Value-based management architecture in energy companies

Abstract

The purpose of this research is to create a concept hierarchical model demonstrating the levels of value-based management in power companies. Basic determinants and conditions are taken into account, the most important ones being the long-term "rules of the game" set by the state for the electric power industry. The next tier identifies factors that make up the intrinsic (fundamental) value of a company. The following are viewed as priority areas: strategic activities that take account of the owners' interests; implementation of effective investment programmes; building a suitable evaluation system for managerial decisions; transformation of the management structure with business units being established that focus on making value-based decisions. No less important is the "superstructure" of a company's intrinsic value that is determined by the stock market situation. This tier is the most volatile in terms of business valuation, but it also provides for a set of actions to be taken in order to meet investors'interests in higher market capitalization. The impact of the identified factors on the effectiveness of value-based management was tested within the framework of the designed model in a number of energy companies between 2000 and 2013. © 2014 WIT Press.