Introduction
This case study Luotang Power: Variances Explained is mainly concerned with a study of variances that will show the changes in performance in the company and the external environment that is not within the power plant’s control.
The Luotang Power Company (Luotang) is a 600 Mega Watt (MW) coal fired power plant located in the Hubei Province, China. Luotang first started in 1997, when the Provincial Planning Commission, working on behald of the Hubei Provincial Government, had solicited bids from international power developers to finance, design, build, and poerate a 600MW coal-fired power plant. The project was contracted on a Build Operate Transfer (BOT) Basis, that meant that the power plant would be given to the Hubei Provincial Government after 20 years of operation at no cost. Luotang was mainly rural in nature but development quickly increased when the power plant opened. Luotang is wholly owned by an American independent power producer. Luotang’s parent company is known as China Hua Tong Power (HT Power). It’s primary customer is the Hubei Provincial Power Company (HPPC) and their main coal supplier was the Pindingshan Coal Company (Pindingshan). Tan Min Yi has been the general manager of the Luotang Power Company since 2002.
In this case study, it talks about how Tan has to make a presentation to the Board of Directors of Luotang’s parent company, that is HT Power about the results received in the 2011 Report of Operations. He is concerned about what their reaction will be as the results are disappointing, although the company did perform well for the year. Tan wants to impress the parent company because HT Power is considering a 2,000 MW expansion at Luotang. Other than that, Tan wants to be promoted to the company’s Executive Vice President.
Luotang did not have such good results in their revenues because of a number of reasons. One of