Abstract
Abstract The paper aims to analyse the development of the financial leverage and its determinants in companies producing electricity from wind resources in Latvia during 2005-2012. The financial ratio technique is used to compute the financial leverage in the companies and the regression analysis method is employed to determine the relationships between variables. The results of the analysis revealed that wind electricity generating companies use substantial share of debt and the financial leverage is increasing. Statistically significant relationships were found between the financial leverage and profitability of companies, their growth opportunities, collateral value of assets, size of the company and an effective tax rate. Results will be used to construct weighted average cost of capital (WACC) for the economic assessment of investment into wind electricity sector in Latvia.
Highlights
With the aim to increase the level of security of supply and to improve the sustainability of energy sector the Latvian Cabinet of Ministers adopted Regulations No 571 on the Guidelines for Energy Sector Development 2007–2016 (Cabinet of Ministers, 2006)
Hydro resources will play a crucial role in fulfilling the renewable energy sources (RES-E) target, it is expected that the contribution of wind electricity will be meaningful too (National Renewable Energy Action Plan of Latvia, 2009)
The research investigated the development of the financial leverage and its determinants in companies producing electricity from wind sources in Latvia during 2005–2012
Summary
With the aim to increase the level of security of supply and to improve the sustainability of energy sector the Latvian Cabinet of Ministers adopted Regulations No 571 on the Guidelines for Energy Sector Development 2007–2016 (Cabinet of Ministers, 2006). The Regulations set the target for the country's energy sector to increase the share of electricity from renewable energy sources (RES-E) in the final consumption of electricity up to 49.3% in 2010. Seeking to achieve this target the country self-committed to promote the construction of cogeneration units and production of RES-E. Hydro resources will play a crucial role in fulfilling the RES-E target, it is expected that the contribution of wind electricity will be meaningful too (National Renewable Energy Action Plan of Latvia, 2009). There will be installed totally 416 MW of wind power plants in 2020, which will produce up to 910 GWh of electricity (National Renewable Energy Action Plan of Latvia, 2009)
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