Strategic Analysis and Valuation of Dong Energy

David Hindersson

Student thesis: Master thesis


The purpose of this thesis, is to evaluate whether DONG Energy’s initial public offering in June 2016 was sold at an attractive price. The world’s biggest offshore wind-park operator sold 17.4 percent of its shares at 235 kroner a piece, corresponding to an equity value of DKK 98.2 billion.
The valuation is based on a strategic analysis of DONG Energy as well as an analysis of the historical financial performance. The strategic analysis is based on well-known theoretical models such as PESTEL, Porter ́s Five Forces and the value creating activities are highlighted. The analysis is summarized in a SWOT analysis which gives an overview of DONG Energy's strengths, weaknesses, opportunities and threats.
The strategic analysis shows that DONG Energy, through its global leadership in the offshore wind market, is well advanced in the renewable energy transformation. The significant first-mover advantage combined with the integrated business model bodes for strong growth within offshore wind power. In addition, it is found that DONG Energy through sale of non-core activities and a unique partnership model in Wind Power, has managed to improve the capital structure.
The analysis of the historical financial performance shows that especially 2012, 2013 and 2015 have been difficult years for DONG Energy. However, it is noticed that heavy investments have been made in new technology. Thus, the outlook for the cash generation are solid, and DONG Energy are well positioned to take advantage of the structural change within the utility sector, which going forward will result in positive cash flows.
The valuation is executed through the DCF-model which is made from the combined analysis of the strategic and financial performance. The estimated equity value of DONG Energy is calculated to be DKK 129,5 billion based on numbers available at the end of fiscal year 2015. Compared with the offered IPO-price of DKK 98,2 it is concluded that DONG Energy was offered an attractive price with a discount of around 30% to the fair value concluded in this thesis.

EducationsMSc in Finance and Strategic Management, (Graduate Programme) Final Thesis
Publication date2016
Number of pages86