Valuation of Renewable Energy Investments Practices among German and Swiss Investment Professionals 1st edition by Christian Hürlimann 3658274696 9783658274696

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ISBN 10: 3658274696 

ISBN 13: 9783658274696

Author: Christian Hürlimann 

In this book, Christian Hürlimann examines valuation methods and their application in the context of managerial finance within renewable energy investments. Besides a review of classical finance models, the application of other contemporary techniques are discussed. Based on a mixed-methods approach, current practices in performing valuation are empirically analyzed among German and Swiss investors. The developed concepts provide practitioners tools to define equity value drivers, consider risk treatments and value investments along the two dimensions of value creation and value protection.​

Valuation of Renewable Energy Investments Practices among German and Swiss Investment Professionals 1st table of contents: 

1 Introduction
1.1 Background and Relevance of Research
1.2 Scope and Framework of Research
1.3 Contribution to Research
1.4 Research Approach
1.5 Publications
1.6 General Outline of the Thesis
2 Literature Review
2.1 Renewable Energy Projects and Investors
2.1.1 Characteristics of RES-E Projects
2.1.2 Investors and Investment Motives
2.2 The Concept of Risk, Return, and Value
2.2.1 Risk and Uncertainty
2.2.2 Probability/Likelihood and Consequence
2.2.3 Strategic Considerations of Handling and Managing Risk
2.2.4 The Risk-Return Trade-Off Concept
2.2.4.1 Valuing Risk, Risk Premium, and Expected Return
2.2.4.2 Risk-Return Trade-Off
2.2.4.3 Project Life Cycle
2.2.5 The Concept of Diversification
2.3 Risk Management in Valuation
2.3.1 Assessment of Uncertainty and Risk
2.3.2 Risk Components in RES-E Projects
2.3.3 The Integrated Risk-Return Concept
2.3.3.1 Project’s Stand-Alone Risk in Valuation
2.3.3.2 Market or Within-Firm Risk in Valuation
2.3.4 Risk Mitigation
2.4 Capital Budgeting Techniques
2.4.1 Finance-Mathematical Concepts
2.4.1.1 Time Value of Money
2.4.1.2 Cash Flow Streams and Valuation Phases
2.4.1.3 Financing Policies
2.4.2 Reviewing Existing Valuation Methodologies
2.4.2.1 Discounted Cash Flow-based Methods
2.4.2.2 The NPV and IRR
2.4.2.3 Non-DCF-based Methods
2.4.2.4 Real Option Valuation
2.4.3 Basics of CoC Approaches
2.4.3.1 Opportunity Costs and Equivalent Principle
2.4.3.2 Weighted Average Cost of Capital
2.4.3.3 Hurdle Rate Approach
2.4.3.4 Discount Rate, Risk, and Time Value of Money
2.4.4 Risk Treatment within Valuations
2.4.4.1 Risk-Adjusted Discount Rates
2.4.4.2 Financial and Risk Performance Measures
2.4.4.3 Certainty Equivalent Method
2.4.4.4 Decoupled NPV
2.4.4.5 Integrated Risk Return Management process
2.5 Theoretical Principles about CoC
2.5.1 Capital Asset Pricing Model and Alternative Approaches
2.5.2 Estimating Expected Returns of NTAs
2.5.2.1 Indirect Approach
2.5.2.2 Proxy Techniques
2.5.2.3 Qualitative Approach
2.5.2.4 Semi-quantitative Approach
2.6 Investment Appraisal—Value, Price, Measures, and Managerial Judgement
2.6.1 Value-based Management
2.6.2 Value, Price, and Influencing Factors
2.6.3 Feasibility and Viability Measures for Investments
2.6.4 Non-numerical Factors and Managerial Judgements in Investment Appraisals
2.7 Summary and Conceptualisation
2.7.1 Summary of Literature Review
2.7.2 Research Gaps
2.7.3 Conceptual Framework
2.7.4 Initial Subcategories and Themes
3 Research Philosophy and Ethics
3.1 Research Philosophy
3.1.1 Research Philosophy in Literature
3.1.1.1 Definition and Relevance of a Philosophical Stance
3.1.1.2 Positivism versus Interpretivism
3.1.1.3 Connecting Philosophical Stances with Methodological Approaches
3.1.2 Philosophical Stance and Assumption of this Research
3.1.2.1 Critical Realism as Underlying Research Stance
3.1.2.2 Critical Realism and MMR
3.1.2.3 Critical Realism and Researcher’s Values
3.2 Research Ethics
3.2.1 Ethical Considerations in Quantitative Phase
3.2.2 Ethical Considerations in Qualitative Phases
4 Empirical Research Approach and Methods
4.1 Data Collection and Data Analysis in MMR Design
4.1.1 Mixed-Method Approach in Literature
4.1.1.1 Terminology
4.1.1.2 Rationale for Choosing the MMR Approach
4.1.1.3 Exclusion of Other Research Approaches
4.1.14 Mixed-Method Processes and Typology Design
4.12 Applied MM in this Research
4.1.2.1 Applied Explanatory Sequential Design
4.1.2.2 Overview and Research Stages
4.1.2.3 Justification for the Chosen Approach
4.1.2.4 Applied Data Collection and Analysis Methods
4.1.3 Targeted Population and Sampling Strategy
4.1.3.1 Sampling Technique in Exploratory qual Phase
4.1.3.2 Sampling Technique in QUAN Phase
4.1.3.3 Sampling Technique in QUAL Phase
4.2 Initial Exploratory Qualitative (qual) Interview Phase
4.2.1 Data Collection Exploring Process
4.2.2 Initial Data Analysis
4.3 Primary Quantitative (QUAN) Survey Phase
4.3.1 Research Hypotheses
4.3.2 Quantitative Data Collection
4.3.2.1 Designing the Questionnaire
4.3.2.2 Performed Quantitative Data Collection
4.3.3 Structure of Survey Questionnaire
4.3.3.1 Risk Assessment
4.3.3.2 Risk Mitigation
4.3.3.3 Capital Budgeting Techniques
4.3.3.4 Cost of Capital
4.3.3.5 Valuation Adjustments for Specific Risk Components
4.3.4 Statistical Analysis
4.3.4.1 Data Processing before Analysis
4.3.4.2 Performed Statistical Analysis
4.4 Primary Qualitative (QUAL) Interview Phase
4.4.1 Research Design of Qualitative Research
4.4.1.1 Interview Protocol Development
4.4.1.2 Investment scenarios
4.4.2 Qualitative Data Collection and Documentation Process
4.4.3 Qualitative Data Analysis
4.4.3.1 Coding Qualitative Data
4.4.3.2 Computer-Assistant QDA Software (CAQDAS)
4.4.3.3 Presentation of Findings of Qualitative Analysis
4.5 Inference Phase
4.5.1 Minor Stages of Integration
4.5.2 Primary Stage of Integration
4.5.3 Inference Analysis and Framework Development
4.6 Quality, Validation, and Credibility of Research
4.6.1 Mixed-Methods Research Quality
4.6.2 Assuring Validity of the Qualitative Phases
4.6.3 Validity Check of the Quantitative Phases
4.6.3.1 Non-Response Bias
4.6.3.2 Robustness of Results
4.6.4 Assuring the INF Quality
4.6.5 Assuring the Quality in Relation to the Applied MMR Design
5 Results and Findings
5.1 Findings of Exploratory Qualitative (qual) Phase
5.1.1 Inputs for QUAN Phase
5.1.2 Inputs for QUAL Phase
5.2 Results of Quantitative (QUAN) Analysis
5.2.1 Firm and Participant Statistics
5.2.2 Analysis Results
5.2.2.1 Risk Assessment
5.2.2.2 Risk Mitigation
5.2.2.3 Capital Budgeting Techniques
5.2.2.4 Cost of Capital
5.2.2.5 Valuation Adjustments for Specific Risk Components
5.2.3 Results of Validity Check
5.2.4 Support and Rejection of Hypotheses
5.2.3 Interesting Phenomena to be Analysed in QUAL Phase
5.3 Findings of Qualitative (QUAL) Analysis
5.3.1 Findings from Investment Scenario Discussions
5.3.2 General Findings about Valuation Processes
5.3.3 Numerical Approaches in Capital Budgeting
5.3.3.1 Discount Cash Flow-based Methods as Main Valuation Approaches
5.3.3.2 The IRR and/or NPV
5.3.3.3 Cash Flow Levels—Entity and/or Equity Approach
5.3.3.4 Distribution Potential to Equity Investors
5.3.3.5 Certainty Equivalent Approach
5.3.3.6 Profitability Index
5.3.3.7 RES-E-specific Multiples
5.3.3.8 Payback Period Approach
5.3.4 Judgmental Approaches in Capital Budgeting
5.3.4.1 Evidence for Judgmental Assessments in RES-E Valuation
5.3.4.2 Due Diligence and Transaction Processes
5.3.4.3 Key Characteristics of RES-E Projects
5.3.4.4 Synergies, Upside Potential, Existing Portfolio, and Diversification
5.3.5 Cost of Capital Approaches
5.3.5.1 Discount rates
5.3.5.2 Equity and/or Total CoC (Project Return Rate)
5.3.5.3 Setting Return Rates with Theoretical Concepts
5.3.5.4 Setting Return Rates with Market Sounding
5.3.5.5 Hurdle Rates
5.3.5.6 Risk-Adjusted Discount Rate
5.3.5.7 Static to Dynamic Discount Rates
5.3.6 Risk Considerations in Valuation
5.3.6.1 Risk Mitigation
5.3.6.2 Valuation Adjustments for Risk
5.3.6.3 Risk Components
5.3.6.4 Risk Assessments
5.3.6.5 Understanding Risk and Risk Preferences
5.3.6.6 Explanations for Puzzling QUAN Result
5.3.7 Influencing Factors in Valuation
5.3.7.1 Risk and Return
5.3.7.2 Investment Pressure
5.3.7.3 Market Forces
5.3.7.4 Involved Parties—Experiences and Communication Process in Transactions
5.3.7.5 Personal Interest, Incentives, and Biases
5.3.7.6 Investor and Investment Strategy
5.4 Findings from INF Analysis
5.4.1 Inferences within Capital Budgeting Approaches
5.4.2 Inferences within CoC Approaches
5.4.3 Inferences within Risk Assessment, Risk Mitigation, and Adjustments for Risk
5.4.4 Inferences about Influencing Factors in Valuation
5.4.5 Inferences about Answer Behaviour
5.5 Final Concepts
5.5.1 Equity Value Driver and Influencing Factor Model
5.5.2 Uncertainty/Risk Consideration Model in Valuation
5.5.3 Integrated EVCaP Model
6 Conclusion and Outlook
6.1 Discussion
6.1.1 Risk Components and their Prioritisation, Processing, and Impact on Valuation
6.1.2 Applied Valuation Techniques and Encountered Influences and Deficiencies
6.1.3 Proposed Valuation Concepts
6.2 Contribution to the Body of Knowledge
6.3 Contribution to Practice
6.4 Limitation of the Research
6.5 Direction for Further Research
6.6 Personal Reflection about Research Journey

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Tags: Valuation, Renewable Energy, Investments Practices, Swiss Investment, Christian Hürlimann