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Corporate Governance and Investments in Energy Production Anders Sandoff, PhD School of Business, Economics and Law, Göteborg University anders@handels.gu.se. The importance of corporate governance. Separation of ownership and control Different goals and attitudes towards risk

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Corporate Governance and Investments in Energy Production
  • Anders Sandoff, PhD
  • School of Business, Economics and Law, Göteborg University
  • anders@handels.gu.se
the importance of corporate governance
The importance of corporate governance
  • Separation of ownership and control
    • Different goals and attitudes towards risk
  • Changes are taking place
    • Increased focus on corporate responsibility
    • The role of the corporate board of directors
  • The situation for the power and heat producers
    • Heavy investment needs
    • Widespread State and municipal ownership
    • Potentially high profit margins
    • Low public trust and presence of externalities
how does this effect investments in energy production
How does this effect investments in energy production?
  • Web survey
  • All municipally controlled energy companies in Sweden with power and heat production (approx 100)
  • Chairman of the municipal executive committee
  • Chairman of the board of directors
  • Chief Executive Officer (CEO)
  • Targeted question areas
      • Ownership motives and goals for the company
      • Constitution, operation, role and competence of the board
      • Capital budgeting practices
      • Attitudes towards investments in power and heat production
      • Boundaries of an utility
tentative results
Tentative results
  • Based on approximately 40 % response rate
  • Multiple choice questions
  • Response scale based on literature studies and interviews
  • Work in progress
  • Only graphic display of frequency distributions
  • No non-response analysis
  • Answers are to a limited extent based on responses from the same companies
motives for municipalities to own an energy company
Motives for municipalities to own an energy company

Chairman of the municipal executive committee

CEO

  • Influence the local energy system
  • Influence local environment
  • Low price district heating
  • Lower price distribution
  • Increase regional attractiveness
  • Financing other municipal activities
  • Increases quality in other activities
  • More profitable than selling
  • Gives financial stability
  • Heritage/historical reasons
  • Unclear motives
  • Other than above

Chairman of the board of directors

importance of municipal owner for development last ten years coming ten years
Importance of municipal owner for developmentlast ten years / coming ten years

Chairman of the board of directors

  • Very little importance
  • Little importance
  • Some importance
  • Important
  • Very important
  • No opinion

CEO

most likely reasons for investing in energy production coming five years according to ceo
Most likely reasons for investing in energy production coming five years, according to CEO
  • New connectable heat
  • Profits from power sale
  • Value of green certificates
  • Value of CO2 allowances
  • Need for added reserve capacity
  • Need for increased efficiency in existing production
  • Need for exchanging existing production units
  • Environmental reasons
  • Increased flexibility
  • High financial solidity
  • Customer demands
  • Owner demand
most important changes of the company s current operations in the coming ten years
Most important changes of the company's current operations in the coming ten years

Chairman of the board of directors

  • Increased environmental focus
  • More power production
  • More wind power
  • More CHP
  • More heat production
  • More energy services
  • Expansion of district heating system
  • Expansion of gas grid
  • Reinforcement of power grid
  • Expansion of residential house district heating
  • Existing operations doesn't need to be changed
  • Other changes

CEO

early lessons
Early lessons
  • Wide spread knowledge about owners motives
  • Influence the local energy system
  • Influence local environment
  • Low price in district heating
  • CEO acknowledge the significance of these motives
  • Municipalities is seen as important as owners
  • Expansion of district heating
  • New connectable heat is seen as the main driving force for investments
  • Important to expand residential house district heating
  • Large interest in CHP production
  • Many investments will be driven by aging equipment
possible lines of business if economically attractive
Possible lines of business, if economically attractive…

Chairman of the board

  • Sales of heat pumps
  • Sales of heat exchangers
  • Drying of biomass
  • Sales of pellets
  • Manufacturing of pellets
  • Indoor climate solutions
  • Energy services
  • Energy system solutions
  • Owning production outside of municipally
  • Owning gas/oil production
  • Owning forests
  • Owning pellets manufacturer
  • Owning a broad band network
  • Sale of energy related network contents
  • Sale of non energy related network contents
  • Consultancy in environmental planning
  • Waste management
  • None of the above

CEO