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Evaluation of Synergies in the Context of European Multi-Business Utilities

Author

Listed:
  • Jens Fuhrmann

    (RWTH Aachen University, Templergraben 55, 52056 Aachen, Germany)

  • Reinhard Madlener

    (Institute for Future Energy Consumer Needs and Behavior (FCN), E.ON Energy Research Center/School of Business and Economics, RWTH Aachen University, Mathieustraße 10, 52074 Aachen, Germany
    Department of Industrial Economics and Technology Management, Norwegian University of Science and Technology (NTNU), Sentralbygg 1, Gløshaugen, 7491 Trondheim, Norway)

Abstract

In this paper, we evaluate selected multi-business utilities in the European energy market with regard to synergy potentials. To this end, we survey the development of the energy market in Europe and the performance of integrated versus focused utilities regarding their capital market performance measured by their corporate surplus (or deficit). The analysis is restricted to true business integration, in contrast to horizontal or vertical cooperation among separate firms. The German utility company RWE is analyzed in more detail. We find that, over the last 10–15 years, most of the multi-business utilities investigated underperformed compared to more focused utilities, and that they were even below the STOXX Europe 600 utilities index. Furthermore, synergy potentials need to be evaluated continuously, especially when influencing factors, with the potential to act as “game changers”, are either emerging on the horizon or are already present. We conclude that operating an integrated business model is not necessarily outdated in today’s energy markets, and offers a number of advantages.

Suggested Citation

  • Jens Fuhrmann & Reinhard Madlener, 2020. "Evaluation of Synergies in the Context of European Multi-Business Utilities," Energies, MDPI, vol. 13(24), pages 1-41, December.
    • Handle: RePEc:gam:jeners:v:13:y:2020:i:24:p:6676-:d:463815
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    References listed on IDEAS

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    1. Barbara Glensk & Reinhard Madlener, 2019. "Energiewende @ Risk: On the Continuation of Renewable Power Generation at the End of Public Policy Support," Energies, MDPI, vol. 12(19), pages 1-25, September.
    2. Raffaele Morandi Stagni & Juan Santaló & Marco S. Giarratana, 2020. "Product‐market competition and resource redeployment in multi‐business firms," Strategic Management Journal, Wiley Blackwell, vol. 41(10), pages 1799-1836, October.
    3. Specht, Jan Martin & Madlener, Reinhard, 2019. "Energy Supplier 2.0: A conceptual business model for energy suppliers aggregating flexible distributed assets and policy issues raised," Energy Policy, Elsevier, vol. 135(C).
    4. Sueyoshi, Toshiyuki & Goto, Mika, 2011. "Operational synergy in the US electric utility industry under an influence of deregulation policy: A linkage to financial performance and corporate value," Energy Policy, Elsevier, vol. 39(2), pages 699-713, February.
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    Cited by:

    1. Margarida Casau & Diana C. M. Cancela & João C. O. Matias & Marta Ferreira Dias & Leonel J. R. Nunes, 2021. "Coal to Biomass Conversion as a Path to Sustainability: A Hypothetical Scenario at Pego Power Plant (Abrantes, Portugal)," Resources, MDPI, vol. 10(8), pages 1-20, August.
    2. Rohlfs, Wilko & Madlener, Reinhard, 2013. "Challenges in the Evaluation of Ultra-Long-Lived Projects: Risk Premia for Projects with Eternal Returns or Costs," FCN Working Papers 13/2013, E.ON Energy Research Center, Future Energy Consumer Needs and Behavior (FCN).
    3. Harmsen - van Hout, Marjolein & Ghosh, Gaurav & Madlener, Reinhard, 2013. "The Impact of Green Framing on Consumers’ Valuations of Energy-Saving Measures," FCN Working Papers 7/2013, E.ON Energy Research Center, Future Energy Consumer Needs and Behavior (FCN).
    4. Harmsen - van Hout, Marjolein & Ghosh, Gaurav & Madlener, Reinhard, 2013. "An Evaluation of Attribute Anchoring Bias in a Choice Experimental Setting," FCN Working Papers 6/2013, E.ON Energy Research Center, Future Energy Consumer Needs and Behavior (FCN).

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