Abstract
Based on the business characteristics and EVA, the paper develops an econometric model for the long-term value of grid corporations in China, and analyzes the value drivers and path selection correspondingly. The study shows that, the growing long-term value of grid corporations derives from the creation of future value, and the fundamental factor is an increase in investment. Grid corporations should target at investment management and capital optimization, realizing the goal of long-term value.
Highlights
Enterprise Value is a measure of the comprehensive enterprises competitiveness, and obviously continuous value creation reflects enterprise’s success
As the state-owned enterprises(SOEs), they are supervised by the State-owned Assets Supervision and Administration Commission of the State Council(SASAC) and evaluated with Economic Value Added(EVA) which targets at the value created in excess of the required return of the shareholders rather than the expansion of scale and profit
For the long-term financial performance and value maximization, the management should concentrate on two dominant elements of value creation: revenue growth and accomplishing a return on invested capital (ROIC) beyond the weighted average cost of capital (WACC)
Summary
Enterprise Value is a measure of the comprehensive enterprises competitiveness, and obviously continuous value creation reflects enterprise’s success. Achieving the maximum of enterprise value becomes the ultimate objective for the enterprise management. Grid corporations in China(State Grid Corporation of China and China Southern Power Grid Corporation) invests in, constructs and operates power grids, providing safer, cleaner, and more economic and sustainable power supply. As the state-owned enterprises(SOEs), they are supervised by the State-owned Assets Supervision and Administration Commission of the State Council(SASAC) and evaluated with Economic Value Added(EVA) which targets at the value created in excess of the required return of the shareholders rather than the expansion of scale and profit. It is essential to develop a econometric model for the long-term value of grid corporations, and analyzes the value drivers and path selection correspondingly
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