Energie AG's value management strategy is an instrument for measuring and controlling the economic success of the Group's business activities. It serves to assess the attractiveness of investing activities and secures the company value as well as generating a capital market-oriented return for the owners. Along with the operating result, the weighted average cost of capital (WACC) is of essential importance. The WACC value serves as the basis for determining the minimum yield requirements for Group management and is therefore used as a yardstick for value generation in the Company.
Energie AG calculates the cost of capital as the weighted average of equity and borrowing costs. The cost of equity is determined using the capital asset pricing model (CAPM). Calculations take into account the risk-free interest rate, a country risk premium, a market risk premium and a beta factor. Borrowing costs are composed of the risk-free interest rate, a country risk premium and the credit spreads of the peer group. The parameters specified by the regulatory authority are used for the regulated business units. The capital costs of the business units with activities on non-regulated markets are determined using the reporting-date principle and based on market conditions. In a further step, the bottom-up method is used to weigh these costs up unto the Segment and Group capital costs.
This WACC method is subjected to on-going evaluation taking current publications and expert opinions into consideration. Adaptations are made as needed. Moreover, the costs of capital are continuously monitored against the background of a volatile financial market environment. The consolidated WACC value for the 2020/2021 fiscal year was 4.0% (previous year: 4.2%).
Along with the operating result, one of the most important key figures for operational Group management during the fiscal year is the ROCE (Return on Capital Employed), which indicates how efficiently and profitably the available capital is utilised. The ROCE is calculated as the quotient of Net Operating Profit After Tax (NOPAT) and average Capital Employed.
The NOPAT key figure denotes the taxed profit from operating activities excluding the at equity result of associated companies. One-time effects such as impairments and market valuations are taken into account and are included in the NOPAT. When calculating taxes, all at equity income is eliminated in the tax base, as the former is already adjusted for taxes.
The capital employed is derived by subtracting the non-productive assets and non-interest-bearing liabilities from the average total assets. It reflects the interest-bearing capital pooled in the company. The average capital employed (ø CE) is calculated as the average of the total capital employed of the last two fiscal years. Capital employed includes the carrying amount of the investments accounted for using the equity method, excluding the associated strategic investments. For information on Capital Employed, please refer to the Notes to the Consolidated Financial Statements, section 7. Segment reporting.
The goal of the Energie AG Group is to generate an ROCE above WACC through consistent value-oriented corporate management and control. The ROCE minus the WACC results in the relative value contribution. The absolute value added is calculated by multiplying it by the capital employed. The higher this value is, the more economically successful the respective activity has been. The value contribution is influenced by various variables. In addition to the development of operating earnings, the level of ROCE and value added specifically depends on the capital employed. The NOPAT key figure corresponds to EBIT less related taxes in the amount of EUR 39.8 million and other items in the amount of EUR 26.1 million.
In the Energie AG Group, in addition to strategic considerations, resources for future capital investments and acquisitions are allocated by prioritising projects exclusively on the basis of the presented value-oriented criteria and methods.
In the 2020/2021 fiscal year, the ROCE of the Energie AG Group was 6.8%, 0.9 percentage points above the previous year (5.9%).