Corporate Valuation of the E.ON AG

Seminar paper from the year 2008 in the subject Business economics - Investment and Finance, grade: 2,3, University of Applied Sciences Essen, language: English, abstract: The main scope of this assignment is the valuation of the E.ON AG - a German based
energy corporation, with about 88.000 employees and annual sales of about 69 billion
Euros. It is one of the world's largest investor-owned energy service firms. The core
activities of E.ON are the generation, transmission and distribution of electricity as well
as the transmission, storage and sale of natural gas.
For the corporate evaluation of E.ON, the editor based his calculation on the two most
common global evaluation approaches - the discounted cash flow (DCF) and the
multiplier method. The DCF method estimates the value of a company by discounting
expected cash flows in the future or determined period of time, similar to the value of an
investment. For the assessment of the company value, the entity and equity DCF
method with an assumed constant growth rate between 1.5 and 3 percent, have been
utilized.
For the validation of the calculated DCF corporate values the multiplier method was
executed as second evaluation method based on Price-Earnings, Price-Book value and
Price-Turnover ratios. For the necessary peer-group, the authors selected the other three
big players RWE, EnBW and Vattenfall, which form an oligopoly market in Germany.
Including E.ON they own more than 70 percent of German energy infrastructure and
have a market share of about 95 percent.
The calculation of the different entity and equity based discounted cash flows and P/E,
P/B and P/T ratios resulted in a wide range of corporate values between 73 billion and
146 billion Euros.
Finally, the average corporate value of the E.ON AG was determined at approximately
109 billion Euros.