Luotang Power

In: Business and Management

Submitted By haozhang910903
Words 3675
Pages 15
9-913-533
JANUARY 29, 2013

ROBERT SIMONS
CRAIG CHAPMAN

Luotang Power: Variances Explained
Introduction
As soon as Tan Min Yi received the 2011 Report of Operations for the Luotang Power Company, he called company Controller Fiona Zhu and Sales Manager Ricky Wang into his office to discuss the results. Tan was general manager of the Luotang Power Company, a 600 Mega Watt (“MW”)1 coalfired power plant, located in Hubei Province, China. He was scheduled to make a presentation to the
Board of Directors of his parent company, China Hua Tong Power (“HT Power”), the following week about the most recent results and was concerned about their reaction to the disappointing results.2
Tan knew his company had performed well during the year. Both plant availability3 and fuel economy had improved over the previous year. Additionally the plant’s primary customer, the Hubei
Provincial Power Company (“HPPC”), had met its contractual electricity purchase obligations for the year. However, there had been limited opportunity to sell energy above the contractual minimum, either to HPPC or others. Still, Tan felt that these factors were outside his control. His team had performed well—it just didn’t show up in the financial results.
The scheduled presentation to the Board was important for two reasons. First, HT Power was considering a 2,000 MW expansion at Luotang. However, on a more personal note for Tan, he had been general manager of Luotang since 2002, and he hoped it would be time for a promotion. He hoped that HT Power would consider him for the company’s Executive Vice President position. He also knew how critical fuel price management was to HT Power’s success but wasn’t completely sure how well his team had managed this aspect of the business during the year. Would HT Power pass
1 One megawatt (MW) is equivalent to 1,000 kilowatts (KW). A one megawatt…...

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