Utility Valuation

Appraisal Economics has been performing valuations for the electric power generation industry for over 20 years. Our utility valuation services and expertise has been used to assess power generating facilities all over the world for a wide variety of power plants:

  • Coal
  • Wind
  • Hydro
  • Solar
  • Nuclear
  • Biomass
  • Geothermal
  • Waste to Energy
  • Gas Turbine Cogeneration

We have utility valuation experience for all assets and property associated with power plants, including generation and transmission equipment, land, buildings, and intangible assets. Our team of appraisal experts are dedicated to providing accurate reports and will maintain solid support for our utility valuation conclusions.

Appraisal Economics’ utility valuation services can be utilized for several reasons, including:

Buyer/Seller Negotiations
If you wish to move assets from your utility rate base, a utility valuation will determine their value in order to aid in buyer/seller negotiations and help minimize stranded costs.

Property Tax Analysis
Deregulation has caused an increase in competition in the electric producing industry. For this reason, it is important for both taxpayers and assessors to determine a fair market value for utilities in this evolving industry.

A utility valuation can establish whether or not your assets are properly insured, as well as provide a proof of loss appraisal and claim support for any damaged or destroyed property.

Litigation Support
Appraisal Economics has provided expert testimony before the U.S. Tax Court, U.S. District Courts, U.S. Department of Justice, State Appeal Courts, Bankruptcy Courts, and the American Arbitration Association.

Please take a moment to learn more and to find out how a utility valuation or power plant appraisal could be beneficial for your organization.

An Evolving Industry
Utility valuation methods in the electricity producing industry are changing as a result of deregulation. Congress and the Federal Energy Regulatory commission (FERC) have paved the way for increased competition and new market prices which will be set by state-of-the-art power generating facilities with advanced technology capable of producing electricity more efficiently and cost-effectively.

Three utility valuation techniques are used to determine the fair market value of property.

Income Approach
The first method is the income approach to value. The income approach assumes that the value of property is established by determining the present value of the income stream which it can generate. Traditionally, an income approach to utility valuation was based on the rate of return on rate base and then discounted by the market cost of capital. Deregulation and increased competition has changed this method of utility valuation. Property is now assessed based on an estimation of projected income taking into account expected market prices and competition making it important for companies to re-evaluate the value of their assets.

Cost Approach
The second method of utility valuation is the cost approach method. This method is based on the underlying principle that an acquiring company would not purchase property for more than what it would cost to build a substitute facility with equivalent characteristics. Historically, net book cost or rate base have established the fair market value by taking into consideration depreciation. Now, deregulation has caused adjustments to this utility valuation technique resulting in the necessity for companies to reassess previously appraised utilities.

Comparable Sales
The third method of utility valuation is the comparable sales method. This sales comparison method uses actual sales market prices of comparable properties to determine the value of utilities. Deregulation has also had an affect on this utility valuation technique.

Deregulation is causing electricity producing facilities to base their value on their ability to generate profit at existing market prices. Without regulation, the industry will see an increase in competition and give facilities with old or inefficient technology the disadvantage. As the industry continues to change, the fair market value of utilities will change as well. A utility valuation from Appraisal Economics can help a company determine its position in this evolving industry and provide them with an accurate appraisal of their assets.

Adhering to Utility Valuation Standards: ASC 805 and ASC 350 (formerly FAS 141 and FAS 142)
At Appraisal Economics, all of our opinions and reports meet or exceed all relevant professional standards and are subject to a thorough internal examination. Two such standards released by the Financial Accounting Standards Board (FASB) are ASC 805 (formerly FAS 141) and ASC 350 (formerly FAS 142).

ASC 805 involves accounting for business combinations. It requires the business method of accounting for all business combinations and distinctly prohibits the use of the pooling-of-interests method. Intangible assets must now be classified into two separate groups: those with an identifiable remaining useful life and those with an indeterminate useful life. This makes it possible for these values to be amortized as operating expenses against the future income of the acquiring company. ASC 805 also improves the comparability of financial information and provides for more complete financial reports to help support an accurate utility valuation.

ASC 350 involves accounting for goodwill impairment and other intangible assets. Under the rules of ASC 350, intangible assets with indeterminable useful lives will no longer be amortized over a forty year period. They will now be tested annually to conclude whether the previously assigned value is still justified. If assets are impaired, they will be written down to their fair market value. A utility valuation from Appraisal Economics will combine years of experience with the proper application of ASC 350 to determine an accurate fair market value and provide a unique, valuable professional resource for your company.

Respected Utility Valuation Services
Our commitment to accurate and timely appraisals has earned us respect throughout the industry, as well as from regulatory and judicial agencies, including the IRS. At Appraisal Economics, we apply the most up-to-date utility valuation and econometric techniques to ensure both high quality information and service. We maintain strong support for our conclusions, and our opinions and reports have passed the scrutiny of clients, financial institutions, government agencies, and the courts. When you choose Appraisal Economics for your utility valuation needs, you will receive the accurate information you expect and the personal attention and dedication you deserve.

Our Business Valuation Services
Serving business, financial, and legal communities worldwide, Appraisal Economics offers a wide variety of services that include everything from stock valuations and goodwill impairment analysis, to fairness opinions and more. To learn more about our industry expertise, please follow the links below:

Transfer Pricing

Equipment Appraisals

ASC 718 (formerly SFAS 123)

Trademark Appraisal