Energy

Background:

The passenger vehicle sector represents only about one-quarter of the oil demand barrel and
the current sales volumes of Electric Vehicles are also not bountiful. But what’s peculiar here is
the attention garnered by EVs from the media, environmentalists and most importantly, the
government, which is a matter of concern for energy companies worldwide.

The government of India, in the beginning of this year, agreed to a scheme called ‘Faster
Adoption and Manufacturing of Electric Vehicles in India, Phase II (FAME India Phase II)’, in
order to increase production in the country’s electric mobility segment. Under this scheme, the
government plans to provide support for around 5 Lakhs electric-three wheelers (e-3W), 10
Lakhs electric-two wheelers (e-2W), 7,000 buses and 55,000 four-wheelers (4Ws). The said
scheme also aims to put in place around 2,700 EV charging infrastructure across metropolitan
and mountainous Indian cities and states.

Energy companies are gearing up for this EV onslaught as the charging technology for electric
vehicles (EVs) gradually takes reins from the internal combustion engine and becomes the king
of the road in the rapidly evolving energy landscape.

All about the company:

ABC Limited is a renowned energy supplier majorly involved in upstreaming of oils and gases,
they have petrol pumps all around the country.

Not only is it the largest crude oil and natural gas company in India but also contributes to
around 75 percent of the domestic production in India. ABC Limited is a unique company that
has in-house service capabilities in areas of exploration and production of oil and gas along with
other related oil-field services.

The company has a mission to retain a dominant position in the petroleum sector of India and to
enhance India’s availability of energy. In order to recognize the fact that the resources of
petroleum are dwindling all around the globe, ABC Limited has taken necessary steps to look at
all available forms of energy that can fulfil the growing needs of the country.

The company also has an aim to conduct research in alternate energy, specially on projects that
have the potential to leave an impact on India’s energy landscape.

Opportunities and Challenges:

In the span of 60 glorious years, ABC Limited has crossed numerous milestones to realise the
energy aspirations of the country. Over the years, the journey has been a take of courage,
conviction and commitment. The company’s efforts have proved fruitful in converting earlier
frontier areas into new hydrocarbon provinces. And so, the company has emerged into the
largest E&P companies (in terms of production and reserves) of the world from that of a modest
one in the beginning.

In the recent years, ABC Limited has started working on new initiatives in energy, some of
which include Shale Gas, Coal Bed Methane, Gas Hydrates, Wind Energy, Solar Energy and
Underground Coal Gasification.

But COVID-19 brought with it a number of challenges, some of which are outlined below:

● After three consecutive price reductions in the last 12 months, the gas prices in India are
at their lowest since November 2014.
● According to a survey, ONGC's revenue and EBITDA is estimated to decline by Rs
1,500 crore to 1,600 crore due to lower gas prices.
● The company is already dealing with low oil prices and a further reduction in the prices
of natural gas will exacerbate its decline in earnings.

The probable way out:

The company has suffered huge losses due to the pandemic and the oil crisis. But it has figured
a way out. With a belief that a rapid transition from conventional oil-powered cars to electric
vehicles is both possible and necessary to reduce greenhouse gas emissions and improve
urban air quality, the company now aims to step into the Electric Vehicles segment.

EVs are rapidly moving towards common use and seamless integration will require the right
energy resources to be available in the right places to match demand. Energy suppliers are
planning the uptake of these electric vehicles so that the cost impact is taken care of and the
benefits from the same to the energy market are fully captured.

Investing in the EV charging infrastructure is a difficult choice for ABC Limited as capability
development will incur huge costs for the company and the current rate at which they are being
sold is not promising enough.

As a part of the top management of the company, the onus is now on you to decide whether the
company should invest in the EV charging infrastructure support right now or wait for its demand
to pick up worldwide.

What you need to do:

1) Deduce the approximate number of years ABC Limited has before they start getting into
losses, make relevant assumptions.

2) Suggest what different possible exit strategies can ABC Limited go for. Also explain the future
prospects of each exit strategy

3) For the suggested exit strategies, choose any one and create an entire implementation plan
for ABC Limited.
4) Create a roadmap for this implementation to complete in the number of years deduced in the
first problem.

5) Explain the possible finances and ROI.

6) While devising any strategy, keep in mind that the Board of governors have a vision to project
ABC Limited as a responsible corporation in the industry and in the country. They want your
solutions to touch upon this aspect as well while you work towards achieving your business
goal.