Colbun and the future of Chile Power Harvard Case Solution & Analysis

Colbun and the future of Chile Power Case Study Solution

Energy Mix

Based on the future decisions for Colbon, the company is mainly relying on the energy mix, which were scarce in the local territories and the company was meeting the demand through arranging the energy sources by importing from Argentina, Nigeria, and Brazil etc. The major energy sources include oil, coal, LNG, natural gas and diesel which were less preferred by the company. Moreover, the focus of the company started to vary significantly by changing its energy sources towards more renewable forms such as biomass, wind, nuclear, solar, bio fuels and hydropower etc. the latest energy source to meet the legislative requirement is geothermal by generating energy through non-conventional renewable energy.

Management of possible risks:

The possible risks of regulations can be managed by hedging the risk through the sale of the electricity via long-term contracts which will eventually mitigate the risk of volatile outputs and inputs. Moreover, to overcome the volatility in oil prices can be resolved by building own plants for diesel and coal fire to meet the demand without incurring any loss and focusing mainly on the non-conventional renewable energy. Furthermore, the risk of NGO’s action was managed by showing the opportunity for new energy sources and winning the case filed by environmental groups.

Strategies for mitigating risks:

The Colbun Company strived really hard to mitigate the risks of climatic change and environmental changes locally and the management of the company was able to develop long-term strategic and short-term solutions by adapting its strategy towards optimization by focusing on the low-cost natural gas and hydropower. This was resolved by enhancing the capacity for meeting the increasing demand and making contracts which are compatible with achieving the goals of new energy matrix of the company. Moreover, the company also tried to reduce the long-term contracts, entering into hedging contracts against diesel cost, additions in backup facilities and modifying the terms of existing contracts through negotiations.

Long-term contracts:

The company should sell through the long-term contracts which are profitable such as entering into the long-term contracts for four projects of hydropower CERs and CDM and this will include the sales of total CERs of around 2.45 million after taking into consideration the individual available sales at selected prices.

Moving forward towards HidroAysen issues:

The issues faced by the company in developing HidroAysen project will lead to move forward by meeting all the standards regarding the green environment and company will have to fit the transmission lines, which must cross around 66 cities and 9 regions in total. Moreover, the transmission lines’ environmental study was kept on hold until the new regulation on energy policy is amended.

Recommended Strategy:

In light of these events, the company may develop a business strategy in a manner so that it may move towards market penetration by meeting all the regulatory requirements regarding the environment and may be able to meet the increasing demand through the hedging not only against the diesel. But, it should work on the hydro power project to meet the energy requirements by developing its own power plant and easily compete in the market as well.....................

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