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 basedenergy corporation, with about 88.000 employees and annual sales of about 69 billionEuros. It is one of the world's largest investor-owned energy service firms. The coreactivities of E.ON are the generation, transmission and distribution of electricity as wellas the transmission, storage and sale of natural gas.For the corporate evaluation of E.ON, the editor based his calculation on the two mostcommon global evaluation approaches - the discounted cash flow (DCF) and themultiplier method. The DCF method estimates the value of a company by discountingexpected cash flows in the future or determined period of time, similar to the value of aninvestment. For the assessment of the company value, the entity and equity DCFmethod with an assumed constant growth rate between 1.5 and 3 percent, have beenutilized.For the validation of the calculated DCF corporate values the multiplier method wasexecuted as second evaluation method based on Price-Earnings, Price-Book value andPrice-Turnover ratios. For the necessary peer-group, the authors selected the other threebig 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 andhave 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 and146 billion Euros.Finally, the average corporate value of the E.ON AG was determined at approximately109 billion Euros.