Value-based corporate management is firmly anchored in all of Energie AG's management processes. The central objective is sustainably ensuring corporate value by increasing potential benefits and generating returns for the owners on a capital market-oriented returns basis.
The weighted average cost of capital (WACC) is of central importance for the assessment of a company's value enhancement. The WACC complies with the minimum yield requirements of Group management and thus serves as a yardstick for the creation of company value. It is calculated on the basis of the weighted average cost of equity and debt. The capital costs of the non-regulated business units are determined using the reporting-date principle and based on market conditions. In a second step, the bottom-up method is used to weight these costs into the Segment and Group capital costs. The parameters specified by the regulatory authority are applied to regulated sectors.
Energie AG's cost of capital accounting is subjected to on-going evaluation, and adapted as needed, taking current publications and expert opinions into consideration. Furthermore, against the background of the volatile financial market environment, the development of the cost of capital is continuously monitored. The Group WACC for the fiscal year 2017/2018 was 4.4% (previous year: 4.9%).
The value-oriented Group targets are broken down to the individual Segments and business units, taking into account the strategy pursued and the business-specific general conditions, continually monitored and reported periodically by the Group's managerial accounting and governed by the management.
The central key indicator for operational Group management during the fiscal year is the Return on Capital Employed (ROCE), which shows how efficiently and profitably the available capital is used. This key figure is calculated as the ratio between Net Operating Profit After Tax (NOPAT) and average Capital Employed. NOPAT corresponds to EBIT less related taxes in the amount of EUR 38.3 million and other items of EUR 12.9 million. For information on Capital Employed, please refer to the Notes to the Consolidated Financial Statements.
By comparing ROCE or long-term Internal Rate of Return (IRR) and WACC, business units and projects are evaluated with regard to the generation of value added. Apart from strategic considerations, resources for future investments and acquisitions are allocated by prioritising projects exclusively on the basis of value-oriented criteria and methods (e.g. project-specific risk surcharges).
In the 2017/2018 fiscal year, the ROCE of the Energie AG Group was 7.4%, 2 percent points below the figure for the previous year (9.4%).