losses
for Reliance.
Threat of losing
W3: Reliance dynamic 0.10 3.5 0.35 potential customers
approach with creating
“total consumer

experience” could
0.05 3.0 0.15 Threat of not
complicate the process
completing the project
W4: Financing Dadri project on time
a big liability

Total Score 1.0 3.35

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EXTERNAL FACTOR ANALYSIS SUMARY

EFAS (External factor analysis summary) table

External Factors Weight Rating Weighted Comments

score

Opportunities

O1: Huge scope in power Market Expansion

. 10 4.0
sector. 0.40

O2: Setting up largest

.15 3.5 0.525
thermal plant in Orissa, An encouragement for
the management
which has huge deposits
of Coal Reserves.
A beneficial move for
O3: Good timing with the .10 0.30 the company by the
3.0
passing of Electricity Act government
An opportunity to go
O4: Reaping returns of 0.4
4.0 for R & D and
0.1 expansion
generating power
0.15
O5: Abundance of
0.05 3.0 An opportunity for the
intellectual capital in company to hire
India people at low cost
0.3
O6: Nearly half the 3.0
0.1
geographical area An opportunity to earn
more profits
doesn’t have electricity-
Distribution Opportunities

Threats
T1: Any delay in project Need to quickly
0.05 3.5 0.175 implement the projects
implementation.

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T2: Increase in interest rate. 0.10 3.0 0.3 Need to find cheaper
sources of finance
T3: Other players in the 0.05 3.5 0.175
Need to decrease costs
market, like Tata to outplay their
competitors
T4: Future plans depend on
0.05 3.0 0.15 Need to maintain good
government policy amicable relationship
with the government
T5: Dealing with state
Lower costs of
regulators who 0.10 3.75 0.375 operations to absorb
their bargaining
determine tariff rates
powers
T6: Remote possibility Need to have alternate
0.05 2.25 0.1375 strategies
opportunities back
firing

Total Score 1 3.387

STRATEGIC FACTOR ANALYSIS SUMARY

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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

which has huge deposits of Coal Reserves.

O6: Nearly half the geographical area doesn’t

0.08 2 0.16
have electricity- Distribution Opportunities

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: Dealing with state regulators who 0.05 1.5 0.075

determine tariff rates

Total Score 1 2.71

TOWS MATRIX

SO
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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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External
Factors
Opportunities(O) SO Strategies WO Strategies

Use established and good Use distribution which is

image to skim the huge something new for the
potential of the power company to reach and cover
generation sector those places which have no
electricity to generate more
revenue

Threats(T) ST Strategies WT Strategies

Use strategically 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 could be
market 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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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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• www.wikipedia.com
• www.reliancepower.co.in

• “Strategic Management” by Azhar Kazmi

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