Heat and Power Limited plan to licence the technology developed by Colin Risbridger to build a number of farm based digesters on shareholders premises rather than the traditional route of selling the equipment. How are we going to compete in business? Our company will follow a strategy which can be defined as a prospector; we operate in the emissions reduction market place where there is a broad product market which undergoes periodic redefinition. We shall value being a ‘first mover’ developing new products and market areas even when these efforts don’t prove to be highly profitable. We need to gather market information quickly so we can respond to market signals rapidly and enter new areas of opportunity. We can only compete by stimulating and meeting new market opportunities and building a substantial ‘asset base’ in our home market. We need to get our products into our home market rapidly so we face little or no competition until these markets become established. Our strategy is well suited to the unstable, rapidly changing environment resulting from new technology and shifting customer needs. Industries in the emission reduction marketplace tend to be at an early stage in their life cycles and this offers many opportunities for new product-market entries. The industry structure is unstable because few competitors are present and this is accentuated in the North of Scotland and in particular the Orkney Islands.

Because we emphasise the development of new products and markets we will be strong in, and devote substantial resources to, two broad areas of competence: first, R&D, product engineering and other functional areas that identify new technology and convert it into innovative products; second, marketing research, marketing and sales – functions necessary for the identification and development of new market opportunities.

Our business strategy consists of five components; scope; goals and objectives; resource deployment; sustainable competitive advantage; and synergy.

Scope

We operate in a broad and dynamic market place which is driven by the Kyoto Protocol and the recognised need to reduce emissions of greenhouse gases. Our technology and customer segments are not well established providing many areas of opportunity. Due to the nature of our competitive environment we will regularly review the scope of our strategy. We will organise our strategy around the core technology of anaerobic digestion which will lead to the development of a number of complementary products. We will identify all opportunities to bring our company closer to both its investors and customers by integrating vertically wherever possible.

Goals and Objectives

• Our goal is to maintain 80% of our home market in the Orkney Islands and reach a market capitalisation of £1M by 2012.

• Our objective is to increase profitability year after year until we achieve 25% of capital employed.

• Our goal will be to generate 25% of our profits from new products introduced in the last 5 years.

Our strategy will deliver discounted cash flows which will exceed the business cost of capital and deliver shareholder value in the form of an annual dividend between 5-7% whilst maintaining the ethics of the business in delivering significant reductions in greenhouse gases.

Sustainable Competitive Advantage

The company believes that the only way to maintain a sustainable competitive advantage is to continually innovate by producing new products and providing an exemplary level of customer service with every product produced. We need to minimise the distance between investor, business and customer to promote a sense of ownership and loyalty between the three distinct groups. All customers should be encouraged to become shareholders of the company to foster a long term relationship encouraging the customer feedback we require in order to maintain the level of innovation required to achieve a sustainable competitive advantage.

Resource Deployment

We will allocate our resources differently across product markets, functional areas, and activities. We will devote the majority of our resources to the development of new product markets. Because such markets will require more cash to develop than they produce in the short term we will need an injection of financial resources by opening a share issue.

Synergy

We need to be able to adapt our business quickly and remain flexible in our approach. It is critical that we identify synergies between the products we develop so we can make use of a common skills base to develop these products. The duration of time required to take a product to market will be highly reflective of the changes in that marketplace therefore we have to be able to change the deployment of our resources from one product to another to ensure we gain ‘first mover’ advantage. We shall share our technology, engineering skills and market knowledge with our investors to we can maximise the success rate of the products we develop.

A product is defined as anything that satisfies a want or need through use, consumption or acquisition. Conceptually, products should be thought of as problem solvers since they are purchased because of the core benefits they provide. What is important for our business is how our customers perceive the product as satisfying a need, not how we see our product. Our business needs to turn wanted benefits into tangible products with features and attributes that will provide the intended satisfaction and sense of well being greater than that of our competitors. Our business wants to position our products as speciality products where our customers and investors make a special effort to acquire them. We want our customers and investors to feel unwilling to settle for any substitute for the preferred product. The retail is especially important in creating this brand loyalty and success of speciality goods therefore we will limit the distribution of our products in an effort to get a very strong local sales support. Those unable to obtain our products initially will still be able to join the Heat and Power Limited family by investing thereby ensuring future access to the product.

Localisation Strategy

Our business premise of reducing greenhouse gas emissions means our products and programmes must be adapted to the needs and wants of our customers and investors which means reducing the distance between the business and its customers. In order to create a sense of speciality products we will focus on a localisation strategy and ensuring our business concentrates first on developing an asset base in its locality although we shall still be willing to export the benefits of ownership. Localisation will allow our business to grow whilst minimising the impact of our business in terms ofits own impact on greenhouse gas emissions. As we build up an number of investors and thereby customers in different localities we shall then duplicate our business efforts in that locality. We shall grow the business on the premise of locality ensuring we provide speciality products, a sense of wellbeing and purpose and a feeling of family.

Product Quality

Our business needs to approach quality by looking at it from the perspective of our customers; we need to understand fully what they mean when they recognise quality. Our business defines quality as aesthetics, performance, reliability, after sales support and brand familiarity. These key characteristics will be essential to the success of our business and the building of brand loyalty.

Branding

Branding identifies and helps differentiate the products of one business from that of another. It consists of a name, sign, image or symbol, or some combination thereof. Branding is important because it simplifies purchasing decisions in the mind of the consumer and promotes confidence in the product. Branding helps the business by enhancing the effectiveness of marketing programmes; enhancing brand loyalty and profitability as it is cheaper to retain customers than to attract new ones; enhancing opportunities to extend the brand; enhances margins resulting from the brand competitive advantage; and by channelling relationships with customers and investors. Our business needs to build a brand by increasing our brand name awareness, loyalty, perceived quality and association. It is important for our business to build a brand identity because it is difficult for our consumers/investors to measure objectively the benefit our businesses reduction in greenhouse gases will bring on climate change. Our business aims to create a family brand whereby our name and brand covers all of our products.

Servicing Products

The servicing of our products will include the following variety of activities; reliability, warranty; repair and maintenance, efficient handling of complaints, credit availability, prompt handling of enquiries, fast processing of quotes and orders. Our business should excel in customer service as it is our aim for our customers to also be our shareholders and we need to provide excellent customer service in order to obtain a competitive advantage. The home market we operate in is very sensitive to service therefore we will rely on the satisfaction of our customers and shareholders in order to gain market share.

Heat and Power Limited will develop the following product portfolio;

Energy related products

We will work on developing our core competence in anaerobic digestion technology to provide biogas: a flexible energy form which can be used for heat, power and transport. We will strive to continue and develop our product performance to increase the efficiency of energy provision.

Mission Statement for Energy related products - ‘To produce an affordable alternative to fossil fuels in providing heat, power, and transport whilst reducing the emission of greenhouse gases’.

Waste related products

We will work on developing our core competence in anaerobic digestion technology to provide an alternative to landfill in disposing of organic wastes.

Mission Statement for Waste related products – ‘To recognise that organic materials are not a waste but a source of energy and nutrients and ensure that they are utilised rather than disposed’.

Agriculture, Horticulture and Aquaculture products

We will develop the use of and quantify the benefits provided by digestate as a source of nutrients for agriculture, horticulture and aquaculture.

Mission Statement for Agriculture, Horticulture and Aquaculture related products – ‘To provide the opportunity for food related businesses to diversify and produce a cost effective source of organic nutrients providing a sustainable resource for agriculture, horticulture and aquaculture ensuring the production of environmentally responsible foodstuffs’.

Research, Development and Demonstration related products

We will grow our research activities to create a centre of excellence around anaerobic digestion and the products it produces. The centre of excellence will include the demonstration of all our products and become an attraction to both tourists and educational establishments.

Mission Statement for Research, Development and Demonstration related products – ‘To provide a facility which provides a highly visual and symbolic demonstration of greenhouse gas reduction technology which inspires a sense of inclusion and confidence amongst individuals, communities and businesses alike ’.

In each of these activities we will closely monitor the effect of our products in reducing greenhouse gas emissions and use our actions to demonstrate to government the possibilities that innovation can provide.

Our short term target is to develop and expand the number of Anaerobic digestion (AD) plants to digest organic wastes which is a proven, well-tried and tested technology. Many European countries are using or are interested in using biogas for combined heat and power production to supply electricity from renewable sources.

We feel that initially on farm Anaerobic Digestion schemes offer the most appropriate way forward for AD technology. An annual total of 235,000 t/y of manure is produced from housed livestock in Orkney (91% beef cattle; 9% dairy). The energy potential from AD of this manure is over 135,000 GJ, or the equivalent of 3.7 Million litres of road fuel.