The master thesis “Multiples as M&A tool for valuing wind and solar energy projects in Europe” provides a comprehensive overview of how to value projects with a diverse set of multiples and compares their value for practice. Here is the abstract:
The global shift from an energy system based on fossil fuels to one based on renewable energy causes a significant increase in wind and solar energy production. Consequently, an increased transaction activity of projects in this field can be observed. However, since wind and solar energy projects are unique and hardly comparable, practitioners struggle to implement a relative valuation in their M&A processes. Thus, this thesis investigates the application of multiples for the valuation of wind and solar energy projects. Methodologically, a systematic literature review and a qualitative content analysis based on expert interviews were performed. It was found that EV/MW multiples are used as complementary methodology to the main model, the discounted cash flow valuation. The underlying reasons for not having a relative valuation as primary valuation method are the missing granularity of comparable transactions and the high predictability of cash flows making the DCF more attractive. Further, the thesis showed that practitioners use a sum-of-the-parts valuation model to price heterogenous assets. Additionally, it was found that transaction multiples are relevant for wind and solar energy projects and four distinct sources of multiplies have been identified: Databases from service providers, internal databases, public data, and data from financial advisors. Nevertheless, the study also revealed that there might be a possibility to improve valuation accuracy in the future by deploying a hedonic regression analysis.